Tag Archives: Netflix

How Incumbents Can React to Disruption

GUEST POST from Geoffrey A. Moore

Think back a couple of years and imagine …

You are Jim Farley at Ford, with Tesla banging at the door. You are Bob Iger at Disney with Netflix pounding on the gates. You are Pat Gelsinger at Intel with Nvidia invading your turf. You are virtually every CEO in retail with Amazon Prime wreaking havoc on your customer base. So, what are you supposed to do now?

The answer I give in Zone to Win is that you have to activate the Transformation Zone. This is true, but it is a bit like saying, you have to climb a mountain. It begs the question, How?

There are five key questions executives facing potential disruption must ask:

1. When?

If you go too soon, your investors will lose patience with you and desert the ship. If you go too late, your customers will realize you’re never really going to get there, so they too, reluctantly, will depart. Basically, everybody gets that a transformation takes more than one year, and no one will give you three, so by default, when the window of opportunity to catch the next wave looks like it will close within the next two years, that’s when you want to pull the ripcord.

2. What does transformation really mean?

It means you are going to break your established financial performance covenants with your investors and drastically reduce your normal investment in your established product lines in order to throw your full weight behind launching yourself into the emerging fray. The biggest mistake executives can make at this point is to play down the severity of these actions. Believe me, they are going to show, if not this quarter, then soon, and when they do, if you have not prepared the way, your entire ecosystem of investors, partners, customers, and employees are going to feel betrayed.

3. What can you say to mitigate the consequences?

Simply put, tell the truth. The category is being disrupted. If we are to serve our customers, we need to transition our business to the new technology. This is our number one priority, we have clear milestones to measure our progress, and we plan to share this information in our earnings calls. In the meantime, we continue to support our core business and to work with our customers and partners to address their current needs as well as their future roadmaps.

4. What is the immediate goal?

The immediate goal is to neutralize the threat by getting “good enough, fast enough.” It is not to leapfrog the disruptor. It is not to break any new ground. Rather, it is simply to get included in the category as a fast follower, and by so doing to secure the continuing support of the customer base and partner ecosystem. The good news here is that customers and partners do not want to switch vendors if they can avoid it. If you show you are making decent progress against your stated milestones, most will give you the benefit of the doubt. Once you have gotten your next-generation offerings to a credible state, you can assess your opportunities to differentiate long-term—but not before.

5. In what ways do we act differently?

This is laid out in detail in the chapter on the Transformation Zone in Zone to Win. The main thing is that supporting the transformation effort is the number one priority for everyone in the enterprise every day until you have reached and passed the tipping point. Anyone who is resisting or retarding the effort needs to be counseled to change or asked to leave. That said, most people will still spend most of their time doing what they were doing before. It is just that if anyone on the transformation initiative asks anyone else for help, the person asked should do everything they can to provide that help ASAP. Executive staff meetings make the transformation initiative the number one item on the agenda for the duration of the initiative, the goal being at each session to assess current progress, remove any roadblocks, and do whatever possible to further accelerate the effort.

Conclusion

The net of all of the above is transformation is a bit like major surgery. There is a known playbook, and if you follow it, there is every reason to expect a successful outcome. But woe to anyone who gets distracted along the way or who gives up in discouragement halfway through. There is no halfway house with transformations—you’re either a caterpillar or a butterfly, there’s nothing salvageable in between.

That’s what I think. What do you think?

Image Credit: Slashgear.com

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The Crisis Innovation Trap

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Why Proactive Innovation Wins

LAST UPDATED: September 3, 2025 at 12:00PM
The Crisis Innovation Trap

by Braden Kelley and Art Inteligencia

In the narrative of business, we often romanticize the idea of “crisis innovation.” The sudden, high-stakes moment when a company, backed against a wall, unleashes a burst of creativity to survive. The pandemic, for instance, forced countless businesses to pivot their models overnight. While this showcases incredible human resilience, it also reveals a dangerous and costly trap: the belief that innovation is something you turn on only when there’s an emergency. As a human-centered change and innovation thought leader, I’ve seen firsthand that relying on crisis as a catalyst is a recipe for short-term fixes and long-term decline. True, sustainable innovation is not a reaction; it’s a proactive, continuous discipline.

The problem with waiting for a crisis is that by the time it hits, you’re operating from a position of weakness. You’re making decisions under immense pressure, with limited resources, and with a narrow focus on survival. This reactive approach rarely leads to truly transformative breakthroughs. Instead, it produces incremental changes and tactical adaptations—often at a steep price in terms of burnout, strategic coherence, and missed opportunities. The most successful organizations don’t innovate to escape a crisis; they innovate continuously to prevent one from ever happening.

The Cost of Crisis-Driven Innovation

Relying on crisis as your innovation driver comes with significant hidden costs:

Reactive vs. Strategic: Crisis innovation is inherently reactive. You’re fixing a symptom, not addressing the root cause. This prevents you from engaging in the deep, strategic thinking necessary for true market disruption.
Loss of Foresight: When you’re in a crisis, all attention is on the immediate threat. This short-term focus blinds you to emerging trends, shifting customer needs, and new market opportunities that could have been identified and acted upon proactively.
Burnout and Exhaustion: Innovation requires creative energy. Forcing your teams into a constant state of emergency to innovate leads to rapid burnout, high turnover, and a culture of fear, not creativity.
Suboptimal Outcomes: The solutions developed in a crisis are often rushed, inadequately tested, and sub-optimized. They are designed to solve an immediate problem, not to create a lasting competitive advantage.

“Crisis innovation is a sprint for survival. Proactive innovation is a marathon for market leadership. You can’t win a marathon by only practicing sprints when the gun goes off.”

Building a Culture of Proactive, Human-Centered Innovation

The alternative to the crisis innovation trap is to embed innovation into your organization’s DNA. This means creating a culture where curiosity, experimentation, and a deep understanding of human needs are constant, not sporadic. It’s about empowering your people to solve problems and create value every single day.

Embrace Psychological Safety: Create an environment where employees feel safe to share half-formed ideas, question assumptions, and even fail. This is the single most important ingredient for continuous innovation.
Allocate Dedicated Resources: Don’t expect innovation to happen in people’s spare time. Set aside dedicated time, budget, and talent for exploratory projects and initiatives that don’t have an immediate ROI.
Focus on Human-Centered Design: Continuously engage with your customers and employees to understand their frustrations and aspirations. True innovation comes from solving real human problems, not just from internal brainstorming.
Reward Curiosity, Not Just Results: Celebrate learning, even from failures. Recognize teams for their efforts in exploring new ideas and for the insights they gain, not just for the products they successfully launch.

Case Study 1: Blockbuster vs. Netflix – The Foresight Gap

The Challenge:

In the late 1990s, Blockbuster was the undisputed king of home video rentals. It had a massive physical footprint, brand recognition, and a highly profitable business model based on late fees. The crisis of digital disruption and streaming was not a sudden event; it was a slow-moving signal on the horizon.

The Reactive Approach (Blockbuster):

Blockbuster’s management was aware of the shift to digital, but they largely viewed it as a distant threat. They were so profitable from their existing model that they had no incentive to proactively innovate. When Netflix began gaining traction with its subscription-based, DVD-by-mail service, Blockbuster’s response was a reactive, half-hearted attempt to mimic it. They launched an online service but failed to integrate it with their core business, and their culture remained focused on the physical store model. They only truly panicked and began a desperate, large-scale innovation effort when it was already too late and the market had irreversibly shifted to streaming.

The Result:

Blockbuster’s crisis-driven innovation was a spectacular failure. By the time they were forced to act, they lacked the necessary strategic coherence, internal alignment, and cultural agility to compete. They didn’t innovate to get ahead; they innovated to survive, and they failed. They went from market leader to bankruptcy, a powerful lesson in the dangers of waiting for a crisis to force your hand.

Case Study 2: Lego’s Near-Death and Subsequent Reinvention

The Challenge:

In the early 2000s, Lego was on the brink of bankruptcy. The brand, once a global icon, had become a sprawling, unfocused company that was losing relevance with children increasingly drawn to video games and digital entertainment. The company’s crisis was not a sudden external shock, but a slow, painful internal decline caused by a lack of proactive innovation and a departure from its core values. They had innovated, but in a scattered, unfocused way that diluted the brand.

The Proactive Turnaround (Lego):

Lego’s new leadership realized that a reactive, last-ditch effort wouldn’t save them. They saw the crisis as a wake-up call to fundamentally reinvent how they innovate. Their strategy was not just to survive but to thrive by returning to a proactive, human-centered approach. They went back to their core product, the simple plastic brick, and focused on deeply understanding what their customers—both children and adult fans—wanted. They launched several initiatives:

Re-focus on the Core: They trimmed down their product lines and doubled down on what made Lego special—creativity and building.
Embracing the Community: They proactively engaged with their most passionate fans, the “AFOLs” (Adult Fans of Lego), and co-created new products like the highly successful Lego Architecture and Ideas series. This wasn’t a reaction to a trend; it was a strategic partnership.
Thoughtful Digital Integration: Instead of panicking and launching a thousand digital products, they carefully integrated their physical and digital worlds with games like Lego Star Wars and movies like The Lego Movie. These weren’t rushed reactions; they were part of a long-term, strategic vision.

The Result:

Lego’s transformation from a company on the brink to a global powerhouse is a powerful example of the superiority of proactive innovation. By not just reacting to their crisis but using it as a catalyst to build a continuous, human-centered innovation engine, they not only survived but flourished. They turned a painful crisis into a foundation for a new era of growth, proving that the best time to innovate is always, not just when you have no other choice.

Eight I's of Infinite Innovation

The Eight I’s of Infinite Innovation

Braden Kelley’s Eight I’s of Infinite Innovation provides a comprehensive framework for organizations seeking to embed continuous innovation into their DNA. The model starts with Ideation, the spark of new concepts, which must be followed by Inspiration—connecting those ideas to a compelling, human-centered vision. This vision is refined through Investigation, a process of deeply understanding customer needs and market dynamics, leading to the Iteration of prototypes and solutions based on real-world feedback. The framework then moves from development to delivery with Implementation, the critical step of bringing a viable product to market. This is not the end, however; it’s a feedback loop that requires Invention of new business models, a constant process of Improvement based on outcomes, and finally, the cultivation of an Innovation culture where the cycle can repeat infinitely. Each ‘I’ builds upon the last, creating a holistic and sustainable engine for growth.

Conclusion: The Time to Innovate is Now

The notion of “crisis innovation” is seductive because it offers a heroic narrative. But behind every such story is a cautionary tale of a company that let a problem fester for far too long. The most enduring, profitable, and relevant organizations don’t wait for a burning platform to jump; they are constantly building new platforms. They have embedded a culture of continuous, proactive innovation driven by a deep understanding of human needs. They innovate when times are good so they are prepared when times are tough.

The time to innovate is not when your stock price plummets or your competitor launches a new product. The time to innovate is now, and always. By making innovation a fundamental part of your business, you ensure your organization’s longevity and its ability to not just survive the future, but to shape it.

Image credit: Pixabay

Content Authenticity Statement: The topic area and the key elements to focus on were decisions made by Braden Kelley, with help from Google Gemini to shape the article and create the illustrative case studies.

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What is Digital Transformation anyway?

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Digital Transformation is the third wave of digital evolution.

What is Digital Transformation anyway?

GUEST POST from Howard Tiersky

The first wave was brochureware. Enterprises created websites that communicated their story. As simple as this idea is, it was revolutionary. The business value of providing instant sales and marketing material at the click of a mouse is hugely valuable.

The second wave was eCommerce. Enterprises connected customer-facing digital front-ends to their back-end systems, so that customers could engage in transactions directly via their browser or mobile device. This wave generated much more value than brochureware, because it reduced the cost of customer interaction, and removed friction from the user experience. Businesses who have mastered eCommerce have been able to trump former market leaders. In today’s world, if you can’t provide elegant digital options for the customer throughout their entire journey, you’re toast.

Now we find ourselves in the third wave: Digital Transformation. eCommerce added new pathways for pre-existing offerings, but companies going through digital transformation need to reinvent themselves for a digital age. Netflix made the transition from being a mail-order company to a streaming company. Though they still focus on their core value proposition of providing extended choices and increased convenience, their entire solution offering had to shift, along with their customer experience, pricing, contracts with suppliers, marketing, and more. Furthermore, given new methods of interacting with the consumer, it became practical for them to focus serious resources on content creation, as well. While the Netflix DVD-by-mail service was definitely eCommerce enabled (i.e. you could order DVDs via their web site), their digitally transformed value proposition is fundamentally impossible without digital.

Uber is doing the same thing for transportation. While plenty of taxi and limousine companies have apps that allow you to order their vehicles, Uber created a business model that was completely digitally focused. This meant that they didn’t need to own any vehicles or hire any drivers to become the largest ground transportation company in the world. It’s worth noting that Uber didn’t really go through a digital transformation, it was born digital. Digital Transformation is what pre-digital companies must undertake to compete in the newest wave of the digital age.

But even those companies that are “born digital” will need to focus on ongoing transformation. There are multiple examples of early digital successes, companies like Yahoo and MySpace, that failed to continue to transform.

Digital Transformation also requires a different mindset around where digital “lives” within the organization. You can visualize the way digital transformation works in the enterprises like this:

Wave 1 – Brochureware: Digital was part of marketing.
Wave 2 – eCommerce: Digital is a support service, creating digital pathways to pre-existing services like ordering, customer support, and billing.
Wave 3 – Digital Transformation: Digital reimagines the entire value proposition and business model of the company.

The goal of Digital in Wave 2 is to support the strategy and operations of the company by augmenting non-digital channels with more efficient and elegant digital alternatives. But in Wave 3, digital is driving the bus. The entire company — its value proposition and business model — is reimagined with digital at the center. This requires some substantial shifts in organizational structure, roles, and mindset; these shifts make companies hesitant to move towards true digital transformation. They engage in what is sometimes called Digital Decoration, that makes them seem progressive while protecting the “integrity” of their legacy business structures.

This is a losing strategy. There’s a long history of companies who decided to protect their existing models over supporting new ones. Kodak suffocated its early digital camera products; Blockbuster resisted focusing on digital delivery of entertainment. Western Union scoffed at the telephone.

In fact, here’s an example of an internal memo sent at Western Union:

“Why would any person want to use this ungainly and impractical device [a telephone] when he can send a messenger to the telegraph office and have a clear written message sent to any large city in the United States?”

Western Union opted out of the “digital transformation” of its era and I predict the same outcome for pre-digital companies who take a similar approach.

This article originally appeared on the Howard Tiersky blog
Image Credit: Pexels

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What Disruptive Innovation Really Is

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What Disruptive Innovation Really Is

GUEST POST from Geoffrey A. Moore

I recently read an article in ZDnet by Sherin Shibu discussing disruptive innovation, primarily through the lens of Clay Christensen’s work at the Harvard Business School. The article itself is very sound, and yet I found myself disagreeing with it on a number of points. In this blog, I want to interleave what Shibu says (presented in standard font) with my own commentary (inserted in italics) so that readers can develop their own point of view from the interaction.

What is disruptive innovation?

Disruptive innovation theory is a cautionary concept for large, established companies: There’s danger in becoming too good at what you do best. Delivering to the mainstream market is good and all, but a disruptor could target a market underserved by your current product with a new business model.

For me, disruptive innovation has a much bigger footprint because it also underlies virtually all venture capital investment. Its fundamental promise is to release an enormous amount of trapped value by reengineering an established system or process. The reason it is a cautionary concept for large established companies is that they are the custodians of the legacy systems and processes that are trapping the value. Yes, they can reduce the overhead by optimizing what they have, but no, they cannot compete with a categorically better way of doing things.

Harvard Business School professor Clayton Christensen developed the concept of disruptive innovation in the 1990s with his groundbreaking book The Innovator’s Dilemma, and the theory became wildly popular in the decades to follow. But in some respects it has become a victim of its own success: “Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied,” notes The Harvard Business Review.

Disruptive innovation is a process by which entrepreneurs break into a low-end or new market and create business models that are different from existing ones in those markets. Disruption has occurred when their business model becomes mainstream.

So, a new company targets an overlooked customer base — and manages to deliver a better product at a lower price point. At first, the incumbents don’t take the threat seriously, which allows the potential disruptors to gain a foothold. Then the disruptors target the incumbents’ mainstream customers. If the potential disruptors create something that the mainstream adopts in volume, they have successfully disrupted the market.

I think this reading of the model overemphasizes the need to attack the low end of the market. Yes, that is a proven path, but it is not the only one. The iPhone disrupted from the high end, for example, as has Tesla.

What is disruptive innovation not?

Defining disruptive innovation isn’t easy and not everyone is going to agree on every example. Classic disruptive innovation should not simply describe just any situation of upheaval. If a new company shakes things up a bit for incumbent competitors, that scene is not necessarily one of disruptive innovation — that could simply be a breakthrough. In order for this theory to have power and be used as an analytical and predictive model, it needs to be precisely defined.

My definition of disruptive innovation is one that overthrows and is incompatible with the existing business model or operating model of an industry. In the case of the iPhone, it was Apple’s ability to go over the top of the carrier to provide products and services directly to the consumer. In the case of Tesla, it is its ability to bypass the dealership model not only in sales but in services as well.

Christensen, for example, argued that Uber is not a disruptive innovator according to his definition. It fails to meet two requirements, in that it did not start in a low-end or new market. Instead, it built a name for itself in a mainstream market and then started drawing unserved customers with less expensive solutions. And being less expensive or creating an app to hail rides sustains the existing model rather than disrupts.

This is just wrong and shows the limitations of the “start at the low end” concept. Uber reengineered both the operating model and the business model of on-demand car transportation, allowing consumers to call a taxi to themselves, and allowing Uber to build a fleet of cars and drivers at no capital expense.

Not everyone thinks that’s the case and other perspectives can be found that argue Uber actually is a disruptive innovator. From this perspective, Uber started with a low-market foothold by offering on-demand black car services. It was only when the startup introduced UberX, a low-end market offering, that it was able to move into the mainstream.

What counts as disruption is up for debate, especially as Christensen’s theory is applied to shifting contexts.

In the case of Uber, focusing on the low end simply misses the point.

Why is it important to define disruptive innovation?

Disruption isn’t a fixed point; it’s the evolution of a product or service from the fringes of customers to the mainstream. It’s important to define it this way because then it becomes more about the experimental nature of the process than about the output. See, disruptive innovations don’t always succeed and not every successful company is a disruptor. The process is about building new business models previously unseen in the target industry and appealing to a more niche customer base at first.

In my view, disruptive innovation is a function of a breakthrough technology intersecting with a pool of trapped value, enabling the reengineering of a system or process that eliminates one or more whole categories of spend in its value chain. It is a categorical innovation as opposed to a product or marketing innovation.

Is disruptive innovation the primary way innovation operates?

No, it is not the primary factor of innovation. According to HBR, “disruption theory does not, and never will, explain everything about innovation specifically or business success generally.” It does, however, help predict which businesses will succeed and it provides a solid foundation for further research – it’s captured academic attention for 27 years.

I agree with the point that disruptive innovation is not the primary type. Most innovation is sustaining, meaning that it improves an existing system rather than overthrowing it—evolution, not revolution. What I disagree with wholeheartedly, on the other hand, is the notion that the theory helps predict which businesses will succeed. Historically, the advantage has gone to start-ups because they are unconflicted in their commitment to the new way. Established enterprises, however, have learned that they can neutralize start-ups if they are willing to be fast followers. Microsoft’s Azure is a superb example of a company that has done this. Disney’s response to Netflix is another good example, and it appears as if General Motors is on a comparable path toward neutralizing Tesla.

What is an example of disruptive innovation?

Netflix was around since 1997, and at first, it didn’t appeal to Blockbuster’s core clientele. Renting movies usually happened in person, and Netflix was all online. Plus, Netflix took a few days to deliver movies because selections came through the mail. Blockbuster could easily ignore Netflix because it didn’t have the brick-and-mortar infrastructure needed to dominate the market at that time.

This glosses over what was the initial disruptive innovation that Netflix provided with its home delivery model based on DVDs. The key differentiator at the beginning was designing out late fees.

Over time though, as streaming technology developed, Blockbuster’s target clients were drawn toward Netflix. The same impulsiveness that made renting a movie right away more desirable than getting a movie a few days later translated into wanting to watch movies with a click of a mouse instead of going to a physical location to rent a DVD. Disruptive innovation technology, in this case, streaming, goes hand in hand with implementing innovation.

There is another story playing out in Netflix’s transition from DVD shipping to streaming. It required the company to disrupt itself. This is an extraordinary ask, as most successful disruptive innovations attack someone else’s profit pool, not one’s own. Reed Hastings deserves enormous credit for leading the company through this change, and I would encourage the academy to focus its research lens on how in the world he was able to do so when so many CEOs have fallen short.

Are there any disruptive innovation technologies to keep an eye on?

Online learning is a technology to watch because it’s reaching a population that in-person learning can’t reach at a lower price point.

The main technologies to keep an eye on are the ones that tackle an underserved market and have the potential to expand their offerings to appeal to the mainstream.

Something like autonomous vehicles, for example, can seem innovative, but they aren’t disruptive according to the theory because they’ll be quickly absorbed into existing industries. The incumbent advantage is strong.

The important thing to remember is that innovation does not always lead to disruption.

I strongly support the idea that online education delivery has the power to disrupt the education market—again, a breakthrough technology intersecting with a boatload of trapped value. I think the point about autonomous vehicles is interesting as well because I agree they will be absorbed into the existing industries. But while they may not disrupt the automotive industry, I do think they can reengineer transportation and logistics.

Overall, I support Shibu’s main thesis which is that we have come to take disruptive innovation for granted and have become careless with how we apply the term. And while we part ways on how best to apply it, I still endorse Clay’s breakthrough insights in The Innovator’s Dilemma, which had a huge impact on a whole generation of companies in Silicon Valley.

That’s what I think. What do you think?

Image Credit: Pexels

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The Reality Behind Netflix’s Amazing Success

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The Reality Behind Netflix's Amazing Success

GUEST POST from Greg Satell

Today, it’s hard to think of Netflix as anything but an incredible success. Its business has grown at breakneck speed and now streams to 190 countries, yet it has also been consistently profitable, earning over $12 billion last year. With hit series like Orange is the New Black and Stranger Things, it broke the record for Emmy Nominations in 2018.

Most of all, the company has consistently disrupted the media business through its ability to relentlessly innovate. Its online subscription model upended the movie rental business and drove industry giant Blockbuster into bankruptcy. Later, it pioneered streaming video and introduced binge watching to the world.

Ordinarily, a big success like Netflix would offer valuable lessons for the rest of us. Unfortunately, its story has long been shrouded in myth and misinformation. That’s why Netflix Co-Founder Marc Randolph’s book, That Will Never Work, is so valuable. It not only sets the story straight, it offers valuable insight into how to create a successful business.

The Founding Myth

Anthropologists have long been fascinated by origin myths. The Greek gods battled and defeated the Titans to establish Olympus. Remus and Romulus were suckled by a she-wolf and then established Rome. Adam and Eve were seduced by a serpent, ate the forbidden fruit and were banished from the Garden of Eden.

The reason every culture invents origin myths is that they help make sense of a confusing world and reinforce the existing order. Before science, people were ill-equipped to explain things like disease and natural disasters. So, stories, even if the were apocryphal, gave people comfort that there was a rhyme and reason to things.

So it shouldn’t be surprising that an unlikely success such as Netflix has its own origin myth. As legend has it, Co-Founder Reed Hastings misplaced a movie he rented and was charged a $40 dollar late fee. Incensed, he set out to start a movie business that had no late fees. That simple insight led to a disruptive business model that upended the entire industry.

The truth is that late fees had nothing to do with the founding of Netflix. What really happened is that Reed Hastings and Marc Randolph, soon to be unemployed after the sale of their company, Pure Atria, were looking to ride the new e-commerce wave and become the “Amazon of” something. Netflix didn’t arise out of a moment of epiphany, but a process of elimination.

The Subscription Model Was an Afterthought

Netflix really got its start through a morning commute. As Pure Atria was winding down, Randolph and Hastings would drive together from Santa Crux on Highway 17 over the mountain into Silicon Valley. It was a long drive, which gave them lots of time to toss around e-commerce ideas that ranged from customized baseball bats to personalized shampoo.

The reason they eventually settled on movies was the introduction of DVD’s. In 1997, there were very few titles available, so stores didn’t stock them. They were also small and light and were easy to ship. Best of all, the movie studios recognized that they had made a mistake pricing movies on videotape too high and planned to offer DVD’s at a level consumers would buy them.

In the beginning, Netflix earned most of its money selling movies, not renting them. However, before long they realized that it was only a matter of time before Amazon and Walmart began selling DVD’s as well. Once that happened, it was unlikely that Netflix would be able to compete, and they would have to find a way to make the rental model work.

The subscription model began as an experiment. No one seemed to want to rent movies by mail, so they were desperate to find a different model and kept trying things until they hit on something that worked. It wasn’t part of a master plan, but the result of trial and error. “If you would have asked me on launch day to describe what Netflix would eventually look like,” Randolph wrote, “I would have never come up with a monthly subscription service.”

The Canada Principle

As Netflix began to grow it was constantly looking for ways to grow its business. One idea that continually came up was expanding to Canada. It’s just over the border, is largely English speaking, has a business-friendly regulatory environment and shares many cultural traits with the US. It just seemed like an obvious way to increase sales.

Yet they didn’t do it for two reasons. First, while Canada is very similar to the US, it is still another country, with its own currency, laws and other complicating factors. Also, while English is commonly spoken in most parts of Canada, in some regions French predominates. So, what looked simple at first had the potential to become maddeningly complex.

The second and more important reason was that it would have diluted their focus. Nobody has unlimited resources. You only have a certain number of people who can do a certain number of things. For every Canadian problem they had to solve, that was one problem that they weren’t solving in the much larger US business.

That became what Randolph called the “Canada Principle,” or the idea that you need to maximize your focus by limiting the number of opportunities that you pursue. It’s why they dropped DVD sales to focus on renting movies and then dropped a la carte rental to focus on the subscription business. That singularity of focus played a big part in Netflix’s success.

Nobody Knows Anything

Randolph’s mantra throughout the book is that “nobody knows anything.” He borrowed the phrase from the writer William Goldman’s memoir Adventures in the Screen Trade. What Goldman meant was that nobody truly knows how a movie will do until it’s out. Some movies with the biggest budgets and greatest stars flop, while some of the unlikeliest indy films are hits.

For Randolph though, it’s more of a guiding business philosophy. “For every good idea,” he says, “there are a thousand bad ideas it is indistinguishable from.” The only real way to tell the difference is to go out and try them, see what works, discard the failures and build on the successes. You have to, in other words, dare to be crap.

Over the years, I’ve had the chance to get to know hundreds of great innovators and they all tell a different version of the same story. While they often became known for one big idea, they had tried thousands of others before they arrived at the one that worked. It was perseverance and a singularity of focus, not a sudden epiphany, that made the difference.

That’s why the myth of the $40 late fee, while seductive, can be so misleading. What made Netflix successful wasn’t just one big idea. In fact, just about every assumption they made when they started the company was wrong. Rather, it was what they learned along the way that made the difference. That’s the truth of how Netflix became a media powerhouse.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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Shedding Old Habits for New Possibilities

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Unlearning to Learn

Shedding Old Habits for New Possibilities

GUEST POST from Art Inteligencia

In a world characterized by exponential change — where AI capabilities evolve every quarter and market demands shift before the quarterly report is filed — learning is often cited as the key to survival. Yet, leaders consistently overlook the prerequisite for true innovative learning: Unlearning. As a human-centered change and innovation thought leader, I contend that the greatest obstacle to embracing new possibilities isn’t a lack of knowledge or resources; it’s the weight of what we already know. Our past successes, entrenched processes, and deeply held technical expertise act as cognitive anchors, preventing us from navigating uncharted waters.

Unlearning is the deliberate process of discarding obsolete information, mindsets, and behavioral routines that are no longer relevant to the current reality. It is not forgetting, but rather making room for new knowledge by consciously retiring outdated, suboptimal habits. This is a profound human and organizational challenge. We are biologically wired to favor efficiency and certainty, meaning our brains prefer to use existing cognitive pathways. For organizations, this manifests as organizational memory bias, where past triumphs dictate future strategy, causing us to learn a new tool but insist on applying it using the old, linear process. The key is shedding the old process.

The Three Strategic Imperatives of Unlearning

For organizations to transform unlearning from an abstract concept into a strategic advantage, they must focus on three core imperatives:

De-Crystallizing Core Assumptions (The ‘Why’): Challenge the sacred cows—the beliefs about customers, competitors, or processes that have been true for a decade but may be failing now. This includes unlearning technical assumptions, such as the belief that data must remain siloed, which prevents modern AI integration.
Creating Friction for Automation (The ‘How’): Old habits are dangerous when they become automated and unquestioned. We must introduce controlled friction points—such as mandatory cross-functional rotation or requiring new-hire perspectives in legacy project reviews—to force teams to pause, reflect, and consciously choose a new path over the default path. This is a deliberate intervention against autopilot thinking.
Decoupling Identity from Expertise (The ‘Who’): The most senior and successful employees often have the most to unlearn, as their identity is intrinsically linked to their obsolete expertise. Leaders must establish psychological safety where unlearning is framed not as an admission of individual failure, but as a continuous commitment to organizational relevance.

“Your past success is your organization’s greatest vulnerability. Don’t let yesterday’s win anchor you to tomorrow’s failure.” — Braden Kelley

Case Study 1: Netflix – Unlearning the Physical Asset Model

The Challenge:

In the early 2000s, Netflix achieved remarkable success by disrupting video rental with a superior mail-order, DVD-based model. Their core organizational competency was logistics — managing physical inventory, shipping, and returns. This success became a massive cognitive anchor when high-speed internet made streaming possible. Their deeply ingrained knowledge of the physical world actively worked against their digital future.

The Unlearning Solution:

Netflix’s leadership, led by Reed Hastings, made a conscious, painful decision to unlearn their core asset. They had to shed the identity of a logistics company and embrace the identity of a technology and content company. This meant separating the DVD business and the streaming business, forcing the streaming unit to build entirely new competencies and metrics focused on digital delivery and latency, rather than physical inventory and postal service efficiency. They had to unlearn the “perfect” physical delivery process.

The Innovation Impact:

This deliberate act of self-disruption and unlearning allowed Netflix to build the foundation for its streaming dominance. By voluntarily creating friction and letting go of the habits that made them successful, they freed capital, talent, and attention to master the new competencies required for the digital era, ultimately redefining an entire industry.

Case Study 2: Haier – Unlearning the Traditional Management Hierarchy

The Challenge:

Haier, a massive Chinese appliance manufacturer, faced the global challenge of becoming truly customer-centric in a bureaucratic, centrally managed corporate structure. Their organizational muscle was built on command-and-control and mass production efficiency—a model that stifled local innovation and responsiveness.

The Unlearning Solution:

Haier’s CEO, Zhang Ruimin, initiated the RenDanHeYi model, a radical exercise in organizational unlearning. They abolished nearly all traditional middle management and restructured the company into thousands of small, autonomous business units called Microenterprises (MEs). These MEs were forced to become self-governing, find their own customers, and manage their own P&L (profit and loss) against the market. They had to unlearn the security and structure of guaranteed corporate security and centralized decision-making.

The Innovation Impact:

This massive organizational unlearning forced responsiveness at the edge. By shedding the old habits of central planning and top-down control, Haier enabled its MEs to rapidly innovate and localize products (e.g., specialized washing machines for specific niche markets). The shift created an internal entrepreneurial ecosystem, proving that organizational structure itself is an outdated habit that must be unlearned to achieve true agility and customer-centricity.

Conclusion: The L&D Imperative and the Courage to Be Obsolete

Unlearning is the highest-leverage activity in a change-driven environment. It requires leaders to demonstrate courage to be obsolete — to admit that the ways that brought them success yesterday will likely be the source of their failure tomorrow.

The L&D function must pivot its focus from teaching new skills to facilitating the shedding of old, limiting beliefs and processes. This is done by actively building the three strategic imperatives—challenging core assumptions, creating friction for automated habits, and decoupling identity from expertise. Stop asking only, “What must we learn next?” and start by asking the harder, more critical question: “What must we willingly let go of first?” Only by creating empty cognitive and structural space can you truly plant the seeds of new, emerging possibilities.

Extra Extra: Futurology is not fortune telling. Futurists use a scientific approach to create their deliverables, but a methodology and tools like those in FutureHacking™ can empower anyone to engage in futurology themselves.

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Tailoring Experiences at Scale

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The Power of Personalization

Tailoring Experiences at Scale

GUEST POST from Chateau G Pato

For decades, the dominant logic in business was mass production and mass consumption. The goal was simple: optimize for the average customer. But in today’s hyper-connected, hyper-competitive marketplace, the average customer no longer exists. They are individuals demanding recognition, relevance, and respect for their unique context. As a human-centered change and innovation thought leader, I argue that the future of competitive advantage lies in mastering The Power of Personalization — the ability to deliver tailored, meaningful experiences to millions of people, simultaneously and seamlessly. This is the ultimate convergence of human-centered design and technological scale: using data and intelligence to make every single customer feel profoundly understood. Innovation must move beyond simple segmentation to anticipatory intimacy.

Personalization is not just about slapping a name on an email. True personalization is a strategic innovation challenge that addresses the fundamental human need for relevance. When a product, service, or communication is relevant, it eliminates friction, conserves the user’s valuable time, and builds trust. Conversely, irrelevant experiences create “digital noise,” foster annoyance, and actively erode loyalty. The challenge for leaders is to establish the infrastructure—both technical and human—that allows the organization to perceive, remember, and respond to the unique needs and behaviors of its individual customers, moving from a transaction-based relationship to a personalized partnership.

The Three Dimensions of Human-Centered Personalization

Effective personalization at scale requires a deliberate strategic focus across three integrated dimensions, ensuring that technology serves human purpose:

1. Contextual Intelligence (The When and Where): Personalization fails when it is delivered out of context. This dimension involves using real-time behavioral data, location, time, and device context to deliver the right message at the exact moment of need. It’s about being helpful, not just interruptive. For example, offering a specific type of coffee to a regular when they step within range of their usual store, not hours later at home.
2. Behavioral Prediction (The Anticipatory Insight): Moving beyond “what they bought” to “what they are about to need.” This requires deep data analytics to model future behavior and latent needs. The innovation here is in creating proactive experiences—solving a problem the customer hasn’t even fully articulated yet. This is the difference between recommending a product and recommending a solution to a future pain point.
3. Ethical Transparency (The Trust Equation): The more personal your service, the higher the need for trust. Personalization must be built on a foundation of ethical consent and clarity. Customers must understand what data is being used, why it benefits them, and have meaningful control over it. Lack of transparency transforms personalization from helpful to “creepy,” immediately destroying the human relationship you were trying to build.

“The best personalization doesn’t guess the customer’s mind; it anticipates their next human need.”

Case Study 1: Netflix – Personalizing the Discovery Experience

The Challenge:

With thousands of titles in its library, Netflix faced a monumental human-centered challenge: choice overload. An average customer who spends too long searching often quits out of frustration, leading to churn. The vastness of the library became a liability rather than an asset.

The Personalization Solution:

Netflix innovated by turning its entire platform into a hyper-personalized discovery engine. Their personalization extends far beyond basic recommendation rows. They use data to:

Personalize Artwork: Displaying different title images for the same movie based on the viewer’s previous habits (e.g., showing a romantic image to a romance watcher, or an action scene to a thriller fan).
Personalize Rows: Creating unique rows that reflect highly specific taste segments (e.g., “Visually Stunning Sci-Fi Movies with a Strong Female Lead”).
Behavioral Prediction: Using complex algorithms to anticipate the titles most likely to be watched next, drastically reducing the cognitive effort required to choose.

The result is a service where the entire interface is tailored to the individual, solving the human problem of choice overload.

The Human-Centered Result:

By investing in personalization as its core product strategy, Netflix dramatically increased customer engagement and reduced churn. The experience feels curated and intimate, creating a strong sense of value. It proved that in the digital age, relevance is the killer feature, and the best way to innovate around a huge catalog is to make it feel small and tailored to each person.

Case Study 2: Spotify – Tailoring the Moment of Discovery

The Challenge:

The music world is characterized by an infinite library of new content. For Spotify, the challenge was helping users feel connected to new artists and music they would love, without relying solely on manual searching or static genre lists. The innovation needed to capture the highly personal, emotional nature of music discovery.

The Personalization Solution:

Spotify’s innovation, particularly the Discover Weekly playlist, is a masterclass in anticipatory personalization. The system uses a complex blend of collaborative filtering (what similar users like) and natural language processing (analyzing articles and blogs about music) to create a wholly unique, algorithmically-generated playlist for each user, delivered every Monday.

Contextual Delivery: The timing (Monday morning) positions the playlist as a fresh start and a soundtrack for the week.
Ethical Partnership: The playlist format feels like a gift from a trustworthy, knowledgeable friend, minimizing the “creepy” factor because the value exchange is clear: “We observe your taste, and in return, we give you this high-quality, personalized content.”

This system essentially turns data analysis into an act of creative, personalized curation.

The Human-Centered Result:

Discover Weekly became one of Spotify’s most successful features, driving massive engagement. It demonstrated that personalization can be an act of generosity, giving the user a valuable, curated product that is better than anything they could have created themselves. It solidified Spotify’s role not just as a music player, but as a trusted curator and partner in the user’s emotional relationship with music.

Conclusion: The Future of Business is Individual

The Power of Personalization is the core strategic challenge of our time. It requires leaders to embrace a fundamental truth: human connection scales. You don’t need to choose between mass market reach and intimate relationships; technology has finally allowed us to achieve both.

To succeed, organizations must move from seeing personalization as a marketing tactic to recognizing it as a holistic innovation imperative — a guiding principle for product design, service delivery, and ethical governance. By leveraging contextual intelligence and behavioral prediction with unwavering ethical transparency, we can create a future where every customer feels understood, valued, and served with a precision that delights. The most profitable innovations will be those that master the art of the individual experience, delivered on a global stage.

Extra Extra: Because innovation is all about change, Braden Kelley’s human-centered change methodology and tools are the best way to plan and execute the changes necessary to support your innovation and transformation efforts — all while literally getting everyone all on the same page for change. Find out more about the methodology and tools, including the book Charting Change by following the link. Be sure and download the TEN FREE TOOLS while you’re here.

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Crowdsourcing Creativity

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Harnessing the Wisdom of the Collective

Crowdsourcing Creativity

GUEST POST from Art Inteligencia

For too long, innovation has been treated as an exclusive, top-down process. We build small, elite R&D teams, sequester them in innovation labs, and task them with generating the next breakthrough idea. While this model has produced many successes, it is fundamentally limited. It relies on the finite expertise of a select few and often suffers from groupthink, tunnel vision, and a detachment from the very customers it seeks to serve. As a human-centered change and innovation thought leader, I am here to argue that the most powerful engine of creativity is not a closed-door meeting, but the wisdom of the crowd. The future of innovation belongs to those who are willing to democratize the process and harness the boundless creativity of a diverse, global collective.

Crowdsourcing is more than just a buzzword; it is a strategic shift in mindset. It is the practice of outsourcing a task or problem to a large, undefined group of people, whether they are employees, customers, or the general public. By opening up the innovation process, organizations can access a level of diversity in thought and experience that no internal team could ever replicate. It moves the focus from a single point of origin to a decentralized network of passion, insight, and fresh perspective. The problems that have stumped your experts may be solved in minutes by someone with a completely different background. The key is to stop asking “who can solve this?” and start asking, “who might have a good idea?”

The Foundational Pillars of Crowdsourced Innovation

Successful crowdsourcing is not a random act of faith; it is a carefully designed, human-centered process built on a few core pillars:

Openness and Access: The first step is to break down the walls. Create a clear, low-friction platform where anyone can submit an idea. The easier it is to participate, the more diverse and numerous the ideas will be.
Specificity and Challenge: The “crowd” needs a clear, compelling problem to solve. A vague request will yield vague results. Frame the challenge in a way that is inspiring and provides enough context for people to contribute meaningful solutions.
Meaningful Incentives: People are motivated by more than just money. While cash prizes can be effective for technical challenges, a sense of purpose, recognition, or the opportunity to see their idea come to life can be just as, if not more, powerful.
Transparency and a Feedback Loop: The crowd needs to feel heard. Be transparent about the process—how ideas are evaluated, why some are chosen, and what happens to the winning submissions. Closing the loop by celebrating the contributors, even those whose ideas weren’t chosen, builds trust and encourages future participation.

“The best ideas don’t come from the people you pay to think; they come from the people who can’t stop thinking.” — Braden Kelley

Case Study 1: Lego Ideas – From Fan Passion to Product Powerhouse

The Challenge:

For decades, Lego relied on an internal team of master builders and designers to create new sets. While this produced incredible products, the company faced a challenge: how to tap into the passionate and creative community of Lego fans who were building their own amazing creations at home. This was a classic case of an innovation process being limited by its own walls.

The Crowdsourcing Solution:

Lego launched Lego Ideas (originally Lego Cuusoo), a brilliant crowdsourcing platform that turned its most loyal fans into an R&D department. The process is simple: anyone can submit an idea for a new Lego set. If the idea garners 10,000 votes from the community, Lego’s internal team reviews it. If it is chosen for production, the creator receives a percentage of the sales and credit for the design. This model is a masterclass in human-centered innovation.

Incentivized Engagement: The promise of having their design sold globally and receiving a portion of the profits is a powerful incentive for creators.
Built-in Feedback: The voting process acts as a powerful market validation tool. Lego gets instant feedback on which ideas resonate most strongly with their core audience.
Community Building: The platform transformed passive consumers into active co-creators. It fostered a vibrant, global community of builders who felt a deep sense of ownership and pride in the brand.

The Result:

Lego Ideas has been a resounding success, leading to the creation of some of Lego’s most popular and iconic sets, including the *Minecraft* series and the *Back to the Future* DeLorean. The program proved that the best ideas were not always in the boardroom but were being built in the homes of their most dedicated fans. It leveraged passion, talent, and a sense of shared purpose to build an innovation engine that is both profitable and profoundly human.

Case Study 2: The Netflix Prize – A Technical Challenge for a Global Crowd

The Challenge:

In the mid-2000s, Netflix was a DVD-by-mail service. A key part of its business model was its movie recommendation engine, which was good, but not great. Improving its accuracy by just a small percentage could lead to millions of dollars in savings and increased customer satisfaction. This was a highly technical, data-driven problem that had stumped its internal team of brilliant engineers.

The Crowdsourcing Solution:

Netflix took a bold and unconventional approach. They launched the Netflix Prize, a global crowdsourcing competition with a prize of $1 million to the first team that could improve their recommendation algorithm’s accuracy by 10%. They provided a massive dataset (anonymized, of course) and a clear, measurable goal. The contest was a highly structured, incentive-based crowdsourcing effort that attracted academics, data scientists, and engineers from around the world.

A Clear, Measurable Goal: The 10% improvement target was specific and quantifiable, which made the challenge compelling to a technical audience.
High-Stakes Incentive: The $1 million prize was a significant reward that attracted some of the world’s best minds in a way that traditional recruitment could not.
Intellectual Freedom: Netflix provided the problem and the data, but no one was constrained by internal bureaucracy, politics, or assumptions. The crowd was free to experiment without limits.

The Result:

The contest was a wild success. Over 40,000 teams from 186 countries participated. After three years, a collaborative team of researchers finally met the 10% goal, with the winning algorithm being an ensemble of different methods. The Netflix Prize not only solved a critical business problem but also created a new industry standard for recommendation engines and demonstrated the power of open innovation. It proved that for highly complex problems, the right answer may not be in your office, but in the collective genius of the global crowd.

Conclusion: The Future of Innovation is Collaborative

The era of closed-door innovation is over. In a world defined by complexity and rapid change, the ability to crowdsource creativity is a non-negotiable strategic capability. It’s about more than just getting new ideas; it’s about building a more resilient, connected, and human-centered organization. By treating your customers, employees, and the global community not as passive audiences but as active collaborators, you can tap into a wellspring of creativity that is truly infinite.

As leaders, our role is to move beyond the traditional models and create the platforms, the incentives, and the cultural mindset that empowers everyone to contribute. The most profound innovations of the future will not be created by a single genius in a lab, but by the collective wisdom of a motivated crowd. It’s time to open our doors and invite the world to help us build a better future, together.

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