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Don’t be Netflixed!

Hailed by The Harvard Business Review as “a landmark of the managerial profession,” the late Peter Drucker was “the most important management thinker of our time.” Consistently ahead of the curve, he advocated the use of teams in 1954 and in 1969 pioneered the concept of the “knowledge worker.” If he were alive today he would caution: Pay attention to changing demographics and don’t be “Netflixed.”

At its peak, Blockbuster video had more than 5,000 stores, 60,000 employees and a market cap of $5 billion. Blockbuster filed for bankruptcy shortly after a new business model appeared. It was beaten by Netflix. Rapidly changing demographics and business models pose great challenges and fantastic opportunities.

According to Saul Kaplan, author of “The Business Model Innovation Factory,” no organization or industry sector is safe in our rapidly changing global economy. “Incremental changes may have helped firms stay competitive at the end of the industrial era marked by ‘me too’ products and services, process re-engineering, best practices, benchmarks and continuous improvement. But that isn’t sufficient for the 21st century, which will increasingly be defined by next practices, disruptive technologies and the creation of new markets.”

Why must we create new markets? According to World Population Review, by the end of the 21st century, if current birthrates continue, Italy’s population of 58 million will decline to 20 million and Japan’s population of 127 million would shrink to 55 million. Drucker predicted that the U.S. population will grow for another 15 to 20 years, but all other developed market populations will shrink.

Why is this important? For the past 200 years, all companies have assumed that the population, and therefore their market, will grow. Now, to successfully sell to developed nations, business strategies will have to be based on the assumption of a shrinking population, especially a shrinking young population and perhaps a shrinking middle class. Who will have enough money to buy your products or services in the future and where in the world will they be living?

Ruchir Sharma, author of “Breakout Nations” cautions that both India and China have issues, including per capita debt and poverty levels that cause one to question the sustainability of a growing middle class that will have discretionary income enabling them to buy your products or services. According to Sharma, countries such as South Korea, the Czech Republic, Turkey, Russia and Brazil have far better potential and all enjoy average incomes well over $10,000.

If you’re successful at finding a growing market that can afford your products or services the next question is, will you be netflixed? Kaplan offers numerous examples of organizations that either have been or are in the process of being what he calls netflixed. Amazon netflixing Borders, Apple netflixing Tower Records, email netflixing the U.S. Postal Service, Craigslist netflixing local newspapers, Google netflixing libraries, Wikipedia netflixing encyclopedias, Peapod netflixing supermarkets and online education netflixing universities.

Drucker would caution that no industry or market sector is safe and that to successfully sell into growing markets that can afford to pay for your goods and services you must dare to go where you have never gone before. The markets that you have become accustomed to are shrinking and everything from how we acquire and listen to music to shopping at the supermarket is changing. To flourish in the 21st century, leaders must focus on creating new and better business models and selling to expanding markets.

Questions for discussion:

• What is happening in the marketplace right now that could “Netflix” our business?

• Where must we go to find more people who can afford our products and services?

Joe Murtagh, The DreamSpeaker, is an international motivational speaker, meeting facilitator and business trainer. For questions or comments, email Joe@TheDreamSpeaker.com, visit TheDreamSpeaker.com or call (800) 239-0058.

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