There has been a lot of press over the last month or so on Netflix’s pricing and product missteps. Starting with the 60% price increase and the subsequent user revolt, closely followed by a mea-culpa by Reed Hastings, Netflix’s CEO, which in the 10th paragraph introduced the world to the Qwikster spinoff that lasted less than 3 weeks before the culmination of which was a full retreat from the product split.
A Fearless Culture Begets Some Missteps
I do not know if I’m the only one, but I don’t really see these events in the same way as the predominant voices in either the Technorati or the business media. Where others see slip-ups and a lack of foresight, I see a willingness to take risks and a fearless organizational culture that is comfortable with pushing into unknown territory. Before writing this article off as contrarian nonsense, please take a look at the following:
Netflix's brilliant slide presentation on their organizational-culture ethos (which, try as it might, cannot escape the shadow of its obvious inspiration; James Collins' magnum opus -- Built to Last)
When a company truly embraces this way of being and these types of values, there is an inescapable consequence; mistakes. Mistakes are a natural outcome from a company that chooses to strive for greatness rather than settle for mediocrity.
Netflix is in Good Company
Lest one forget, industry messiah, Steve Jobs, made many a faux pas along the way to universally acknowledged brilliance. Amongst others, here are my favorites:
- The Lisa -- Apple's most often cited flop that was a precursor to the original Macintosh
- The Newton -- Apple's glorious failure at making and marketing a PDA
- Pippin -- Apple's failed entry into the game console market
- Hiring John Scully
- NeXT (initially a failure before the software was sold to Apple)
- Antennagate -- "Just don't hold it that way"
The Real Issue for Netflix -- Lack of Content
What I personally find to be the most limiting question for Netflix's future has nothing to do with its botched Qwikster launch or its reviled price increase. Instead, I'm drawn to what readers of CMSWire are also no doubt wondering about: How will Netflix solve its content woes? If you are a Netflix subscriber (like me), you know to what I'm referring. Regardless of the latest deal with Disney, the lack of titles worthy of streaming leaves most, if not all, users scratching their heads wondering, "Why would I pay for this?"
Given that Hastings' vision of a streaming-dominated future is essentially right, what would be bewildering to me is how Netflix could commit, so hard, so close to the loss of Starz and Sony content.
Note that I said, "would be bewildering" above and not "is bewildering". Netflix's real misstep here is making decisions atomistically instead of holistically. This is not bewildering because this is the American business norm. This sort of narrowly focused decision-making paradigm seems to be a rule for businesses operating in the United States (Apple, Amazon and Disney are three notable exceptions.)
When enterprises forget to pay enough attention to the interconnected nature of how all the parts of a business and its offerings come together to form a whole, you get fragmented offerings (eBay, Google) and fragmented organizations (the entire telecom and cable industries).
This type of thinking shows a lack of understanding around what made the iPod and iTunes such runaway hits. It was not the beautiful device. It was not the integrated nature of the experience. It was not the massive amount of songs. It was not the dirt-simple ninety-nine cent per song model. It was all of them collectively. I'm not sure if Netflix's prior spinoff of Roku in favor of going with the platform religion will turn out right or wrong in the long run, but I am sure that Netflix needs to embrace a little more of what Dan Pink refers to as "Symphony" in his book - Whole New Mind.
Given that Hastings is a geek (and I use that self-referential term with respect), I see Hastings' decisions and communications as awkward rather than the arrogant. Hastings has built a great product and up to this point a beloved company but it seems he is disconnected with his customers.
Why I will Always Be Grateful to Netflix
Hastings does, however, have something going for him that competitors and critics should not discount: He took out Blockbuster. If you want to talk about an arrogant and reviled company which people begrudgingly did business with, the discussion starts and ends with Blockbuster. There will always be a huge mass of people, including myself, who will, out of gratitude for destroying the despicable late-fee nazis at Blockbuster, look past this spate of errors and trust that Netflix will take responsibility, as its culture and values demand, and make this right.
If I could offer some unsolicited advice to Hastings, I would offer three suggestions:
- Use the mistakes as an opportunity to build loyalty: An apology without a gesture to make amends is a platitude. Do something nice for your remaining customers and anyone who comes back. It doesn't have to be big. Show us that you are willing to do something beyond saying "I'm sorry." Even disconnected companies like RIM and Yahoo! got this more right than Netflix.
- Fix your content problem with any and all available urgency: Netflix's strongest asset, ubiquitous accessibility across hundreds of devices, is literally worthless without worthwhile content to stream. Netflix cannot be satisfied with the recent Disney deal, rather Netflix needs to understand the network effect as it applies to content (each piece of additional high-quality content makes every other piece of content more valuable).
- Don't change your core approach to taking risks: It would be so easy to allow the recent mistakes to alter Netflix's core way of being, but it would be a shame. Please don't let this happen. Netflix's ever-onward approach is a shining beacon everywhere for right-brained, qualitative, possibility seekers. Please don't become another tedious myopic six-sigma oriented failure (hello moto, anyone there?).