Tuesday, September 20, 2011

The Growth Fetish cont. -- Netflix and Dylan

Joseph has a great post up that dovetails nicely with my earlier post on attitudes to corporate growth and contraction in which he elaborates on Karl Smith's insightful reaction to a statement by Netflix CEO Reed Hastings. You should definitely read what both Joseph and Smith have to say but it was another aspect of Hastings' quote that caught my eye:
Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.
This fable of CEO as Dylan at Newport, boldly walking away from proven success to try something new, is a cherished part of the mythology. It is not, however, true all that often. I can think one example offhand (CBS's rural purge of 1971) and of many counterexamples where a business lost a lot of money trying to do something new to avoid the dreaded contraction. Interestingly, one of these counter-examples is Borders which hastened its demise with an ill-considered attempt to expand into overseas markets.

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