Tuesday, May 16, 2006

How Milking a Cash Cow Too Long Kills Innovation

A modern fable about a good farmer and his cow

Chapter One

Once there was a farmer who had a cow. The farmer loved his cow and worked hard to care for it. Before long the cow responded to the farmer's dedication and began to produce large quantities of milk. This made the farmer very happy and he began to spend more and more time tending to his cow.

The cow became locally famous and one day a friend told the farmer that his cow was not an ordinary cow; it was a "cash cow." The farmer liked the idea of owning a cash cow and decided to work even harder developing the full potential his cow.

Chapter Two

In a short time the farmer stopped planting and harvesting his other crops. He calculated he could make a living and maybe get rich by just by focusing completely on his cash cow. The farmer even hired scientist and cow consultants to help improve the income from his cash cow.

His plan was extremely successful but he realized the maintenance of the cash cow was now a 24/7 job. The farmer was getting tired so he decided to take some time off. The farmer turned over the care of his cash cow to the newly formed corporation his attorney had set up as a tax haven and took a vacation.

So Cash Cow Corp hired one of the consultants to manage the cash cow while the farmer was away. Things continued to go so well the farmer decided to retire so he would have more free time. After all he had earned it. He had the only cash cow in the whole valley and everyone talked about the success of Cash Cow Corp.

Chapter Three

One day the farmer's son, a bright kid but with no talent for farming, told the farmer "I just heard about this new thing called the Internet that was created by a Swiss atom scientist and I think we need to look into it."

The farmer, now the chairman of the Cash Cow Corp, said: "What do the Swiss know about cash cows? They invented the first electric watch but didn't follow through. Now the Japanese make all the watches in the world and the Swiss watch makers are all unemployed."

We don't need the Internet we will just stick to what we know - our cash cow!

Chapter Four

Well you know what happened next. The cash cow got older and new customers started to use the Internet more and more. But Cash Cow Corp still refused to change their business plan even after new competition from low fat milk producers and soy milk began to skim away market share. Soon their profits began to soften like melted butter.

It happened so gradually it was hard to believe. By the time Cash-Cow-Corp woke up it was too late to recover their former glory and a few years later the whole cash cow business was purchased by a dot com millionaire for the equivalent of milk money.

Ted Bailes



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