The Remaking of Netflix

Netflix needs urgent change to stop the bleeding and rebuild its business model. It is running out of cash and losing support from customers and shareholders.  Management must re-establish its credibility with bold moves.  Here is a series of steps and techniques to do that.

1.  Reframing:  Use the Subtraction Tool to reframe and see new possibilities.  Make a list of the major components of the company (patents, products, brand, employees, customers, network, etc.).  Now imagine Netflix will merge with a company from another industry.  Create a phrase something like this: “Netflix cannot stream movies to customers, but it has all the other components.  What company has the ideal set of products that would best fit the remaining resources of Netflix?”   For example, would a company in the retail sector have products that would find new growth within the Netflix enterprise? Companies like Path Intelligence might be a good candidate.  Perhaps Netflix could merge with a brick and mortar movie theater company like AMC Entertainment and leverage the strengths of each.  Perhaps Netflix links up with Research in Motion to leverage its proprietary Blackberry network for streaming data.  Use this same approach for all the components, one at a time, to envision new possibilities.

2.  Reverse Assumption:  This technique helps “break fixedness” about assumptions.  List the key business assumptions about Netflix and its industry.  For example:

• Netflix streams content to customers
• Consumers want more options
• Netflix sends DVDs to customers

Reverse the assumptions one by one.  “Customers stream content to Netflix.”  Perhaps the new business model is to offer a service allowing customers to stream information to Netflix which is then re-streamed to others.  Perhaps Netflix uses its streaming skills to enter the business-to-business market, servicing banks or other companies that need to move digital content in a unique way.  Perhaps customers send DVDs to other customers instead of sending it back to Netflix, saving time and money.

3.  UDP Chain:  The UDP (Un-Desired Phenomena) technique shows what’s broken and why.  First, make a list of the main issues in the problematic business model.  These are factors that create problems, transfer them, or are their “victims.”  Develop a chain that sequences these factors together.  Build the chain up by asking “so what.”  What does this factor cause to happen?  Build the chain down by asking “why.”  What causes or gives rise to this factor?  Once the chain is built, consider different options for breaking the chain.  What factors are in Netflix’s control versus out of its control?  Each break in each of the UDP chains begins to suggest a new business model that may improve Netflix’s situation.

4.  Innovate in Adjacent Markets:  Use The Big Picture framework to see stretch opportunities beyond Netflix’s current business model.  Ask these questions:

• Quadrant 1:  What substitute products are non-category consumers using to fulfill the need? Where are they buying it?  What complementary products go along with these substitutes?  For example, could Netflix enter the education market, streaming lectures to students?
• Quadrant 2:  What other products do loyal Netflix customers buy, perhaps at the same price point or to fulfill the same or similar brand promise? For example, could Netflix offer music, photos, artwork, or other forms of aesthetic pursuit in a digital format?
• Quadrant 3:  Why do multi-brand customers use several brands?  Is it time-dependent?  Situation-dependent?  Why does it vary?  What other products are used when the competitive brands are consumed?  For example, could Netflix stream content to movie theaters, airplanes, restaurants, or other places where people view content?
• Quadrant 4:  What other category of products do Netflix’s competitor sell?  How do those fit into their product line?  How could they fit into Netflix’s?  For example, look at Amazon.com and Walmart.com to spot categories of products that Netflix could leverage with its know-how.