Tuesday, July 19, 2011
Even when you are a leader with a seemingly unassailable hold on your market, things can go horribly wrong, horribly fast if you ignore your customers or take your leadership for granted. Currently, three strong category leaders are suffering the consequences of certain amount of leadership arrogance that may leave them diminished, if not wrecked entirely.
Facebook: Facebook has a long-standing, self-interested antipathy to its customers privacy concerns and has frequently changed its policies to try and get its users to be more open and hold less back from public view. Despite lots of grumbling, this had not had any measurable impact on their business. But now Google has used this source of irritation as its opportunity to break into the social media space. While Google's earlier efforts, Buzz and Wave, failed to get any traction, Google+ has attracted more than 10 million subscribers in record time (despite being invite-only). Its Circles feature, which allows users to categorize friends and only update to select groups, has captured people's imagination, differentiated Google+ from Facebook and given them a solid reason to try something new. (Almost half the people in a recent survey said that Circles was the feature that Facebook should be most afraid of.)
News Corp.: A lot of schadenfreude has been flowing as Rupert Murdoch's media empire has taken a battering after a phone hacking scandal centering on the UK's News of the World. In its determination to use any means (legal or not) to dig up the dirt and get a story that no-one else had, the paper showed a sense of entitlement that leaders are prone to develop. Now the company faces a firestorm that's out-of-control and which has already led to arrests, the closure of the News of the World and a 15% drop in News Corp.'s share price.
Netflix. Netflix has used up a significant amount of its reserves of consumer goodwill with the price increase it announced last week. For some customers (including me) this is a 60% increase for the same service. Anger has been high and even Wall Street Journal readers voted, by a 90%+ landslide, that this increase is a bad idea. It's a bad move, badly handled. Netflix has decided it needs to switch from a dvd-distribution model to a streaming model, a strategy that makes sense from a technology evolution perspective. But, trying to force people to change their behavior to conform to what the company wants with unjustifiable pricing and before the product is ready* reflects an arrogant, taking-things-for-granted attitude that tends to lead to consumer revolt. The one good thing that Netflix did was to forward date the increase to the end of September and provide some other pricing options that are not as egregious as the 60% increase. That will allow time for people's anger to subside so they can make a rationale choice not an emotional one. By then, perhaps less than the 41% of people who say that they are going to cancel will actually do it.
* The streaming product selection is much less than the dvd selection and a lot of recent movies are not available.