To get the drop on the competition is to obtain an advantage by acting before they do. But in order to get the drop, companies need to be able to see what’s ahead.
People tend to think of how innovative both have been as they’ve dominated their respective industries. That is true, but one aspect that doesn’t get enough attention — their strategic approach to the entirety of the customer experience. They didn’t merely focus on delivering a great product or service, they sought to improve the customer ecosystem.
Netflix Everywhere
When Netflix launched streaming in 2007, it seemed to catch the world off-guard. Who was this DVD-by-mail company to be offering streaming content?
But for those of us working at Netflix, it was anything but a surprise. Co-founder and CEO (sole CEO at the time), Reed Hastings, was always thinking ahead and what strategy would accomplish its goals. And he always communicated that strategy to the entire company.
The initial strategy of Netflix was to “grow big on subscription DVD-by-mail then move into streaming” when the technology was ready. By the time of launch, streaming had been a topic of intense discussion, research, and building for years.
But once streaming launched, the strategy shifted to one of “device ubiquity.” Or, in plain terms, “Netflix everywhere.” By having the Netflix app on anything that connected to the internet, we not only would be fulfilling our brand promise of “movie enjoyment made easy,” we’d be front and center when people first fired up their machine after connecting to the internet.
The thing is, at-launch, not many OEMs (Original Equipment Manufacturers) had devices that connected to the internet. At first, Netflix pursued making a streaming device.
The reason it was eventually stopped and then spun out as the Roku player was because it was against strategy. Rather than build equipment to compete with OEMs , it would be wiser to convince them to connect more devices to the internet. So Netflix set about to do just that. This approach meant that when Blu-ray players, smart TVs, and more started to mainstream, Netflix was already there.
By thinking about the ecosystem of streaming rather than just being the streamer, Netflix could get a significant jump on any other potential streaming services.
Tesla Extends The Range
When Tesla first launched with their rather expensive Roadster, you could hear the sneers. They weren’t a real car company.
Yet, as the world has found out, yes, they very much are. Having rolled out the relatively less expensive Model S, then the Model Y, and much cheaper (again, relatively speaking) Model 3, Tesla is a real car company. Note the average US car price in 2020 crossed over $40K. The Model 3 was listed at just below average at $39,990.
But aside from price, which is continuing to come down, range and weak charging options are the second and third biggest objection according to a survey by Autolist. Battery technology, while improving, has limited the distance one could travel on a charge. In consumers’ minds, this relegated electric cars to be for short commutes or trips around town but not a real replacement for their internal combustion engine car.
With gas-powered cars, there is a decade’s-old system of fueling stations where one can fuel up. With electric vehicles, not so much. There was only a jumble of charging stations here and there, a significant obstacle for consumers on top of low battery ranges.
How did Tesla overcome that? By offering owners of their cars the use of Tesla charging stations for free. Placed along major travel routes like Interstate 5 in California and various cities, Tesla solved the two biggest objections to owning an electric vehicle — limited range and weak charging options. But they weren’t just charging stations; they were supercharging stations. Tesla owners could pull in and re-charge in 20 minutes, and it was free.
While all other car manufacturers were solely concentrating on the car itself, Tesla thought strategically about overcoming barriers to entry and getting ahead of the competition.
The Takeaway
To be clear, companies can still succeed without applying a company’s strategy to ecosystem thinking. But if they do, they can get the drop on competitors and take the lead in their space. And even if the benefits of being a first-mover can fade over time, the company won’t feel the loss of those benefits as they’ll already be on to the next phase.
P.S. Obviously, one could extend the ecosystem thinking of Tesla to include solar roof tiles and whole house batteries. I opted to keep the focus on how these two companies beat the competition in a single market by thinking holistically.
Thanks to Marc Röger, Adam Leidhecker, and Gary McMath for the editorial assistance.