Friday, August 30, 2013

On the ubiquity of chicken rotisseries

Once upon a time, long long ago -- i.e. 1995 -- rotisserie chicken was a huge business.

The trend was started with Boston Chicken (now Boston Market). The idea was making a healthier, classier, more expensive alternative to fast food. The original founder of Boston Chicken bought the idea and franchised it (not unlike Ray Kroc) because the owners were ringing up an average of $13.75 per bill.

Many clones popped up in the early-90s. The rotisserie chicken craze was big enough such that Seinfeld once featured Kenny Rogers Roasters on the show:



In 1993, Boston Chicken had a massive IPO. By 1998, the company was bankrupt. Kenny Rogers roasters was bankrupt slightly beforehand.

What happened?

The key issue with rotisserie chicken is that it takes almost no space and no overhead to do it. A 10 or 20 chicken rotisserie will cost you somewhere in the neighborhood of $5K. So every Safeway, Dominicks, Costco and Walmart in America soon had their own rotisserie installed and were undercutting the crap out of these businesses that made it their sole business to cook rotisserie chicken.

Is this at all sounding like a lesson that might be applicable to the tech world in Silly Valley? You betcha.

I happened to watch Morning Joe yesterday, and they were broadcasting from Detroit. In talking about the history of the city, Packard cars and various other aspects, someone mentioned "Detroit was the Silicon Valley of its time." And holy crap, they nailed it. Detroit had attracted the brightest minds. They were innovating on cars, and dominating the landscape from the early 1900s to the 1960s.

Then... what happened? They got rotisseried. The technology for making cars, especially autonomously (i.e. robotics) became ubiquitous. And margins dropped. And they got crushed. And high-end cars like BMW started building a better brand in the states, and they crushed the high end.

A lot of people blame the union pensions at these companies, and I'm sure that has something to do with the cost structure problems. But the overall cause of the issue was that the technology to provide the product consumers wanted (cars, or rotisserie chickens) became easy to replicate.

And now it's time to evaluate for yourself: what's a business's rotisserie machine? What's the component that makes it valuable, and how does that component become easily replicable? Apply this metric to companies that are building tech especially -- what happens when their custom tech becomes commodity?

1 comment:

Future Primitive said...

I enjoyed this observation, Trimbo.

Looking forward to using "they got rotisseried" at the earliest opportunity as well.