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Netflix: Hubris and Strategy is a Bad Mix

Posted on September 20th, 2011 by Anne Marie Smith

I can picture Netflix’ last strategic planning retreat clearly in my mind. I imagine CEO Reed Hastings saying, “I’m bored with being so successful. I’m thinking I want to shake it up a little. Get out there and take some risks. Okay, team, let’s get planning.” I then imagine what’s in the final plan…

Strategic Initiatives

  • Reduce our customer base.
  • Reduce the value of our stock shares.
  • Create a PR nightmare/social media frenzy.

Tactics

  • Cut our product offering and raise our prices by 60% (pay more get less).
  • Announce the change without an explanation or apology.
  • Remind customers they can stream a movie to only one device in the house.
  • Complicate a simple process by dividing DVD-only and streaming services into completely separate entities that forces the customers to go to two different websites if they still want both.
  • Choose a new company name (Qwikster) without doing enough due diligence (the Twitter handle @Qwikster is currently being used by a potty-mouthed, pot smoking young man).

Desired Results

  • Tick off and alienate our entire loyal customer base and lose 1 million customers in less than two months.
  • Slash subscriber outlook for the third quarter.
  • Reduce the forecast for streaming subscribers to 21.8 million from the previous 22 million.
  • Lower DVD subscriber forecast to 14.2 million from 15 million subscribers.
  • Reduce value of per share stock by 56%.

Mission accomplished.

While I get what they are doing (moving the company, eventually, to streaming only) and why they are doing it, I’m just shaking my head, awestruck, at how they did it. Me thinks Netflix will become an MBA textbook case study in a few years on how not to treat your customer base. How about you?

One Response to “Netflix: Hubris and Strategy is a Bad Mix”

  1. Most of my product management career has been spent doing B2B product management. For the last year and a half, I have switched over to B2C product management in my current role as Director of Product Management at Gazelle. Last 12 months has been a lot of fun learning a whole lot of new things in the consumer world. Given this learning, I have been able to create a long list of things that matter a whole lot more doing B2C product management that may not be as important doing B2B product management.

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