What Healthcare Can Learn from Netflix
Content Distribution Healthcare
Today, technology, globalization and climate change are altering our lives at a blistering speed. In order to survive this rate of change, organizations are being forced to undertake large systemic changes. Consider this: In 1961, a company on the S+P Index had an average lifespan of 62.5 years. By 2024, that number will decrease to only 15 years. Those who recognize the changing environment and evolve with it will survive; or, in the case of Netflix, thrive.
The key to survivability is to recognize the changing environment and evolve with it. And that’s where systems theory comes in.
Healthcare and by extension, hospitals, are systems. A system is composed of three parts: purpose, relationships and components. In healthcare, the purpose is what the system is set to achieve, or the answer to the question: What business are we in? Relationships are the threads that hold the various components together: the rules, culture, incentives and hierarchies. Components are the building blocks of the system, such as the people, staffing, buildings, technologies, departments and equipment. In order to truly transform, an organization must start with defining its purpose; only then can it move on to focus on relationships or enhancing components. For example, if you purchase a new machine, hire new staff, reorganize departments or change incentives (components), you aren’t truly transforming anything. It’s the purpose that must be the guiding force that determines relationships and components; and purpose should always be connected to the future.
Netflix Finds Purpose, Blockbuster Upgrades Components
When Netflix came on the scene in 1998, the company’s purpose was to transform the world of video rental. It began by offering DVD rentals even though few Americans owned a DVD player at the time. But Netflix was confident in its vision of the future and stuck with it. Next, it introduced the concept of monthly subscriptions meaning no late fees or return dates for rentals. Blockbuster, however, failed to see the looming future and dismissed the “start-up” given its lack of scale and niche nature. Instead of hiring leaders from the tech industry, Blockbuster continued hiring executives from other large retailers.
It continued to see itself as a retailer and doubled down on its in-store amenities. By the time Blockbuster caught up and introduced a mail service, Netflix was on to the next big thing: making the transition toward digital content distribution and fine-tuning its streaming service. Netflix understood that consumers wanted content that was instantly available and in high-definition and so it provided thousands of choices, allowing consumers to switch from one piece of content to the next on a whim — something unachievable in Blockbuster’s brick-and-mortar store.
Instead of concentrating on diversifying and upgrading its components like Blockbuster did, Netflix redefined its purpose allowing itself to become a consumer data company that uses its entertainment content platform to monetize insights generated by its data. Where Blockbuster focused on distribution channels and video rentals, Netflix focused on data, preference prediction and content generation, all using a pure subscription model.
Wings on a Caterpillar? Just Become a Butterfly
By the time Blockbuster came around, it was too late and they were finished. Since that time, Netflix has redefined how it achieves its purpose through content creation, winning awards for their self-produced content — television shows that never made their way through the conventional platforms of television.
Netflix embraced the coming future and transformed with it. They designed a lean, cost-effective operating model using predictive analytics to find out consumer needs and wants and acted on them. They formed partnerships with other networks to expand the offerings to consumers. They formed other partnerships with film studios to produce their own content such as “House of Cards” and “Narcos,” based on subscriber watch patterns and preferences, accounting for a large increase in subscription. And they developed a company culture that encourages decisiveness, freedom and personal responsibility, which empowers employees to own their efforts.
Transformation for the future is a constant effort. If Netflix had stopped with mailed rentals, someone else would have embraced streaming.
What can healthcare learn from Netflix and Blockbuster? If you look at the future from a conventional lens, you are going to have to look even further. If your organization is a circle, transformation means becoming a triangle — not a bigger circle. Transformation is about becoming something different. If you are a caterpillar, simply slapping a pair of wings on doesn’t mean you start flying around feeding on pollen instead of leaves. Those fake wings won’t help you adapt to different ecosystems. Adding features to the same old creature means it’s the same old creature. You must become fast and nimble. You must become something different.
To learn more about transformation, read “The Transformation of Healthcare: How to Pull the Levers for the Most Profound Impact” in Delta, Volume 2.