Monday, September 19, 2011

NetFlix provides lessons for stores...

There has been a lot of flack  surrounding movie rental company NetFlix lately.  First they changed their pricing plans.  Now they are separating the physical DVD business from the streaming business -- requiring customers to have two accounts.  Amidst all of this is was a breakdown in communications between the company and its customers as the company tries to transition from a world of more physical media to one of more digital delivery.

There are several lessons book stores could learn from NetFlix's recent foibles:  Perils of rental models; transitioning from physical to digital; or communication.   However, one quote from CEO Reed Hastings in his apology blog post captures one of the key messages I think stores should hear. 
For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something--like AOL dialup or Borders bookstores--do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.
And there it is.  So whether we are talking about mobile commerce, digital course materials, rental, data analytics, price comparison, or any of a number of other technologies and developments in the retail book space -- we can not be afraid as a channel to venture boldly into a new future if we hope to have one.  This may mean trying new models that at first seem less profitable or sacrificing margins for market share. 

I hear many arguments that say "digital course materials is moving slowly, so I do not need to worry about it."  I believe this strategy is flawed.  Frankly, I do not care so much whether digital course materials take off this year, or in 5 years, or in 10.  We can all debate the rate at which digital takes hold, but that debate is hardly productive.  The truth is that the transition has begun.  Our window of opportunity to drive developments in favor of stores is now.  We must as a channel place "enough focus on the new thing" that when the time comes to move quickly we are not caught in a position of desperation or unviability.  That is key aspect of channel and business stewardship, and it is a critical strategic activity for all levels of management.  With the emerging technologies ahead of us, we are more likely to fail for having taken no action, than we are for having acted and making some mistakes along the way. 

Ok.  Back off of my soap-box. 

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