In September 2019, Harvard Business Review (HBR) released The Top 20 Business Transformations of the Last Decade. Within this piece, HBR reports that a leading factor in a company’s survival is developing and pursuing new opportunities outside of the company’s original core.
The number one company to do this in the last decade, according to HBR, is Netflix.
In 2013, CEO Reed Hastings told employers and investors that Netflix planned to move from solely distributing digital content to a producer of original content. Hastings recognized a need to rewrite Netflix’s mission and purpose. He realized that the greatest profits and likelihood of longevity were not found on the foundation from which the company was built.
A new foundation needed to be poured and a new building needed to be erected. Several Emmys and Oscars later and Netflix’s “revenue has roughly tripled, its profits have multiplied 32-fold, and its stock CAGR has increased 57% annually.”
Netflix is a powerful reminder that changing a company’s purpose can lead to increasing a company’s profits. This is not nearly as easy as it sounds. Starting a business shares many parallels to starting a family. The unknowns and steep learning curve are scary. Mental stress. You’re not sure how much the new adventure will cost your wallet. Financial stress. You’re worried that your vision of the future may not match your reality. Emotional stress. You know your number of sleepless nights will increase and the work ethic required will be at an all-time high. Physical stress.
Like the thoughts of holding your child for the first time consumes your every waking second, so too does an entrepreneur’s thoughts of launching a new business. In both cases, you’re energized at a level that is indescribable. The anticipation of Christmas morning doesn’t hold a candle to the level of anticipation one feels days from launching their new business or meeting their child. Sleep is lost on the quest for the perfect name. Stress multiplies as more finances go out than in as the unveiling day approaches. Hope soars so high that we know failure is not an option we will deal with lightly.
And yet, according to the Small Business Association, failure will find 30% of new businesses within their first two years, 50% during the first five years and 66% during the first 10 years. As undesirable as it is for an entrepreneur to hear their new company needs a facelift–it is their baby after all–that is a necessary conversation if a company plans to continue on or toward the path of success.
Just like Netflix changed its purpose and pursed that change with relentless passion and determination, so too do businesses need to pursue opportunities outside of their original mission. These statistics are a reminder that there is a point when the similarities between new business and a new child end.
Most do not change their children’s names after they’re printed on the birth certificate, nor do they insist their children wear color contacts for a more striking family photo. But this is exactly the line of thinking that launches businesses toward success.
The last thing a company wants to do is start from scratch because the time and finances invested in the original vision are significant. But life changes and with it, so do the needs of consumers. We only need to watch the once vibrant autumn leaves fall to the ground in brown, curled remnants of their once green, elastic selves to remind us of this.
As Georg C. Lichtenberg said, “I cannot say whether things will get better if we change; what I can say is they must change if they are to get better.”
Author: Evelyn Lindell