Are you Netflix or Blockbuster? How a Clear Vision is Vital to Innovation
There is tension in our modern business economy, between scalability and adaptability. On one side, start-up companies are agile, rapidly evolving as they look for a successful business model. Their goal is to standardize this model and scale.
On the other side, large established companies try to innovate and adapt to a changing marketplace, threatened by the agility of these startups.
Agile businesses are looking to scale by standardization.
Established businesses are looking to become more agile by incentivizing innovation.
Structure and innovation shouldn’t be opposites.
In fact, structure is the only sure way to ensure innovation becomes embedded into your company. There are many ways to accomplish this, from encouraging employees to spend 20% of their time on side projects (as Google made famous) to creating an “innovation task” force, a cross-functional team responsible for testing new ideas on real customers. With these techniques, it is not always obvious how to direct the creative energies of your employees without stifling them, or determining which of their ideas align with the long-term goals of the company.
The solution lies in a vision statement.
The vision is one of the three main components of organizational culture, made up of your mission, vision and values. While the mission speaks to the day-to-day of your organization (what you do, how you do it, and for whom), and the values set the standards by which employees will model their behavior, the vision takes a wider perspective. A vision statement should capture the ‘why’ behind your business, focusing on your organization’s “big picture” goal.
How does a vision statement fit into the conversation about scale and innovation? For one, alignment around a vision directs your employees energies towards an agreed upon goal. Not only that, but being able to see the bigger picture can provide management with the context that encourages open mindedness and flexibility, requirements if a company wants to test new business models.
Let’s look at how this applies to two familiar names to an average American: Blockbuster and Netflix.
When it opened in 1978, Blockbuster was radically different than its competition: bigger, better hours, and a computerized inventory system. Most importantly, it refused to stock adult films, establishing it as a family-friendly enterprise. Blockbuster disrupted the movie rental industry. As a result they experienced rapid growth, peaking at 9,000 stores and 60,000 employees in 2004.
Nowadays, however, the movie rental company is a poster child of what can happen to organizations who fail to adapt to new technology and customer needs. After a series of missteps and declining sales, Blockbuster declared bankruptcy in 2010. In terms of vision, the video chain was too focused on the “what” (in-store VHS rental) and lost track of their “why (delivering convenient in-home entertainment for the whole family).
Compare Blockbuster’s precipitous decline with the meteoric rise of Netflix, which began in the late 90’s selling monthly subscriptions to mail order DVDs. Like Blockbuster, their business model was highly innovative. But unlike Blockbuster, who relied on in-store movie rentals and didn’t adapt, Netflix shifted its offerings, focusing on streaming video and most recently on original content.
How did this pivot happen? Netflix reached its current customer base of over 57 million people through a number of factors, but one key component was a commitment to the ‘why’ over the ‘how.’ Though Netflix has never officially declared its vision, CEO Reed Hastings outlined one at a conference in 2011—Netflix was about “helping content creators around the world to find a global audience.”
It is possible to scale while remaining agile by implementing systems that incentivize innovation and gaining alignment around a clear vision.
For Netflix, the ‘why’ has stayed relatively constant. But the means through which they achieve the “why”— the ‘what’ and the ‘how’— have changed over time. This is not merely a retrospective look. A clear vision sets them up for success in adapting going forward.
Innovating your business model is inherently risky. But as the media rental market demonstrates, vision is key. Gain consensus around your company’s vision. Socialize it among your employees. Maybe even put it up on your wall. Because a clear vision with buy-in at all levels is key to long-term success. And if you pair this vision with systems that incentivize employees to suggest and test new ideas, innovation will no longer refer to a single event — the initial insight on which your business was founded. Innovation will be the growth engine that drives your company.