Failure to Execute

Business leaders spend lots of time and brainpower selecting the best strategy to follow. Often, they spend inordinate amounts of time searching for the best strategy, instead of using that time to deploy a good strategy. The truth is that unless one strategy is clearly superior (and thus should be easily and quickly selected), a good strategy implemented today beats a marginally better one tomorrow.

But whatever strategy one follows, execution is still crucial. Behold Netflix.

By many accounts, they chose a strategy that made sense. Netflix started life in 1997 as a purveyor of DVDs, and quickly became the leader in movies-by-mail. Within 10 years there were 10 million subscribers. Now they have 23 million. Stock price, revenues and profit went through the roof.

But as Netflix grew, so did the demand for streaming video. Different from their successful core business, Netflix chose a strategy: disconnect the two businesses, have separate pricing for each, keep the Netflix name and website for the streaming business and launch a new website—Qwikster— for the movies-by-mail.

And then began a comedy of errors. First, they announced a 60% price increase for customers who wanted both movies-by-mail and streaming. This caused a rush for the exits by many customers. Then, they ham-handedly announced the two website-two accounts plan for separating their legacy business from what they consider to be the future business of streaming. More customer outrage led to a midnight e-mail to customers from CEO Reed Hastings apologizing for not communicating the change better, as well as attempting to explain the logic and benefits of the new Qwikster/Netflix strategy.

That only seemed to fan the flames, and ultimately, Hastings was forced to announce that Netflix would remain the sole brand, and Qwikster was relegated to history’s scrap heap. Meanwhile, in the 3 months of this botched execution, Netflix stock lost 2/3rds of its value.

Pundits will argue whether the strategy was flawed or genius, but there is no argument about the execution: it was just plain lousy.

The Netflix story has lessons for everyone involved in leading a company: Make sure you spend as much time on your execution plan as you do selecting a strategy, and once you select a strategy, communicate it clearly and often to make sure customers understand it. And never, ever embark on a strategy without considering how customers will respond.

Today’s Fact-Cetera

Tolstoy’s War and Peace was originally titled All’s Well That Ends Well.

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