Search

11 September 2009 • 7:00 am

Blockbuster and Hollywood Threatened by Redbox

A Redbox kiosk outside a Walgreens. Peter Wynn Thompson for the New York Times

A Redbox kiosk outside a Walgreens. Peter Wynn Thompson for the New York Times

According to an article earlier this week in the New York Times, there will be 22,000 Redbox automated vending kiosks renting DVDs for a dollar a day by December. In the already crowded market for video rentals, Redbox and similar firms are occupying a niche between Blockbuster’s retails stores and Netflix’s rent-by-mail and nascent online streaming services.

With self-service machines, overhead is quite low. Not only do such retail stores as Walgreens, Wal-Mart, and McDonald’s welcome the foot traffic that the kiosks bring, but some are even subsidizing rentals – the article reports that Walgreens has discounts that essentially make the rentals free. So the business model combines the low overhead of Netflix (with no retail stores) with the convenience and spontaneity of any-time impulse rentals (sort of like Blockbuster). And Redbox supports the kiosks with a simple web site that enables its customers to locate machines, view the surprisingly extensive (yet limited) inventory of titles in each machine, and reserve movies online. Very low cost rentals, web-enabled browsing, same day rentals, convenient locations (movies can be returned at any kiosk, not just the one at which it was rented), in short, yet another new value proposition for video rentals.

more

9 September 2009 • 7:00 am

Making Money From Giving Things Away

free_cover_200After a bit of a slog, I am now done reading Free: The Future of A Radical Price (Hyperion; $26.99), by Chris Anderson, editor in chief of Wired magazine. You may have heard of Anderson from his 2006 bestseller, The Long Tail. Anderson’s book hit my radar screen from several directions at once over the summer, including an interview on NPR’s Fresh Air (listen for free) with one of my favorite interviewers, Terry Gross, and a review in the New Yorker (read it for free) by one of my favorite authors, Malcolm Gladwell. When Gross and Gladwell are both talking about the same thing, it is hard for me to resist. So in keeping with the spirit of the topic, I used an old model of free, and got the book from our local public library. Free is also available as an abridged audio book for free (of course), online at http://www.hyperionbooks.com/free.   

Anderson offers an initially breezy, but eventually somewhat tedious journey through the concept of free. Even the word itself (which I swear must appear an average of ten times on each page) has to be parsed – free as in “freedom” and free as in “at no cost.” To ensure our comprehensive understanding of the phenomena of free, Anderson journeys from history into behavioral science, literature (science fiction), and pop culture.

more

8 September 2009 • 7:00 am

Newsflash: Netflix CEO Likes Watching Movies – In Theatres!

the ubiquitous (and soon obsolete) red envelopes
the ubiquitous (and soon obsolete) red envelopes

The Tortoise’s interest (obsession?) with DVD rental company Netflix was renewed recently with a brief but revealing interview with Netflix CEO Reed Hastings on National Public Radio’s Morning Edition program. 

In addition to his candid admission that he likes watching movies – especially comedies – in theatres, Hastings talks a bit about Netflix’s drive to improve its recommendation algorithms, and of course its strategy to reinvent itself (validating our earlier observation) by making obsolete it’s ubiquitous red mailing envelopes. Its future is very much tied to negotiating more deals with movie studies to stream content directly to TVs and computers. But another part of this strategy depends on increasing availability of Wi-Fi equipped televisions. Says Hastings, “I think that we’re on a trajectory over probably 10 years to have nearly everything on streaming. Not just Netflix, but other firms also — and also, to have Wi-Fi built into every television over 10 years.”

more

31 August 2009 • 7:00 am

Size Matters – But is Bigger Always Better?

Economist illustration by by Jon Berkerly

Economist illustration by by Jon Berkerly

The cover story in the U.S. edition of this week’s Economist proclaims that “Big is Back” – that the era in which large companies were on the defensive and the small company model was ascendant is coming to an end. And it is true that big companies have had their share of challenges over the past several years. The U.S. telephone monopoly AT&T was broken up in a court-ordered divestiture in the 1980s. Giants such as Enron, MCI, and Arthur Anderson fell prey to management misbehavior, and formerly powerful financial behemoths such as Merrill Lynch, Bear Stearns, Countrywide Home Finance, and Northern Rock were victims of the implosion of the past few years, and General Motors and Chrysler are meek shadows of their former selves. In an interesting and telling statistic, the Economist asserts that the share of GDP produced by big industrial companies fell from 36% in 1974 to 17% in 1998.

more

21 August 2009 • 7:00 am

The Hypotheses of Strategy

A running theme in these posts has been that of strategy as a hypothesis. I’ve often asserted that all organizations need to change in response to change in the environment; to realize new opportunity and to defend against threat. I’ve said that the organization that fails to change its value proposition will lose relevance, and ultimately become extinct. Most leaders understand intuitively that their job is not only to only to maximize short term results, but to ensure the long-term viability of the organization. Of course, desperate times may cause some leaders to focus excessively on the short-term at the expense of the long term. Balancing focus between the two is one of the great challenges of organizational leadership.

The normal view of strategy as a hypothesis is oriented to the organization itself; a set of assumptions about what the organization should do, and what will happen as a result. Leaders who are engaged in a strategic change program are properly concerned with monitoring those things that are (nominally) within their control; the actions of the enterprise and its constituent parts. Measurement systems, dashboards, and balanced scorecards convey in effective detail the intent of the strategy (through the selection of measures), and the extent to which the hypothesis is playing out (the actual value of the measures relative to established targets). This is all well and good. But it is a disturbingly short sighted view of strategy.

more

5 August 2009 • 7:00 am

Technology Happens – And An Industry Collapses

(Copyright 2009 The New York Times Company)

(Copyright 2009 The New York Times Company)

Those of you reading Monday’s post about the mystery industry whose distribution methods kept evolving and cannibalizing older versions can now view the rest of the story. As presented in an op-ed piece by columnist Charles M. Blow in last Saturday’s New York Times, the graphic shows the demise of the traditional recorded music industry in ‘graphic’ detail. It’s another example of the power of thoughtful graphic design.

more

29 July 2009 • 7:00 am

Competition and Collaboration from Netflix

Netflix prize web page

Netflix prize web page

The Tortoise’s fascination with Netflix was enhanced with the news yesterday that Netflix’s public competition to improve the effectiveness of its recommendation system has drawn to a close with two teams essentially tied for the prize. But each of the two teams are actually consortia; teams comprised of other teams. Netflix has harnessed the power of competition and collaboration to solve a challenging business problem.

Subscribers to Netflix are asked to rate (on a scale from one to five stars) each movie they’ve rented, and are even able to rate movies seen in theatres or elsewhere. The data base of millions of individual ratings are used to predict and recommend movies to individual subscribers. The system works pretty well; around two thirds of all rental decisions made by Netflix subscribers are the result of a computer-generated recommendation.

more

6 July 2009 • 7:00 am

Poached Frogs and the Capacity for Change

If you drop a frog in a pot of boiling water, it will of course frantically try to clamber out. But if you place it gently in a pot of tepid water and turn the heat on low, it will float there quite placidly. As the water gradually heats up, the frog will sink into a tranquil stupor, exactly like one of us in a hot bath, and before long, with a smile on its face, it will unresistingly allow itself to be boiled to death.

So goes the often cited and vividly unfortunate metaphor of the poached frog, which is used so often in business settings that it has become a tired cliché. James Fallows of the Atlantic Monthly has even devoted an entire series of blog posts devoted to the worthy cause of banishing its use, and the myth has been busted by scientists and journalists alike, notably in Issue 1 of Fast Company. I confess to having succumbed to the lure of using the poached frog story myself, but I have since foresworn using it, and encourage you to do the same.

more

3 July 2009 • 7:00 am

Evolution and Your Brain; Strategic Planning and Dental Floss

Our brains are not helping us as strategic planners. That’s my take-away from an interesting op-ed column yesterday by New York Times writer Nicholas Kristof. Kristof summarizes some academic research that tells us what may be obvious to many; that the human brain is not very good at judging risk. Evolution has made us far better at responding to immediate threats, like snakes or enemies with clubs, than to prospectively greater dangers in the future. According to Kristof, this hypothesis is worthy of note given our apparently tepid response to the risks of climate change compared with the apparently terrifying prospect of former Guantánamo Bay inmates being transferred to high-security prisons on U.S. soil.
more

22 June 2009 • 7:11 am

Cascading Conundrums – Part III

In Parts I and II of this topic, I asserted that cascading a balanced scorecard (BSC) across an organization is a process that requires careful planning, and thoughtful answers to the ‘When’, ‘Why’, and ‘Where’ questions. I cautioned that hastily planned cascading can derail the entire change program. Here, we conclude with the final three questions a leadership team should consider before cascading strategy across the organization.
more