One question I have is, how would user-generated content be integrated into their current business model? Would it look more like YouTube, where anyone can post (almost) anything, or Amazon Studios / Amazon Prime Video, which crowd-sources scripts and pitches but produces the content in-house?
>> This is a great question. I’ve been thinking about this a lot. Since Netflix’s operating model is “high quality” from the beginning (e.g., garbage in garbage out so they accept only high quality video to process before uploading it to their site), I’m wondering if it looks more like users can submit their stories or story ideas or even videos and Netflix develops an algorithm that searches or compares this text/video against past scripts or past videos to see if it is truly unique before passing it on to internal staff that produces content!
If in-house, how would the studios respond – would Netflix still rely on them for traditional film and broadcast/cable TV content, or eliminate them from their business model entirely?
>> I think Netflix would only eliminate these partnerships only if they start becoming “unprofitable” or strong-arming Netflix. As Netflix grew and became more popular, they were no longer the new kid on the block, but an established player with lots of money and other studios expected them to pay up. At the end of the day, they still want to deliver all you can eat content to their customers and users would be very unhappy if most of the library they grew up with was suddenly gone.
And in any of these cases, what would customers think? Given Netflix’s past failed attempts at change (the Qwikster disaster), how will management implement change over time without alienating customers?
>> Great question. The answer really is radical change in new initiatives (and employees) but still keeping all the original pieces. The Qwikster debacle taught Hastings a lot: 1) Netflix customers are still sensitive to price and do value “value” of the offering (is price reasonable compared to what I’m getting), 2) customers aren’t ready to eliminate options. That’s why I really think Netflix can’t become an ONLY original content creator, because that would alienate its customers used to streaming other non-Netflix original content. Rather, Netflix originals will become an add-on until other parts naturally become obsolete — one reason Netflix still operates its DVD business in the US!
Whole Foods is one of my favorite stores, Vicky, so so great to see your write-up!
To Marc’s point above and as you’ve pointed out, can you lend us a bit more color on its internal controls? Why have they been cracking and how must they be changed? And why is Whole Foods struggling to scale so much if its had managed great growth before? Might there be a “limit” to organic, fresh produce? What would cause Whole Foods quality to crack? And how far removed is the original founder from today’s stores — might that have anything to do with it? What can it, like Starbucks, do to attract its original core demographic + its new members without alienating either as it becomes more “mainstream” and “commercial”?
Leigha – I had NEVER understood the fan following and cult-like status of In-N-Out Burgers until your enlightening article. In fact, I had mentally lumped In-N-Out with all those burger chains (Five Guys, etc.) and had vowed never to go. It also doesn’t help that I don’t eat beef 🙂
This article, however, made me ravenous and highlighted how a company can be totally aligned with my beliefs (serving fresh food, keeping employees happy) — even if it isn’t serving burgers I can eat! From reading several articles, it appears that employee satisfaction is an emerging theme among SEVERAL winning companies in delivering value to customers.
So, now, where can cracks develop? What limitations is the company creating? Could In-N-Out perhaps expand to another meat, such as turkey, to expand the demographics they attract? And as people become increasingly health-conscious, even with simple, fresh ingredients, these are high-caloric burgers, must In-N-Out consider expanding its menu to healthier sides? What would be the tipping point? How do they decide the locations for stores / patty center distributions? Is it by customer density? If so, what is stopping them from opening either near Boston or NYC? Are there any other regulations at play here?
I loved this thorough post Hilary! I had known most of the lower SKU model, prepackaged model, etc. before, and I absolutely enjoy the staff. That said, are there any parts where Trader Joe’s does not do so well? Are there any demographics that Trader Joe’s COULD attract but isn’t? What does it do to differentiate itself from Whole Foods (other than price)? And is there anything it COULD learn from Whole Foods?
For example, I find the produce and fresh meat/fish at Whole Foods to be far superior quality so I ended up having to shop at both Trader Joe’s and Whole Foods or end up shopping at Whole Foods because I value the fresh produce so much more. I also find checkout at Trader Joe’s to be the worst part of the process. It’s often very manual, with very long lines, and someone walking around with a large sign directing people, instead of Whole Foods locations having parallel lines (segmented by basket size) and screens to look at to know where to go next really quickly. I realize that this system is definitely against Trader Joe’s culture, though. So how does Trader Joe’s navigate and make these choices? How can it help increase the quality of its fresh produce?
I love this thorough analysis Matt! To the comments both made above, Hello Alfred has been actively tweaking its pricing policy. Every single time I visit the site, it says something a bit different. Right now, it moved away from monthly pricing all together to display pricing by week: https://www.helloalfred.com/pricing. That can definitely change psychology and customer uptake.
In terms of profitability, is profitability the main metric to be judging Hello Alfred against? Or what do you think would be the most important operational metrics for Hello Alfred to track?
On profitability, especially with venture-funded companies, including Uber (which is not profitable) and Facebook (which was also not profitable for a long time), the bet they usually make is that they expect the NPV of all projected cash flows, which are expected to increase while costs relative to revenues will decline, is large and positive. What do you think Hello Alfred DOES need to do to ensure that it continues adapting to On-Demand 2.0 or 3.0 as the on-demand services it serves as an umbrella over change? What are the results of having workers with benefits? Has employee churn actually declined relative to Uber? And if it hasn’t, what can a service provider do to decrease employee churn if it matters for a person to have a “consistent” butler? I wonder if you can reach out to some Hello Alfred team members to do a follow-up since they are HBS alums!
Kevin — you really broke down WeChat for me because everyone always explains it several generalities without going into specifics. It seems like a core lever it has pulled is multiple acquisitions, including buying a car-on-demand service Didi Dache, just like Google Ventures invested in Uber. Much of what WeChat has done really reminds me of Google, too. What do you think has allowed WeChat to succeed in ALL its product launches / additions (as it sounds like), including Wallet, whereas Google has a far lower success rate? Or, rather, what are product launches or components of WeChat that are far less successful? What differentiates WeChat’s successes from its failures, both within the company, and it comparison to similar companies such as Google?