Rushing to adapt can lead to a crash, and failing to think ahead isn’t any better.
Learning to drive is thrilling. The world suddenly becomes broader as exciting new possibilities come into focus. But you have to be careful. It’s easy to get carried away and put your foot down. That’s when things go wrong and you find yourself at risk.
The same thing happens to businesses when they push too hard: the wheels come off and they crash. Take Netflix. The company understood that the future of movie watching was streaming before any of its competitors, and it steamed ahead. What was the problem, then? Well, it was too quick for its subscribers, who were still satisfied with the old offer that allowed them to rent DVDs and stream for $9.99 a month.
In 2011, Netflix decided to push its customers and split their offering into two separate components: rentals and streaming, now priced at $7.99 each – a pretty hefty price hike for people who wanted to continue using both services.
The decision didn’t go down well. Netflix hemorrhaged a million subscribers, and the value of its shares fell by 25 percent. The service did eventually recover, of course, but if it hadn’t been so hasty it would have achieved its current success much sooner.
Failing to anticipate changes in the market is even more damaging, however, as Blockbuster found out. Founded in 1985, the movie rental business quickly grew over the following decades. By 2008, it had thousands of stores across the United States. But despite its dominant position in the market, it was caught entirely unawares by the streaming revolution.
Even worse, it failed to launch its own streaming service while Netflix began establishing itself. That would have been simple enough – after all, Blockbuster held all the aces: it was a household name with a large customer base and had plenty of capital.
But Blockbuster wasn’t nimble enough to adapt to new realities. It continued focusing on customer experience in its brick-and-mortar stores even after a new CEO was hired in 2007. By 2010, the writing was on the wall. Blockbuster declared bankruptcy and was gobbled up by the American TV company, Dish Network.