The Last Netflix DVD
I’ve been thinking about obsolescence lately. Becoming obsolete. Outdated. Outmoded. But more than anything, I’ve been thinking about how there is opportunity on the other side of obsolescence. Let me explain.
Obsolescence is “the process of becoming obsolete or outdated and no longer used.” Maybe I’ve been thinking about it because I’ve been writing about Artificial Intelligence and how it can act as a co-worker.
If you’ve followed me for a while, you’ll know I’m fundamentally optimistic about humanity’s ability to adapt and leverage new technologies.
Then I saw this headline this week:
Above: The last Netflix DVD will ship this month, marking the end of an era, a reminder of the march of progress and the opportunities that await on the other side of obsolescence. (The New York Times)
It’s finally happening. This month, Netflix will mail out its last DVD.
I don’t know about you, but this news came to me as a surprise. Netflix still mails out DVDs?? I don’t think I’ve received a DVD from Netflix in at least ten years. But it doesn’t seem that long ago that this upstart company Netflix was upending the video rental industry with its mail-on-demand DVD service.
I’m old enough to remember the last Blockbuster in my town. When I first moved to the Pacific Northwest in 2004, there were still occasions when we might run to the video store to pick up a DVD for Friday night. Then Netflix changed everything.
At its height, Blockbuster boasted 9,000 stores and 60,000+ employees. Today, one single, solitary Blockbuster remains. It’s such a topic of fascination to nostalgia-driven culture that a documentary was made about the store – The Last Blockbuster.
Unlike Blockbuster, Netflix understood it wasn’t really in the DVD rental business. In 2007, they invested in video streaming, well before the technology (and home internet speeds) widely supported it.
In essence, Netflix began to cannibalize its own business, supplanting DVD rentals with the shift to streaming.
And that self-disruption paid off. In 2007 when Netflix began competing with itself by streaming videos in addition to mailing DVDs, its marketing valuation was $1.72 billion. Today, that market cap is $170.52 billion. Turns out that upending your business model and the way you do things can pay off!
Netflix eventually concluded that it was not in the physical DVD rental business and not even in the streaming video rental business. The problem was that Netflix was streaming other studios’ content, and they didn’t have the rights. Netflix ultimately concluded that it was in the entertainment business rather than the streaming business, and started developing original content in 2011. Its first major hit was House of Cards.
As leaders, you and I face the constant risk of obsolescence – the process of becoming obsolete or outdated and no longer used.
Let’s wrap up by considering four takeaways you and I might be able to learn from Netflix as it phases out DVD rentals this week:
💡 Takeaway #1
There is Opportunity on the Other Side of Obsolescence
New technologies and innovations always displace something. When the printing press was invented in 1452, the entire profession of scribes was about to be displaced. But, the technology enabled those willing to learn new skills to tap into a whole new world of opportunity.
How many authors and editors and printers and publishers have been able to make a living and thrive since the innovation of the printing press? Many magnitudes that of scribes who might have been displaced. There is always opportunity on the other side of obsolescence.
💡 Takeaway #2
You Must Understand Your Core Driver
At its core, Netflix realized it was in the entertainment business – not renting DVDs or even streaming video. This recognition that the thing that drives Netflix is its unique entertainment content has helped the company be willing to disrupt itself repeatedly.
Core drivers are a small subset of everything an organization does that ultimately drives the health and vitality of the organization. Core divers are often not the surface-level outcomes you might think of, like “we get results X or Y or Z.” Outcomes are often lagging indicators of doing your core driver well.
What’s your core driver? What do you do that drives everything else?
Don’t make the mistake of getting caught up in assuming what you do is your core driver. This brings us to the next takeaway – don’t fall in love with your own model.
💡 Takeaway #3
Don’t Fall in Love with your Model
Blockbuster made the mistake of falling in love with its model – videos rented on physical media from a store down the street. Likewise, AT&T used to think of itself as a maker of telegraph machines, but they eventually realized they were in the communications business.
Don’t make the same mistake within your organization. Separate your model – what you do and how you do it – from your core driver that we discussed above. As the world evolves, be willing to disrupt your own models to accomplish your core driver better. This brings us to the last point – disrupt yourself, or someone else will.
💡 Takeaway #4
Disrupt Yourself, or Someone Else Will
History is full of examples of organizations – whole societies even – that invented one way of doing things but failed to adapt to the next. Netflix understood this when they shifted from DVDs to streaming starting in 2007, upending their own business model. They did it again in 2011 when they moved from licensing video content from other studios to begin producing original content – again, upending their business model.
Once you’ve separated what you do and how you do it from your core driver, ask yourself – are we overreliant on our model? How are we disrupting ourselves? Are we even willing to disrupt the current model?
Until next time… Surfs Up! 🌊
- Dave
About the Author | Dave Raley
Consultant, speaker, and writer Dave Raley is the founder of Imago Consulting, a firm that helps non-profits and businesses create profitable growth through sustainable innovation. He’s the author of a weekly trendspotting report called The Wave Report, and the co-founder of the Purpose & Profit Podcast — a show about the ideas at the intersection of nonprofit causes and for-profit brands.
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