General management

Any successful business is a legacy business

The proven business modelI was struck last week by the story of the Netflix customer revolt — it shows that even young companies have problems managing change.

To review: Netflix want to shift their business to video streaming, and away from DVD delivery. As part of this they’re reducing the service to DVD customers so that you can no longer add to your wishlist (aka queue) from devices which also allow streaming. There is much wailing and gnashing of teeth.

What’s remarkable about this is that Netflix is only young (14 years old) and yet it’s having problems transitioning from a now-legacy position to something more current. The irony is that Netflix itself was once the radical disruptor and dramatically changed the film rental game. It would like to change the game again, but it’s not so easy this time around.

The darlings of the tech media are the young startups — what innovation! What promise! And the cutest stage-school darlings are the lean startups — thrill as they pivot when faced with insurmountable problems!

But these media darlings too often lack a certain… revenue stream. Or reliable customer base (which is what Netflix has). Or any other success factor that’s generally considered meaningful. And as soon as any business hits on that then they’ve got something they need to protect. And that makes change really difficult. All that promise and innovation and game-changing energy is suddenly anchored by the need to retain that success factor — that thing they’ve worked so hard for for so long.

That’s why any successful business is a legacy business.

There is one thing which will prevent this, and that’s if the business is explicitly designed to continually change. Otherwise even very young companies will find they’re facing similar problems to very old ones.

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