Disrupting the disruption paradigm

It feels like it has been a long time since I have heard or had a business conversation where the topic of disruption has not been at least once or twice.

There is a good reason for this. Prior to the current economic storm – which is threatening to turn into a global recession – the last time that companies had to face this kind of disruption was in 2008. Fourteen years of economic growth, albeit slow growth at times, is still progression. It allowed companies to build a new narrative and to find a comfort zone where they could be profitable within that narrative.

The Covid Pandemic changed this and provided companies who were agile and responsive to change the opportunity to grow during a period of turmoil. However, as the world is starting to recover from the Pandemic, we are starting to see that business models that thrived on disruption are now being disrupted.

It is not a case of Netflix and chill anymore. There is disruption

In its recent first quarter earnings report Netflix said it lost 200 000 subscribers during the first three months of the year compared to the final quarter of 2021. That marked the first time in a decade that the leading streaming service, which began streaming in 2007, has lost subscribers.

Its global paid memberships fell to 221.64 million, though up by 14 million from the same quarter last year. But in the United States and Canada, its subscribers dropped by 600 000. Further, Netflix projected a loss of another 2 million subscribers during second quarter, indicating the fourth quarter was no blip or fluke. It could be the start of a trend.

Revenue still grew, but slower, at a rate of 9.8% year over year, compared to 24% in first quarter 2021. Revenue totaled $7.686 billion.

The markets were unhappy with the news. In after-hours trading, Netflix dropped 26%, and the market seemed to take the subscriber news as an indicator of the overall sector’s health. Shares of Roku fell 8.3%, while Walt Disney DIS +3.2% Co., parent of fast-growing streamer Disney+, declined 5.3%.

In a letter to investors, Netflix indicated that the pandemic made it difficult to gauge where the streaming marketplace was headed. Quarantines and movie theatre shutdowns boosted streaming subscriptions, at a time when new players like HBO Max and Discover+ entered the market.

“Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds,” reads the letter. “The big Covid boost to streaming obscured the picture until recently.”

The streaming service also lost 700,000 subscribers in Russia, where it suspended service following President Vladimir Putin’s invasion of Ukraine. Netflix also raised prices between $1 to $2 per month for all three of its tiers in Canada and the United States back in January, which undoubtedly sparked some of the turnover.

Not just a Pandemic winner

One of the immediate challenges that needed to be addressed at the beginning of the Covid Pandemic was corporate meetings and conferences. This void was addressed by online meeting platforms. Many of these existed before Covid, but Zoom grew so quickly during the Pandemic that it can genuinely be used as a case study.

The article points out that reason for Zooms growth is because the company’s mission statement is remarkably simple and straightforward: “Make video communications frictionless.”

At a time when most corporate mission statements try to acknowledge every priority and every stakeholder, this short, direct message stands out.

the article adds that, most importantly, this statement provides clarity to every team member. If you are a developer, network expert, or any other Zoom employee, you know that any action you take should never increase customer effort or increase complexity. If you do, you’ll be contradicting Zoom’s reason for existence.

Zoom was founded by Eric Yuan, who left Cisco’s Webex unit to focus on mobile-friendly video conferencing. Webex was the dominant video conference player before Zoom passed them.

A little too frictionless when it comes to disruption?

The article points out that Zoom grew more rapidly than its much larger competitors because it made things easy for its users. Easy to set up, easy to use, easy to change one’s background… maximum simplicity, minimum effort. But, in striving to make onboarding a user as simple as possible, Zoom skipped some security precautions.

One of these lapses made Mac computer webcams vulnerable to hackers. Another security hole allowed zoom bombing, in which a hacker could enter and disrupt an ongoing video conference.

The article adds that, not unlike fellow unicorn Uber, Zoom initially focused on exponential growth, not perfection. After its software was universally adopted, Zoom changed its code to beef up security.

Although security issues could have derailed the firm, Zoom’s growth continued without interruption.

Moving beyond technology: The importance of social interaction

It is clear that the world is planning a Covid recovery and that in person meetings and conferences will become popular once more. Will this disrupt Zoom?

I recently read an article which points out that while technology is key to online meetings, it is not the sole enabler of successful and efficient videoconferencing. Efficient moderation of online events, for instance, has become even more important for effective online meetings since participants are only a click away from finding something more interesting on the internet. Therefore, moderators need to appropriately engage with the audience by adapting content to online settings, avoiding long statements, interacting with participants through icebreakers such as polls and surveys, brainstorming and other collaborative activities, and be ready to improvise on the spot.

The article adds that good planning and preparation, such as preparing a scenario ahead of time, are key to conducting a successful online meeting. Time management is no less important. Below are some of the most important tips regarding time management during an online meeting.

Emotions and social contexts are equally important. Often, it is hard to remain focused on the meeting, and being physically present does not imply cognitive presence. It has become even harder to resist distractions in the online environment where the abundance of interesting content is just a click away. Given that our attention is limited, keeping pace with an ever-growing number of video conferences will require making meetings brief and focused, and increasing the use of interactive and engaging tools and approaches as mentioned above.

The article points out that social interaction is indispensable to meetings. Eye contact and body language are an essential part of every meeting. However, many have addressed the challenge of reproducing this kind of social interaction in the online environment. That said, one can still apply various aspects of body language to video conferencing by having a video on during the meeting, making eye contact by looking directly at the camera, paying attention to the posture, or replicating gestures used during the onsite meetings (e.g. hand gestures).

Who has the disruption best buffer?

I feel that Zoom has a better disruption buffer than Netflix. Conferences will gravitate towards a hybrid approach whereby a limited number of people will physically attend the conference with the remainder dialing in. There is also the added advantage of having meetings with people who are in multiple locations.

Netflix has a problem in that it not only faces disruption from people going back to movie theatres, but it is also facing challenges from increased competition. Disney+ recently launched in South Africa so it will be a battle of content to see who gets the most subscribers. As with any media company, content drives growth.

I feel that Netflix has a larger battle than Zoom. However, if it can overcome these challenges, it can take one step closer to that ever elusive bullet proof operating model.

Phahlani Mkhombo is the MD of Genesis Corporate Solutions and is a Senior Business Rescue Practitioner.