Netflix backs off - a little - from their radical restructuring

This appeared on the New York Times Media Decoder blog this morning:

Abandoning a break-up plan it announced last month, Netflix said Monday morning that it had decided to keep its DVD-by-mail and online streaming services together under one name and one Web site.

The company admitted that it had moved too fast when it tried to spin-off the old-fashioned DVD service into a new company called Qwikster.

“We underestimated the appeal of the single web site and a single service,” Steve Swasey, a Netflix spokesman, said in a telephone interview. He quickly added: “We greatly underestimated it.”

Mr. Swasey said that the Netflix chief executive Reed Hastings declined an interview request. But in a statement, Mr. Hastings said, “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.”

Others will likely pile on with criticism of the change, its timing, the original decision, etc. I, for one, respect them for adjusting quickly. And it will be interesting to see what, exactly, Netflix does look like 4 or 5 years from now.

Related post: Reed Hastings: "I messed up" in communicating price increases

Mistake: Being Too Small. Solution: "Look Bigger"

This post by Scott Weiss of Andreesen Horowitz doesn't dwell on a mistake as much as recovering from one. As a tech startup selling to large enterprises, Scott's company IronPort learned that they were being disqualified from consideration because of their size alone. [This is an issue faced by B2B-focused startups everywhere.] As one prospect stated: “We like what you guys are doing but there’s no way we’d replace the aorta of our communications infrastructure with a beta box from a 20-person startup.”

So: the mistake, as Scott and his fellow leaders determined, was acting small. Now, the fascinating part: Scott goes into great detail about what they did to fix their mistake.

We felt like the little kid that kept getting turned away at the height chart at the rollercoaster—we can handle the ride, just give us a chance! Somehow, we had to find a way to look bigger and more credible quickly. After an intense brainstorming session, we hit upon a really important concept: since perception was reality, any weakness that the customer couldn’t see and couldn’t touch did not exist. By being absolutely maniacal about each of our customer touch points, we would appear to be far bigger than we were. No matter how rinky-dink the “man behind the curtain” was, it didn’t matter because the Great Oz would be massively impressive.

What IronPort did to change how they were perceived included both surface items (website design, business cards, custom faceplates for their servers) and, most profoundly, operational strategies and tactics:

All of these details mattered, but the key to the entire plan to make our little company appear big was to perform like the very best large companies. For us, this meant dramatically beefing up customer care (CC). In general and especially in high tech, CC had been a backwater—treated like a cost center to be minimized. Since this was arguably the most important early customer touch point, we took a completely opposite approach: we treated it like a marketing expense. With a firm belief that this was the primary catalyst for word of mouth, we invested heavily in the entire post-sale ecosystem. Our approach was to answer email inquiries instantly and telephone calls on the second ring with little to no hold time. We concentrated on how to deliver the best possible experience first and then went back and figured out how to cost-optimize it later

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To me, it's very instructive that customer service was the key operational area that made IronPort appear bigger than they actually were. Telling the board and investors that they needed to staff up in customer service must have been a difficult discussion. But, as Scott points out, support was the most visible aspect of their service offering to customers; therefore, it needed to be world-class if they were to be viewed that way. I have never read a better business case for excellent customer service before (and I've read a few).

There's more elaboration on all these items in Scott's entire post.

Mistake mini-story: Petite Palate

This story is excerpted from a NY Times article, "How Six Companies Failed to Survive 2010." It's about the demise of Petite Palate, a specialty baby-food company.

AT ITS PEAK In the spring of 2007, Petite Palate’s organic frozen baby food was sold on Amazon Grocery and in about 100 stores in the Northeast and Midwest. The founders, Lisa Beels, a personal chef, and Christine Naylor, a former cookbook publicist, were presenting their business plan to potential investors, hoping to raise $2.5 million to $5 million.

WHAT WENT WRONG In the fall of 2008, potential investors, skittish about the economy, pulled out. The company was struggling to get its products into the freezer section of grocery stores — yet Ms. Beels and Ms. Naylor stuck to their concept because they believed frozen food was healthier for children than food in jars or pouches.

LOOKING BACK Ms. Beels said she and Ms. Naylor should have been more open to producing shelf-stable formulations. “It took us a long time to acknowledge that and by then we were in debt and couldn’t support the company,” Ms. Beels said. Her new personal chef business is called Haute Palate.

[Hat tip Tim Berry]

A product killed by poor packaging

When John Caddell first became a product manager, he thought his MBA had prepared him for the jump from software development into the marketing world. He still had a lot to learn, as became obvious when he had to create pricing for a new product.

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