Netflix Falls Apart Because It’s Lacking Real Vision

Posted October 11th 2011 @ 4:30 pm by Jerod
Netflix Falls Apart Because It’s Lacking Real Vision

The Netflix train wreck is now a full-on spectacle.  Over the past few months, there’s been a flow of bad news and bizarre announcements that has taken Netflix from a customer favorite to one that’s losing people, and reputation, quickly.

In July, the movie-mailing and streaming giant said it was raising rates by 60 percent while providing no new services.  While a lot of that increases was due to greedy media studios, Netflix took the brunt of the blame.  Following the announcement, Netflix was also not able to secure future content contracts from providers, like the movie channel Starz. 

Then, the bad turned to bizarre.  Netflix said it was going to split into two companies.  The DVD mailing service that made them famous would become Qwikster and the streaming part would stay Netflix.  So instead of paying one bill and using one website, customers who wanted both DVDs and streaming would have to use two separate systems.

Acknowledging this announcement as a communications blunder, Netflix later explained that the split would let them better innovate and serve customers with two distinctive businesses. While customers were a little dumb-founded and investors sent the stock sinking, former Netflix CEO Marc Randolph applauded the move.  While Randolph, who left Netflix in 2002, hasn’t been with the company during these decisions, he’s still well connected to the employees there.  He wrote, “I think it is one of the smartest, most disciplined and bravest moves I’ve ever seen,” he wrote, “Plain and simple, this move was all about focus.  Relentless focus.”

Randolph echoed Netflix’s reasoning: Micro-focusing on each distribution method individually would help Netflix and Quickster better tackle problems and innovations for the future

Now, just a few weeks later, Qwikster is gone.  Well, it never really existed, but it won’t now. On his blog, current CEO Reed Hastings announced that Netflix will stay the same: DVD mailing and streaming services will stay under the same roof.  He wrote, “It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.  This means no change.”

The stock continues to sink.  Customers shake their heads.  People, like my co-worker Mike, have conspiracy theories about the whole thing.  Netflix went from an admired organization to one that looks increasingly desperate.  And all of it occurred in the name of vision.

I would argue vision, relentless or otherwise, was never really behind this decision.  Here’s why:

  • Good vision-casters have a good understanding of the people they’re leading. Sure, they’ll make decisions that aren’t popular or that make people uncomfortable, but they’re not catastrophic. The decision to split into two companies would have actually made life more difficult for consumers who want both DVDs and streaming content. Netflix should have known that.
  • Good vision isn’t so reactionary. If this was a truly vision-based decision, Netflix would still be splitting into two companies. They would still believe it’s the best thing for customers. People will follow compelling vision—even if they don’t necessarily like it—because they can understand why it makes a difference.  Look at Facebook.  People get upset about every change Facebook makes.  Yet, the company sticks with what they’re doing because they believe it will help people better share their lives online.  While people complain, very few actually leave.  The same is true for churches that cast bold vision.
  • Real vision isn’t just an excuse to make a change. It also is not a disguise for other motivations. I think Netflix was under a lot of pressure to do something.  They were at a point of trying to decide what’s next for the future of the company.  Business analysts will say Netflix wanted to separate out the DVD business so they could sell it to have enough money to buy content rights for its streaming business which will be more important in future years.  There’s some vision there, right?  But this initial decision sounded like a business move and the explanations about vision only came later when people started getting upset. 
  • Good vision has a path to the end.  You may have a great vision for the future, but if there’s no path to get there, it’s a problem.  If Netflix’s end vision was to become a streaming-only business (because they saw that was the best way to serve customers), then that’s great. But it seems as though they didn’t put as much visionary thought into how to get there.  All of the Qwikster stuff seems rushed and thrown together without much thought about how it would actually work with customers.

Do me a favor: don’t let the Netflix/Qwikster debacle discourage you from boldly casting vision.  If we can learn anything from this, it’s that we can’t just say we’re casting vision as an excuse for why we’re doing something new.  It has to be a result of understanding your organization, its people and how you can better engage with them in the future.

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