How Netflix busted blocks in the video rental industry

I still remember the days when going to the video library was an exciting event. We would look forward to the release of the latest blockbuster and rush to the library with great anticipation. Some weekends we would grab a couple of the latest movies and also get a bunch of discounted weekly rentals. The entire weekend would be spent watching movies back-to-back. I hate to admit that there were days when it was too cold in Melbourne and we would ‘chuck a sickie’, rush to the video library to grab a few rentals and then cover ourselves with doonas and blankets to watch our movies.

This is what the entire video rental customer journey looked like, with its pain points well enmeshed:

Over time video libraries made some improvements to address some of the above issues.

• Movie guarantee – if a new release is not available, then you can borrow it next time for free.
• Booking movies – you could ring up and book a movie of your choice.

However, the above improvements did not address all the pain points in the process. While video libraries were looking at short term solutions, there were organisations that were beginning to leverage internet speeds. With the quick introduction of home internet from dial-up to broadband and then fibre net, and the quick upgrades of mobile internet from 3G to 4G and 4G-LTE technologies in succession, streaming high quality video was now possible at dramatic speed. Digitalisation and a range of video streaming services such as Netflix, Amazon Prime, Apple Movies are now available.

Let’s look at the customer journey for video streaming.

No late fees, no driving to pick movies. Videos are always available at any time and at a much lower cost. Every single pain point in the video library journey is addressed through the new customer journey for video streaming.

Initially there were concerns around the quality of video streaming. But the advent of H.264 video coding technologies and its advanced versions have made high resolution videos available in 4K with full Dolby digital sound.

The increase in internet speeds definitely made it technically possible, but the video rental industry did not take the digital threat seriously enough, creating a massive CX chasm, leaving much scope for companies such as Netflix to identify and address these pain points and create digital disruption in the industry at a global scale. To begin with, Netflix posted video DVDs to customers, but this was just the beginning before it burnt itself down and rose from the ashes like a phoenix digitally transformed to disrupt the industry.

Netflix not only addressed the pain points of customers, but also provided value additions by leveraging the paradox of choice theory. It went all out to understand customer preferences via machine learning tools and customised recommended videos instead of sifting through the increasing options. It also provided a platform for cinema and original entertainment shows that could stream via its online platform rather than broadcast over a television channel. This was a revolution in entertainment viewing that Netflix and its compatriots such as Amazon Prime Studios and Hulu brought into the television entertainment industry too. If it’s of any consequence, Netflix won as many Emmy awards as television channel HBO in 2018. In fact, the 2018 Emmys found streaming channels walking away with about 46% of the awards, proving their increasing attraction to viewership owing to the convenience they offer consumers of watching programs anytime, anywhere and via the handy mobile phone too.

Hence, while Netflix brought the video onto the mobile phone of a customer, it simultaneously addressed the problem of plenty with the added spice of curated playlists, enhancing its customer experience offering. From a customer perspective, when the recommendations I receive are relevant, my perception of Netflix (or any company for that matter) relates to one of a value-provider and as a guide for my purchase decisions.

Almost every industry category that has been disrupted has had CX gaps that digital has filled. They do this in a variety of ways, whether by leveraging technology or creating new platforms primarily to enhance customer experience, and not focus on disrupting the industry in a race or follow the line. Regardless of how they disrupt an industry and usher in a new concept, the very reason they have the opportunity to disrupt a sector is because the existing customer experience is far from optimal.

Disruption is something that organisations need to anticipate and proactively strategize for. But it is imperative that this is centralised around reinvigorating or improving the quality of customer experience. If a Digital Transformation project is based primarily on any other premise, even if it is as well-meaning as efficiency, collaboration, or even innovation, then you may instead be setting yourself and your sector up for disruption. I now leave you to ponder:

• Have you mapped/ begun mapping your customer journey from start to end?

• Do you understand the key pain points that could open you up for disruption within your industry?

• Categories plagued by mediocre or bad customer experiences open themselves up to challengers and disruptors, just like the video rental libraries. Does this sound like your industry?