In 1997, Netflix launched as a DVD-by-mail business, quickly disrupting Blockbuster's brick-and-mortar business model. By 2005, Netflix was thriving, while Blockbuster was struggling to keep up and adapt to changing customer desires.
However, Netflix CEO Reed Hastings could see the writing on the wall. He knew that a new company could disrupt Netflix just as easily as Netflix had disrupted Blockbuster. Netflix needed to anticipate and respond to threats before it was too late. By 2007, streaming services began to enter the market. They were slow and clunky; most people thought streaming would never replace physical media.
When faced with disruption from Netflix, Blockbuster doubled down on its business model, refusing to innovate and adapt. Hastings didn’t want to make the same mistake. When Netflix could have been defending DVDs, it invested heavily in streaming. Instead of seeing streaming as a threat, Hastings saw it as an opportunity. He knew that if Netflix didn’t disrupt itself, someone else would.
Hastings said, "Companies rarely die from moving too fast, and they frequently die from moving too slowly."
By aggressively licensing movies and shows and being one of the first to build a solid streaming platform, Netflix turned a threat into a massive opportunity for growth. Digital media was cheaper and easier to scale globally, and Netflix developed deep customer loyalty.
Netflix reinvented itself again by leading the transition to original content in 2011. They worked hard to understand their customers and delivered creative programming based on viewership data gathered through their streaming platform. Hastings understood that content is king, and took a big risk, disrupting the traditional studios by creating shows like "Orange is the New Black" and introducing "binge watching" by rolling out entire seasons at once. The risk paid off—Netflix is now a major content creator serving over 260 million subscribers across the globe.
Hastings' leadership at Netflix is an example of turning business threats into opportunities.
Every problem is a gift if we learn and grow from it.
The key to leveraging challenges is anticipation. If Hastings had waited to invest in streaming until DVD rentals were seriously declining and Amazon and Apple had already cornered the market, Netflix may not exist today.
Business disruptions are inevitable. You can choose if you want to be disrupted or if you want to be the disruptor. But you have to shift your psychology to anticipate challenges before they arrive and adapt quickly.
The ultimate competitive advantage is anticipation.
What's the best way to anticipate problems before they arise? By studying businesses and watching for patterns. Impending crises leave signs; if you’re watching for these triggers, you can adapt, disrupt yourself and turn crises into opportunities.
Crisis triggers
Tony Robbins says that there are eight triggers of crisis. They are the most common signs of challenges that leaders fail to anticipate. These crises can upend entire industries or allow you to revolutionize your company and come out stronger than before.
1. Change in competition
This one might seem obvious, but it has proved the downfall of many companies. You have to be aware of any change in your competition, no matter how small.
Toys "R" Us used to be the dominant toy retailer in the world. However, it failed to anticipate and appreciate the shift to e-commerce. Instead of reinventing its in-store experience or investing in e-commerce, Toys "R" Us outsourced its e-commerce to Amazon in 2000, giving Amazon crucial insight into customer purchasing and supply chain logistics. When Amazon backed out of the deal in 2004, Toys "R" Us was too far behind to ever catch up and eventually filed for bankruptcy.
With the rise of big-box retailers like Walmart and Target and the introduction of e-commerce, Toys "R" Us had an opportunity to reinvent itself, but it hunkered down on its traditional toy-store model. Because it didn’t innovate when things were good, it was too late once things got bad.
2. Change in technology
Technology is evolving rapidly, impacting every business sector. It is not a matter of if technological changes will disrupt your business, but when. If you want to stay ahead of the competition and stay relevant, you have to anticipate and adapt to technological changes.
Kodak was the industry leader in film and photography for most of the 20th century. They even invented the first digital camera in 1975, but shelved it because they thought that digital would cannibalize their profitable film business. Instead of looking to the future and appreciating the change in technology, they tried to protect the past.
Camera brands that embraced digital, like Sony, Canon and Nikon, quickly began to disrupt Kodak. Apple iPhones and the rise of social media changed the camera landscape again. Kodak underestimated the digital revolution's impact and filed for bankruptcy in 2012.
Don't let changes in technology make your business irrelevant. Find ways to incorporate technology that isn’t just trendy, but meets your customers' needs in meaningful ways.
3. Change in culture
The most important thing you can do as a company is to understand your customers' needs and desires. Companies that fail to appreciate cultural changes will fail to connect with their customers.
When Millennials and Gen Z started to value increased inclusivity, body positivity and authenticity in fashion and beauty, some companies stayed stuck. Victoria’s Secret continued to use hyper-sexualized images of ultra-thin women in its marketing. At the same time, leaders made tone-deaf public comments resisting the culture change toward more inclusive representation. As a result, the company lost significant market share to Savage X Fenty and Aerie, which featured more diverse models.
Aerie, on the other hand, saw the culture change as an opportunity. While Victoria's Secret and Abercrombie and Fitch dug in their heels, Aerie launched the #AerieREAL campaign, stopped retouching photos and featured models of all sizes, ethnicities and abilities. This wasn’t just a one-time campaign—they built their entire brand around the values of self-love, empowerment, and inclusivity. As a result, they developed a loyal raving fan base and posted double-digit growth year after year.
4. Change in the economy
It is not a question of if the economy will experience a downturn, but when. Every industry will go through economic winters, but that doesn’t mean you have to just grit your teeth and suffer through it. Some of the most successful companies have reinvented themselves and learned to thrive during an economic downturn. Just like it is important to prepare for winter during the flush months of spring and summer, successful companies anticipate economic winters and prepare accordingly.
During the financial crisis of 2008, Howard Schultz used the downturn to refocus on Starbucks’ core business and reconnect with customers. He said:
"I returned to Starbucks as CEO in January 2008 because we had to navigate through our own issues and deal with the cataclysmic financial crisis. The past two years, we've done our best work. We're a much stronger brand because of the recession."
Every crisis can be an opportunity.
5. A change in government or regulations
Changes in government regulations can overturn an entire industry overnight. We all experienced this during the Covid-19 pandemic. The government has also seriously impacted banks, auto companies, cryptocurrency, car and home rental companies and social media companies by introducing new regulations.
If you fail to anticipate increased regulation, you'll face lawsuits, fines and lost business. Smart companies build regulatory compliance into their business models and are flexible enough to adapt to changing standards.
6. Changes in your customers' lives
This trigger is particularly relevant if one or two demographic groups dominate your customer base—if you cater to baby boomers or millennials, for example.
Your most important job is to know what your ideal customer wants and needs better than they do. Part of that is understanding that your customers will change, especially as they age. They will grow up, have children, take on jobs, age and retire. You have to be prepared to adapt to meet their changing needs or to pivot to attract a new customer base.
7. Changes in your employees' lives
Many business owners have faced a crisis when a top employee, leader or salesperson experiences a major life event and suddenly needs to step away. Life goes on outside of work, and at some point, you will have employees who experience the birth of a child, the death of a parent, a divorce, a mental health crisis or any other number of events that will pull those valued team members away from their jobs.
Successful companies anticipate these challenges by implementing a listening culture so employees have the opportunity to share upcoming challenges—and feel safe doing so. When employees speak up in advance, you’ll have time to make critical adjustments. Great companies also build loyalty by supporting their team members through these life transitions with appropriate paid time off, flexible work schedules, resources and compassion.
People aren't loyal to a company; they are loyal to how a company makes them feel. You can build a raving-fan company culture by anticipating and supporting employees through big life changes.
8. Changes in your life
Remember to look in the mirror and be honest about your changing life and priorities. Smart leaders begin with the end in mind and build a business based on an exit strategy.
The goal is to build a business not just so that you can work in it, but so that it can work without you. Create a " sellable " business even if you don’t intend to sell. The same qualities that make a business valuable in a sale make it profitable and scalable. You want systems that operate without relying on the founder.
Without a good exit plan, you can become trapped by your business in a crisis. On the other hand, anticipating your need to step away from the business will give you direction and clarity and allow you to build a resilient, thriving company.
One of the most valuable resources in anticipating crises and building a company agile enough to adapt is business coaching. In order to prepare your company for internal or external disruptive forces, you have to see your own business with clear eyes. A business coach has the experience and outside perspective to help you do just that.
Most companies just try to hang on and make it through disruptions and economic storms. With the assistance of executive leadership coaching, you can turn crises into silver lining opportunities. You don’t have to just survive; you can grow and thrive and emerge stronger than before.
