Digital Disrupt: What We Can All Learn From the Netflix Model

Business.com / Technology / Last Modified: February 22, 2017

Adoption of new digital technologies has been a catalyst for business success stories. Spotting trends is key for survival—innovate or die.

The past twenty years have been an amazing journey in the world of technology, and if you look at the face of most businesses, their complexion has changed dramatically.

Innovation has knocked some of the most well-known brands out of the race because they either couldn’t adjust their business model fast enough or just didn’t see the train coming. 

In the past, it took decades for innovations to unseat old ways of thinking and behaving. Now, the digital revolution has compressed the time it takes to see very impactful changes in how we socialize, schedule, manufacture, entertain and transact. It used to take at least a generation to see the light, but now in the span of years we see this metamorphosis before our very eyes. Let’s take a look at a few of the big innovators and the impacts they have had.

Related Article: 5 Technology Trends That Have The Power to Change Your Business

Netflix in the mail

Netflix (There’s No Net, Like the Internet)

Netflix started its snail-mail subscription service in 1999. Internet connectivity was relatively slow and infrastructure was just not like it is today. Frankly, the technology didn’t exist to stream video in the volumes that were required and the “net” was really about ordering your movies online and having them delivered to your mailbox.

Most people felt it wasn’t a scalable model and would die on the vine and Netflix was looking to sell early in the cycle to Blockbuster for $50 million, but there was no interest. Netflix figured out how to tune their distribution model for fast mail delivery. Still, you had to plan your entertainment at least two days ahead of time, so the video store continued to prosper for last minute needs.

The Beginning of Binge Watching

As technology improved it was only a small step for Netflix to provide streaming video for its ballooning customer base—they were ready. Streaming video wasn’t a new idea, and there was certainly competitors lurking, but, oh, that sweet customer base. Blockbuster tried to follow but it was too late, for them, and all the others.

In the end the video stores closed, and viewers were watching more content than ever. You would think the studios would love this, but they hate releasing any control of their content, especially digital content. They may be the next soldier to fall when some renegade studio starts releasing first, on Netflix—oh wait, that’s already happening—think of what happened to the music industry.

Now, cable companies are feeling the pressure too and killer apps like iTunes have cemented the concept of buying only what you want when you want it. Big useless bundles of content with a big monthly fee just don’t seem to make sense, but the cable companies are slow to move. How about a Fox News, South Park, MLB and History Channel package for $10 per month? Sold! 

Apple iTunes

iTunes was the first to provide widely distributed digital content and the concept turned the music industry on its ear. An antiquated system of music production, distribution and sales gave way to listeners paying for only what they wanted instead of buying whole CDs with lots of not-so-good music on them. Piracy was a chief concern for the studios as it was very easy to copy and duplicate music (movies are still tough because of their sheer size).

But resistance by the studios to succumb to this new method of purchasing music simply led to more piracy, and finally bands were self-producing and releasing without the studios and without the music stores.

Consumers wanted the convenience of downloading music and only music they wanted to hear. The music production industry is still in a massive financial funk, and, when was the last time you visited Tower Records…Sam Goody anyone?

Related Article: Who is the Next Bill Gates or Steve Jobs?

eBay Sets the Retail Pace, Amazon Wins the Retail Race

eBay was founded in 1995 as AuctionWeb and went public in 1998. It was, in fact, the first “killer app” and the online auction model quickly took hold and was the favorite of all internet savvy users. Traditional retailers didn’t take notice because it was just a place where people sold used junk for, sometimes, ridiculous prices. They continued to ramp their big box strategies up in every major metropolitan area in the US (talk about expensive) and “eCommerce” uptake for major retailers was slow.

Amazon book sales were on their way to prove that the internet was a hugely scalable retail platform that didn’t require a huge real estate and workforce investment. Still retailers didn’t see the promise—the thought of shipping costs, packaging and returns gave them a headache, and adoption was slow. At the same time shippers like UPS and FedEx started to see the promise of this digital retail world.

Off to the Races

As the popularity of eBay continued, Amazon began selling more than just books and the concept exploded. To compete eBay started “Buy It Now,” Amazon with zStores, eBay with eBay Stores, Amazon with Prime, eBay with PayPal—fierce competitors, staying in the game.

In just a few years the bottom started falling out for the big box store; Circuit City, Radio Shack, Sears, Kmart, CompUSA and now WalMart is having trouble—they are gone or struggling today. How will Best Buy innovate itself out of this mess, or, will it?

Related Article: The Shocking Truth: Why Every Company Is a Technology Company

Who Else Needs to Look Over Their Shoulder?

Industry or CorporationDisrupterWhy?
Visa / Master CardApple, Google – Mobile PaymentsMobile payments are here and the infrastructure rails of major card providers are soon to be the “horse and buggy” of the digital age. Be prepared to have the middle-man cut out of the game.
HP, Intel, IBM, Cisco et alAmazon Web Services – Cloud IT Infrastructure ServicesCloud infrastructure (computers and network) providers support a pay-as-you-use model (like renting movies). While these companies will always have a market, no longer will there by half utilized hardware on the data center floor of large corporations. Get ready to sell less, much less.
Airlines and Transportation

Skype - Video Communications

Uber – Taxi Service

Skype is the first that comes to mind but there are many others. As video teleconferencing technologies improve business travelers will be less inclined to travel for meetings and presentations. Get ready to sell less (at least to businesses), this is coming.

The results on Uber are still out. It appears that drivers just don’t make enough money after all, but there are always those who will do this for $10/hr.

Recording StudiosApple – Garage BandThis has already happened. Recording studios across the world have seen their profits dip dramatically. Amateur production engineers can now record their own music with “good-enough” quality and release it as well. Studios will always be around for musicians that don’t want to deal with it.
KodakDigital PhotographyThis story is finished. Kodak reinvented itself as a manufacturer of print production technology. Still, Kodak’s workforce shrunk from 60,000 in the 1980s to only 3500 today. Wow!
Comcast, Time Warner, VerizonSatellite, Wireless, CellHard to see these guys going away, they own the country. But, they are going to have to make sea changes in how they do business. One day our wired infrastructure will be defunct and power houses like Google could sneak in with technology that doesn’t rely on the infrastructure these monopolies own.

 

Entertain the Possibilities

Digital technology has been a massive disruptor to commerce of many types; retail, entertainment, communications and travel. Trying to predict the impacts of certain trends is a complicated task, but you can see that seemingly unrelated or new innovations can have a massively negative impact on business if you don’t take notice, and, you can be sure that someone will.

Sometimes businesses have invested so much in infrastructure it is almost impossible to turn the ship, so it’s important to get an early start, very early—R&D is an imperative. Digital makes everything fast and it no longer takes thirty years to scuttle an outdated business concept—at least entertain the possibilities and make sure innovative change is a constant, especially digital innovation.

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