retail news in context, analysis with attitude

The New York Times has a good story about Netflix, the online DVD rental business, in which it makes the following key observation: that it “foresaw its possible demise at the moment of its own creation.”

Here’s how the Times frames the issue:

“The company was formed in 1997 with the idea of sending movie DVDs, then a new technology, through the mail. But Reed Hastings, the founder and chief executive, and early employees, recognized that delivery of movies over the Internet would replace the mail carrier soon. They named the company Netflix, not Mailflix or DVDs by Mail ...

“It was only last year, more than a decade after its founding, that streaming movies started to take off. But it was Netflix pushing people to do it, even though it meant that the company might rent fewer discs by mail ... Since January 2007, it had been offering a small selection of movies for streaming from the Netflix.com site to a customer’s personal computer. Then it began streaming to TV-connected devices so that the movies could be displayed on a larger screen, the way customers have always watched movies at home.

“If you have a Nintendo Wii, Microsoft Xbox 360 or Sony PlayStation 3 game machine, a new Blu-ray disc player, an Internet television from LG, Sony or Vizio, the Roku digital video player, TiVo digital video recorder or Apple’s iPad, you can stream movies. The list continues to grow, to beyond 100 devices. If there is an electronic device in the living room, Netflix wants to send a movie through it.

“Netflix, meanwhile, keeps cutting deals with movie studios to get more films and television shows online. Now a movie aficionado paying $8.99 a month, for example, gets one DVD in the mail at a time — but can also watch movies online to his heart’s content.= At one movie a day, the cost of the habit drops to less than 30 cents a film. Mail-only subscriptions are still available.

“There is no way that a store with racks of movies can sell its wares for as little.”

Which is why Blockbuster - even though it has tried to compete with Netflix, to move beyond its traditional business model - is in so much trouble, flirting with bankruptcy, seemingly unable to keep up with a disruptive competitor that is focused on remaining relevant even as technologies and consumer preferences change.
KC's View:
The lesson here is simple, and while it has been stated before, it cannot be repeated enough.

Every company should have someone in charge of putting the company out of business, of finding the chink in the corporate armor, the weakness in the marketing plan, the fundamental flaw in the company’s commercial prospects. And that person should be empowered to help push the company in new directions, not marginalized or even let go when he or she says something that threatens management’s comfort zone, that conflicts with how business is conducted on an everyday basis.

There’s no such thing as a comfort zone. Not anymore.