A few months ago I came upon this amazing conversation between Reed Hastings and Marc Andreeson on the Era of Mass Customisation. In this conversation they talk about internal disruption and how Netflix managed to disrupt itself internally to successfully transition to a new business model driven by Tech trends and foresight by the founder. Reed Hastings the CEO of Netflix even goes as far as to describe how he separated the two teams to enable the transition.
This got me thinking, how many companies do we see today that are facing similar headwinds but fail to transition. In this article I want to make a case that it is critical for the leadership to identify which business it is in and what strategy, organizational talent and structure is required to succeed.
Please note that I do not use “DVD business” in a derogatory term. It merely means to signify a stable business that makes money and there is hope that tweaking it a bit will make it win in the “Streaming business”. In this article I am making a case that it is better to seed a “Streaming business” with a different strategy and team rather than try to change the “DVD business” into a streaming one.
The reasons why it is better to take a fundamentally new approach is below to transition into a Streaming business is below
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Focus — Imagine asking the team running the DVD business — Why don’t you also try to think about the Streaming business ? How much time and energy do you think they will be able to devote to this new idea ? How many distractions of the current business will keep them from thinking about the future. The success of an idea is directly proportional to the focus of the team. Anything less than 100% focus to the idea makes it hard to succeed.
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Team — This is another overlooked factor. The team that is executing on the idea is everything. Does this team have the skills to succeed in the new objective. The skills required to build and run a Streaming business might be very different from the skills needed to run a “DVD business”. Success in one does not necessarily translate into success in another area.
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Protecting current turf / Cannibalisation threat — Imagine asking the DVD team to think about the new Streaming business. How many folks will first think of the threat to their way of thinking and working ? After all the energy spent in building up the DVD business, will this team be ready to tear it all down and think about it objectively. It is easier said than done. This is natural human behavior, nothing wrong with it. Just doesn’t help in the transition to the new business model
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Energy required for change — Organizational changes are big beasts and require an incredible amount of time, energy and patience. Imagine having to change the behaviors , mentality and old way of doing things. This is not a trivial task. Instead why not spend the energy in hiring and fostering a new team to seed the idea and then ramp that up. it doesn’t mean less energy is required, it just means that all the energy is spent on the idea and growing it and not getting stuck in company politics and people related issues
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Too Much to lose — Established DVD businesses often have a good revenue pipeline, processes perfected over time and people trained to run the business efficiently. Problem is — there is just too much to lose. Trial and error and failures are a part of the new “Streaming business”. Sometimes when there is nothing to lose and that alone spurs innovation and winning over a long term. This is also one of the big reasons where trying to keep status quo
So net net, I argue that — In order to win in a new “Streaming” business you might want to invest in a totally different team, strategy and approach while still letting the DVD business run and run its own course. That increases chances of success, reduces disruption in your current business while still allowing for the new idea to execute.
So what do you guys think ? How would you react if you found yourself in the DVD business ? How did you succeed / fail in the “Streaming business” ? Have you folks seen similar trends in your industry or company or observed this elsewhere ? Thoughts and comments are welcome.
DISCLAIMER — The thoughts and ideas expressed in this article are purely my personal viewpoint and do not represent the views of my current or previous employers.
