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Click search or press enter. Compared with the events of recent decades, what Schumpeter saw was creative destruction in slow motion. And the pace of innovation has picked up markedly in the last five years, because the spread of smart phones, tablets, and other mobile devices is letting us all take the incredible power of the Internet with us wherever we go.
The market is now richly rewarding Netflix for being on the cusp of achieving this vision, but what Hastings should get credit for is how diligently he prepared for this day. Hastings also considered numerous pricing models for streaming and ultimately decided to start by giving it away as part of DVD subscriptions.
In late , after almost 10 years of experimentation, he offered a streaming-only option for about half the price of a subscription for DVDs by mail. That, combined with the increasing size of the library, should accelerate the move to streaming.
Hastings had a grand vision from the outset, but he started with lots of small projects that often failed and that he killed quickly. Many companies are not very good at this process. Instead, they tend to swing between complacency and panic. At the moment, malls have a huge disadvantage relative to online stores.
The first step is getting customers to identify themselves using their smart phones. Some customers already do so through social apps such as Foursquare and Facebook Places.
Building on this newfound identity and location information, and leveraging social media, malls and stores are starting to create social experiences that are not possible online. Eventually, a group of teenage girls might go to a store and disperse but keep track of each other through the GPS on their phones. The girls would keep up with each other via Facebook, tweets, or texts and gather periodically as someone finds an interesting item or person.
They could attract other friends to the mall. A movie theater, practicing yield management the way airlines do, might entice some of the girls with cheap tickets rather than have seats go vacant. The whole mall experience could become an adventure. It had thousands of stores, many owned by franchisees who had rights that restricted how quickly Blockbuster could change. So while Netflix plotted for a decade to make its world-class mail-distribution system irrelevant, Blockbuster clung to its stores and made itself irrelevant.
It filed for bankruptcy protection in While many companies respond to technological change by clinging to their traditional markets and business models, Hasbro shows how an old-line business can claim new territory too.
Transformers—basically, robots that could disguise themselves as cars—were more than a quarter-century old. Joe went all the back to the early s. But Hasbro invigorated sales by leveraging its brands beyond toys and games, for instance making them the basis for a series of big-budget Hollywood movies. Hasbro also effectively adapted Scrabble to modern technology. Rather than just fight a rearguard action and protect sales of Scrabble boards, Hasbro now lets people play Scrabble on smart phones and other mobile devices.
Textbook publishers have traditionally been all bundled up.
They relied on their lobbying with states to win the right to sell books, rather than having open, continual competition based on price, quality, or anything else. The situation is beginning to change because of consumer uproar about the cost of college texts, budget cutbacks at schools, and reforms in the educational system. Now technology is poised to destroy the traditional textbook business model altogether, because the spread of electronic devices is reducing the need for books and creating an open field for innovation.
Basically, the textbook can become the electronic hub for educating a student. When Johnny finishes his homework, the computer will correct it for him immediately and make suggestions about what to do differently.
Parents will be notified that Johnny has done his homework or not. The teacher will get an e-mail that night showing which problems caused problems for the class, so the teacher can address those the next day. Textbook publishers will get data about areas that are confusing students and will be able to test different wording and different teaching methods. Any list of the most successful companies in the U. Customers will talk with each other, talk back to the company, talk to other companies, and on and on.
Every permutation will be possible, and companies will struggle to innovate adaptations. But as Schumpeter saw, every act of destruction provides an opportunity to create.
They are also co-authors of Billion-Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years. Business Impact , innovation , Innovation Strategy.
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