March 23rd, 2012 17:40 EST
Comcast Will Beat Netflix?
Recently Comcast announced it will launch a video streaming service aimed at beating Netflix. The battle to own the "digital home" has heated up - Apple is rumored to be launching a television, Amazon`s video streaming business is taking off, and television channels are increasingly streaming directly - and how it plays out will have significant consequences for investors and television viewers around the country.
Kaihan Krippendorff, a former McKinsey consultant, author of "Outthink the Competition," and strategic advisor to numerous leading companies including Microsoft and L`Oreal, and popular Fastcompany blogger, has been studying the patterns of corporate conflict for over a decade. His research shows that contrary to public opinion, the company with best service rarely ends up ahead, instead the companies that command a critical strategic asset will win. History tells us that Comcast and other cable companies, though late to the came, will end up on top of heap.
1. Three sources of advantage and why Netflix have none of them: for any company to win over the long-term they secure one of three sources of competitive advantage: customer captivity (think Microsoft Windows), economies of scale (think Wal-Mart), or preferential access to resources (think DeBeers Diamonds). Netflix once enjoyed customer captivity but this advantage has eroded thanks to its missteps that upset users and to growing competition
2. History predicts Comcast will win: cable companies have historically adopted a predictable pattern - they let someone introduce a new service, watch the market grow, and much later step in and take away the opportunity. This is how cable companies beat out TiVO (which introduced the world to the DVR) and Vonage (which convinced Americans to embrace VoIP)
3. Netflix last hope is to become HBO: there is little reason to believe Netflix can regain customer captivity or create economies of scale, so the company`s only hope is secure preferred access to content, which it is attempting to do by producing its own shows and movies. If Netflix can succeed at this it will begin looking more like HBO. If it fails it falls.
Kaihan Krippendorff is the author of "Outthink the Competition" and three other books. A former business consultant with McKinsey & Company, he helps emerging and leading companies including Microsoft, Symantec, L`Oreal, and GE learn build the beat their competition. He writes one of the most popular blogs on Fastcompany.com, the Outthinkers.
Judyth Piazza interviews Kaihan Krippendorff, Author of Outthink the Competition