Future of Mobility #6: Netflix and the dream of “Mobility-as-a-Service” (1/3)

I had the intention of writing an article on the “Netflix of Mobility” to better understand what is the meaning of this concept and the benefit of applying Netflix experience to new Mobility projects. This is when several friends recommended that I read “No Rules Rules” from Netflix CEO Reed Hastings and INSEAD professor Erin Meyer. As the idiom says, “opportunity makes a thief”… here is the first chapter of an article to be published in three parts over the next weeks.

 Chapter One: The lessons learned from the dispute between Netflix and Blockbuster

The story starts with the fear of automotive companies falling into the same trap as other corporations who failed to adapt their businesses to new technologies: Famous cases are Kodak (from Paper photo to Digital), Nokia (from flip phones to Smartphones), AOL (from dial-up internet to Broadband), Xerox (from copy machines to PC) and also the failure of Blockbuster that was unable to shift from VHS rental retail to online streaming.

This last case is interesting for our “Future of Mobility” topic. Effectively, automakers seem to have missed the revolution towards digital and shared mobility, so they are required to shift their business model to “Mobility-as-a-Service” (MaaS) or the so-called “Netflix of Mobility”. We will come back to this concept in more details in Chapter 3.

First, let’s remind ourselves of what happened to both entertainment companies over the past three decades. I have summarized below the main events of this history:

Amongst all of the articles I read on this fascinating story, I recommend the debate (Harvard Business Review in April 2014) between John Antioco, Blockbuster CEO from 1997 to 2007, and Carl Icahn, activist investor who pushed Antioco to step down in 2007. I am pretty sure that they would keep their rather divergent position if we would put them again face-to-face ten years after this previous interaction!

I also recommend Greg Satell’s articles at Forbes, Harvard Business Review and DigitalTonto. On top of that, Greg explains very well the current disruption with the necessity to develop ecosystems (such as Amazon with its cloud computing services) and to introduce constant innovations to increase scope/scale of new businesses.

From this entertainment business story, my takeaways for services in the Mobility sector are the following:

• Always think of the benefit for the customer to avoid negative feedback: Blockbuster’s business model was relying on the penalties paid by customers on late return of the videos: wrong approach of making profit at the expense of the customer. Netflix made a similar mistake when asking customers to pay for mailing and streaming separately, but fortunately they reacted very quickly.
• Do not avoid or delay the deployment of new technologies: It took 5 years for Blockbuster to launch an online DVD subscription and, on top of that, they never launched Video-on-Demand and online streaming. By adopting these technologies earlier, alongside with their retailing business, the story could have been different.
• Anticipate the impact of new technologies on retail business: Yes, it was easier in the nineties to go pick up a video at the store to view on the same day (no need to wait a few days for mail delivery), but later on, online services and streaming completely killed the retail business of Blockbuster.
• Need to upgrade the customer online service regularly to improve experience and engagement: Netflix has brought improvement almost yearly (ratings, recommendations, list sharing, interactive storytelling, etc.). This is a very important lesson for all mobile applications in Mobility sector which will require also regular updating.
• Do not underestimate the trend of subscription models and the habit that customers are taking to it, vs. traditional pay-per-use models: The change in customers’ habits will impact all activities including car leasing and mobility practices (same as the Apple improvement in customer services is now becoming a reference case for customer service in any other business).
• Set up a permanent innovation culture inside the company: Need to generate inside the company the openness for innovation and breakthrough ideas, such as creative series and movies for Netflix, but also cloud computing and Home Services for Amazon.
• Follow carefully the speed of diffusion of any niche idea into the population: It is particularly true for innovating digital ideas which are targeting the young generations. The initial Netflix business with unlimited DVD rentals (without due dates, late fees, or monthly rental limits) has created disruption. Netflix smartly applied the Maloney’s rule to accelerate the diffusion of Innovation (see below Everett Rogers’ graph).

There are more lessons to learn from this Netflix adventure and several of them will come from the book of Reed Hastings and Erin Meyer that we will review in our chapter 2 next week.

And for the fun, you can see here the video (from Action Go) of the crazy traffic at the Arc-de-Triomphe roundabout, from which the headline photo on the right side is extracted. We will come back to it in chapter 3!

That’s it for now! In the meantime, enjoy your week!