Something else has changed, too. The credit and spending binge has left us with a different kind of hangover. We need a way to get the goods and services we actually want and need, but at less cost, both personal and environmental. Fortunately, we're quickly gaining more power to do so. A new model is starting to take root and grow, one in which consumers have more choices, more tools, more information, and more power to guide these choices. I call this emerging model "The Mesh."
The competitive advantages the Mesh offers in today's information-soaked environment will pose a persistent and growing threat to traditional business models. For example, Blockbuster's Wayne Huizenga grew highly profitable enterprises by recognizing the advantages of share platforms. Whether he was dealing in Dumpsters or videos, his core strategy was to invest in products that customers could use over and over again.
But Netflix knew that Blockbuster's Achilles' heel was late fees. Blockbuster's revenue model depended on the fees, but customers hated them - its best customers were the most likely to be punished. Netflix realized that if it could create a profitable business model that didn't require late fees, it'd win. It introduced a subscription model that allowed customers to watch and return movies at their own pace.
What clinched Netflix's advantage, though, was that it functioned as an information business. Early on, Netflix began using a customer's prior selections and ratings to suggest other videos that might be of interest. As the service developed, the company added layers of information to inform a user's choices, such as reviews from people in the network whose profile of selections and ratings were similar. Recently, it sponsored a contest awarding a million dollars to anyone who could significantly improve the movie recommendation service.
Netflix's more robust and networked share platform gave it the power to collect and crunch consumer, usage, and product data to shape customized offers. And in a business blink of the eye, Netflix replaced Blockbuster as the dominant player in the category. In the future, the byword will be "convergence"--of TV, the Internet, and mobile devices. Netflix remains well positioned to compete in that arena as a sophisticated information company with a trusted brand.
WHAT WALMART COULD LEARN FROM NETFLIX
Walmart is the largest retailer in the world. The company sells many cheap, throwaway goods. Moving those goods across the globe and country burns energy. True, Walmart is taking steps, and setting a good example, to reduce its carbon footprint. But a bigger, Meshier opportunity lies before them and other big-box retailers.
Big-box retailers are poised to take advantage of a richer part of the value chain. They could move from being huge retailers to becoming huge product service and repair providers. Walmart and other big-boxers could become the center of gravity for the conservation of goods, employ people with actual know-how, and develop deeper, longer term, more profitable relationships with their customers.