Tuesday, October 11, 2011

Moving too fast? (Qwikster is stillborn)

In a literal sense of Monday morning quarterbacking, sports radio talk show host Colin Cowherd provided his quick analysis of Oakland/Los Angeles/Oakland Raiders head Al Davis, who died over the weekend. In Cowherd's view - a view that is not disputed by many - Al Davis was forward-thinking at the beginning of his career, seeing things that other owners did not see. Unfortunately, after 1988 Davis stopped innovating, and as a result the football that proclaims its "commitment to excellence" now seems to have a commitment to mediocrity. Cowherd contrasted this with Steve Jobs, who (according to Cowherd) continued to innovate to the end of his life.

Both Davis and Jobs have taken leading-edge stances in their industries, often at great risk to their companies and to themselves.

Davis entered into a deal with the devil with the then-dominant National Football League, agreeing to merge the American Football League and National Football League together. If it hadn't been for the success of the New York Jets in Super Bowl 3, it's likely that the old American Football League teams would have been perceived as the junior partner in the merger, losing everything that they had gained. But after the merger, teams such as the Jets, the Pittsburgh Steelers, and the Oakland/Los Angeles/Oakland Raiders held their own in the combined NFL.

Jobs, of course, got thrown out of his own company and started a new company called NeXT. But NeXT did not become a second Apple, at least initially. Regarded by some as a failure, NeXT was available to be acquired by another company. That company turned out to be Apple, and Steve Jobs therefore rejoined Apple, incorporated NeXT technology into Apple's computers, and began a process which admittedly (even to this John Sculley fan) rejuvenated the company.

In both cases, things could have gone terribly wrong, and both the Raiders and Apple have faced adversity throughout the years. But at the end of the day, neither organization was killed because of the bold actions of its leaders.

Which brings us to Netflix and Qwikster. Reed Hastings, in a forward thinking way, decided to bet the future of his company on streaming video, and to split off the older DVD technology to a spinoff company, Qwikster. Oh, and by the way, this was accompanied by an effective price increase. Dan Evon of the Inquisitr describes the reaction:

Qwikster was not a good idea. From the moment it was announced Netflix has lost customers and gained criticism. So much so that the company has decided to abandon its plan to separate Netflix into two services and will revert back to having both its DVD rentals and online streaming services on one website.

Evon links to a New York Times article which quotes Reed Hastings:

"Consumers value the simplicity Netflix has always offered and we respect that. There is a difference between moving quickly -- which Netflix has done very well for years -- and moving too fast, which is what we did in this case."

Now in some quarters, I'm sure that Hastings is being called a st00pid l00ser d00d. After all, Hastings made this big gargantuan move, and then (except for the price hike) had to completely retreat.

But did Hastings really lose in the long term?

Does Facebook lose when they push the feature envelope, only to (sometimes) pull back due to customer anger?

Did Coca-Cola lose over the whole "New Coke" fiasco?

Well, in the short term, Netflix did well:

Netflix Inc. rose as much as 9.6 percent after retreating from a three-week-old decision to split its mail-order DVD and Internet-streaming services, a move that had angered users.

Netflix rose $6.97, or 6 percent, to $124.182 at 10:11 a.m. New York time after touching $128.50 for the biggest intraday gain since Jan. 27. Before today, the stock had tumbled 24 percent since the announcement of the separation.

And in the long term, I'd bet that Netflix will continue to do well.

Yes, they wasted money on preparing to implement a company spinoff that they never implemented. And I'm sure that there are a bunch of Qwikster bumper stickers in a warehouse somewhere, gathering dust.

But Netflix has let the world know that they aren't going to commit to the status quo.

In tech and tech-related industries, your company doesn't want to get the reputation of being stodgy.
blog comments powered by Disqus