Don’t Get Netflixed
I’m feeling nostalgic today. Netflix has announced that after 25 years and 5.2 billion DVDs it is ending it’s pioneering OG business model, DVD-by-Mail. I have long sung Netflix’s praises for bringing Blockbuster to its knees with a better business model followed by disrupting itself as it transformed its business model into the global streaming juggernaut that we know today. My persistent mantra to companies, institutions, communities and to all of us as individuals continues to be “ don’t get netflixed”.
R&D for new business models is the new strategic imperative for all leaders. Why? Business models don’t last as long as they used to. All businesses are vulnerable to being netflixed. A Netflix, Uber, or Airbnb can swoop in and disrupt or totally destroy existing industry business models. And make no mistake — this is not about new technologies or new products, it’s about new business models. These upstart companies didn’t invent anything; they all deployed new business models that networked available capabilities in different ways, to change how customer value is delivered.
Incumbent companies were caught flatfooted and unable to compete, because the typical company responds to competitors’ disruptive business models by leaning against them — creating regulatory moats to slow competitors while at the same time working urgently to strengthen their current business model and hold on to customers. However, tweaking and protecting the current business model will not work for long. These are stopgap measures at best. They will not prevent your company from being netflixed.
How can leaders avoid being netflixed? The only way to avoid this is to do ongoing R&D for new business models, the same way companies do R&D for new products and technologies today. Companies must explore and test new business models in the real world, even models that might disrupt their current business model. If you don’t, you can be assured someone else is. Since business models don’t last as long as they used to, the time to do R&D for new business models is when the current one is still strong. It’s too late if you wait until your current business model is netflixed. Just ask anyone in the newspaper business.
The CEO must directly lead R&D for new business models. Assigning the task to line executives responsible for the performance of the core business model will result only in incremental…