Movies, Coffee, and Going on the Offensive
Picture this. It’s 2008.
The world is in the turbulent grip of a housing crisis that would go on to trigger a recession, costing almost 9 million jobs. The pillars of Wall Street are cracking and crumbling, and American consumers are feeling the burn in ways they haven’t in decades.
The outlook for Reed Hastings, owner/founder of Netflix is grim to say the least. Household budgets are tightening, and that doesn’t bode particularly well for a home DVD rental service.
At the same time, Howard Schultz (newly returned to his role as CEO for Starbucks) is facing a similar pickle. As global financial systems begin unraveling, consumer spending on “luxuries” like premium coffee is starting to plummet. Most financial analysts believe that Starbucks will close some stores, trim their workforce and hunker down to withstand the storm.
As you’re probably already aware, this is not what happened. At all.
Netflix and Starbucks were not victims of the 2008 financial crisis. They THRIVED and grew and (in many ways) reshaped the landscape of the consumer economy in the process.
Business shares a lot in common with sports. Sometimes you’re playing offense – expanding, exploring new opportunity, and taking new territory. Sometimes you’re playing defense – fortifying, building “moats,” and inoculating yourself from the effects of economic turmoil.
When economic outlooks are tumultuous, the tendency is to shift into a defensive mindset. To begin to fortify, not advance.
Reed and Schulz not only did the exact opposite by going on the offensive, but they did it SO effectively, that their businesses actually gained significant ground while others languished or even dropped off the map.
Perhaps you’re looking around at the current economic climate and thinking, “Now would be a smart time to barricade myself in, cut my losses, and wait till things improve.”
We would argue that, if you’re smart, you’re actually looking for ways to GROW your business by going on offense… even if the entire rest of your industry is going on defense.
There are 3 critical moves that Netflix and Starbucks made starting in 2008 that ensured that their positions held strong. What’s crazy is, we’re seeing clients and other businesses mirroring these moves now and gaining incredible leverage.
By the end of this article, we trust you’ll feel empowered to do the same.
Ready to buck the trend and grow while everyone else shrinks? Let’s do this.
The 3 Keys Netflix and Starbucks Used to Advance
In analyzing the moves that Reed Hastings and Howard Schulz made in 2008, you start to see the makings of a 3-part playbook. We’ll outline the parts, then dig a little deeper into the lessons to be learned.
- Invest in front facing technology that extends the value they provide to their market.
- Double down on the quality of their offers (while others cut corners to save cost).
- Place strategic long-term bets that competitors are too fearful to match.
These offensive plays are far from reckless. They’re calculated ways to secure advantages that persist long after eventual economic rebounds.
Let’s take a look at the lessons we can learn from them.
Investing in Technology
This is easily one of the BIGGEST move that either company made, and one that can’t be undervalued.
Netflix pushed harder into streaming services and away from their original model of mailing pre-selected movies and television rentals direct to peoples’ homes. Not only did this simplify a complicated and time consuming process for the end user, it also leveraged emergent technology to deliver a better experience.
Similarly, Schultz pushed Starbucks to green-light their first mobile rewards app, allowing users to order in advance, and gain points that could be accumulated and used toward future purchases. Technology fused with LOYALTY.
This mirrors what we’re seeing with our own clientele. Businesses in every industry are leveraging development and the power of AI to produce apps that increase (and accelerate) the value they provide to the market without increasing overhead costs.
One of our clients has a business building marketing strategies, funnels, and advertising for holistic health practitioners. He recently took all of his proven frameworks for repeatedly getting his clients results, and coded an entire software solution that allows even more people to access his brilliance without fully consuming his bandwidth. It’s increased the profitability of his offer so much that he is now shifting ALL of his efforts into growing the software and continuing to charge premium prices.
This isn’t skating to where the puck is. It’s skating to where it WILL BE. Adjust accordingly.
Double Down on Offer Quality
As the economic “screws” get tightened, business owners are often tempted to look for ways to trim manpower. This approach leads to weakened, watered down aspects of their offer or service. Defense creating vulnerabilities without meaning to.
Netflix faced this same dilemma as they began their aggressive move toward streaming service. But they made a subtle shift that changed everything (and that we are still feeling the effects of today). Reed Hastings pushed the team toward building an original content roadmap. Movies and shows created specifically for the platform long before there was a public outcry for it. Rather than fall prey to the immense cost of acquiring licenses for every movie people might possibly want, they started creating those movies instead.
With rival coffee companies trimming costs and skimping on their offerings, Schultz headed the exact opposite direction. He funded a mass retraining of baristas and store managers, putting extreme emphasis on the QUALITY of the customer experience at every level. The brand was re-invigorated as people started to notice Starbucks shifting it’s atmosphere and becoming a place they wanted to be.
Your business is no different. Your competitors will feel the burn and scramble to do everything they can to relive pressure… including compromising what makes them unique. Do not fall into this trap. Double down on quality. Show the market exactly why you’re exemplary by doing what no one else is willing to.
Place Strategic Long-Term Bets
Separation from competition is the lifeblood of longevity.
Sometimes creating that separation requires you to take a calculated risk that will position you miles ahead of them before they even realized that the topography of the industry has shifted. This requires powerful longterm vision.
Jay Abraham calls it “seeing around the corners.” Knowing in your gut that if you go all in on a couple of strategic plays, you will not lose.
Let’s return to 2008, and our friends Reed and Howard.
Just when you’d think that Starbucks would play conservatively and think about what was best in the immediate, they “zagged.” Instead of freezing expansion, they accelerated into new markets that they didn’t have existing footholds in – but where they could sense that competitors were hesitant. Specifically, they began opening Starbucks locations in China, where luxury coffee markets were stagnant and ripe for disruption. Globalization became a key initiative for the brand.
Meanwhile, Netflix took a different approach by creating a price and access advantage. While cable packages soared in price, and American families lost their appetite for high cost services, they sowed all of their efforts into a fixed, affordable flat rate model (which they still employ today). Their customer base grew rapidly even as the economy sank lower and lower.
These titans chose not to “wait and see” what would happen. They started making money moves that, in hindsight, seem almost prophetic. They were 5 steps ahead of nearly everyone, but they knew the risks were worth the potential reward. And those moves are still being rewarded even now.
Playing to Win
Perhaps you’ve heard it said (maybe even by us) that there is a substantial difference between playing to win and playing not to lose.
In times of uncertainty, the leaders who overcome and build things that stand the test of time are the ones who favor bold, decisive action. The ones who don’t get caught up in playing a game of survival like everyone else. They play a game that has but one objective: WIN.
Times may feel chaotic, but don’t let what you’re seeing around you convince you to play small. There’s too much to lose, and a whole lot of amazing things to be gained. Go on the offense and advance!
Position Yourself for Your Next Quantum Leap
Unlock quantum growth, even in economic downturn, by tuning your beliefs, attitudes and actions with our self-guided 4-week challenge. The Quantum Growth Track walks you through 4 mental protocols one week at a time, with video training, a research-packed workbook, and weekly homework that will get you thinking on the offense… rather than being constantly on defense.
