What Netflix Needs To Do To Progress Further

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I have both supported, and spoke highly of Netflix.  I’ve also ripped them to shreds when I found their business decisions to be absolutely horrible, and pulled my money as an investor when it started to do things that was not along this side of visionary.  So with the latest announcement of canning the split business scenario, I thought… maybe they’re finally understanding again.  Regardless, Reed Hastings is on the right track although his means to the end was not exactly the best of methods.   So this is what I propose that he starts doing if he’s indeed still pushing for settling on Netflix being a streaming business.

  1. Re-position internal organizations
    Internally, you’ll start splitting your company into two divisions.  One is DVD, one is streaming.  Both would have online teams that work together, but ultimately your sales, metrics, and growth will be separated out.   Timeline? 1-2 years.  I have yet to participate in a major company-wide re-organization that has never taken at least 12-18 months.
  2. Customer service needs to get back on par
    Netflix as a company took their reputation and basically threw it out the window.  That’s a lot of reputation when you consider that it was chucked in three months and the company has been around since 1997.   Get back to doing what you were doing best, which was handling customer service well and providing for those that bring you revenue.   Don’t forget that while people are just means to end, your company is also in the service business.  So service.
  3. Transparency
    I am still amazed that there are people out there that don’t understand that the best online businesses are the ones that have such deep linked inner-workings that have absolutely no ties to what the customer interacts with and how it’s done.  Amazon is a great example of this.  From a consumer standpoint, their website is a shopping area and 2-days later, a product arrives.  But the amount of logistics that went into making all of that happen behind the scenes?  Vast.  AND really none of the consumer’s business.  The fact is that all of this and expansions is made possible because of transparency.  With the Qwikster model, there was absolutely no transparency, and you took a brand and threw it out the window.  Once a business operates in a transparent function, it makes changing the consumer end very simple.  You could sell the online division, or dvd rental without batting an eye since the buyers can see that it can both operate seamlessly or by itself.  That makes your company all the more attractive.
  4. Improve Online UX
    So far, Netflix keeps changing up their UX, but their applications lag behind sometimes and they don’t really improve.  For example, they took away the DVD queues on the iPad app, but that’s something that I want to have access to when I use your “services”.  Which is what I pay for.   I don’t just pay for half of it so don’t just show me half.   That sort of interfacing is an important aspect of both how the consumer feels about your services and how easy it is to work.
  5. Improve streaming
    With more and more content, the price increase obviously is going back into the system. But, I have still yet to see a way to choose different language tracks in foreign films.  I also have yet to see DVD previews and all sorts of other things that could be on a streaming service.  This needs to improve if you wish people to take your streaming business model seriously.
  6. Quit thinking your customers are complete idiots
    I hate to be the bearer of bad news, but the last three months should be a complete eye-opener.  You treated your customers as complete dolts, and then expected them to understand the business and why it was needed.  Then you followed up the bad scenario with another completely terrible scenario.  What may be a good business decision still has to be sold to the shareholders just like any other political message.  Note that the best politicians are great salesmen.   That’s because they can sell you a dream that in reality is a piece of rock.  In the same manner, you need to sell your business models instead of just throwing it out and letting the pieces land where they may.
Customers of services and products do their talking with their feet.  And at the end of the day, especially in bad economics, realize that your product or service is an entertainment expense, not a necessity.   This in itself is a consideration of how you set up and execute the business.   When you’re finished with understanding that (of which I’m not sure what happened in the last three months that you forgot when you remembered the last decade), you’ll be able to continue down the same road that you’ve been trying to go down.  Only then, will you have all the pieces in place to pull off what you were trying to accomplish here in 2011.
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