This recent amendment to Japan’s law marks a significant step in the competition law system. Why? Because in the past, hindering fair competition targeted anti-competitive behaviors of a single company within a specific market range. However, the key to Japan’s current law amendment is “starting from the ecosystem perspective”!
Category: Business & Tech_newsletter
This article synthesizes 20 years of innovation at Netflix and explores how, after two decades of continuous innovation, Netflix has once again reinvented itself, identifying its next engine for revenue growth.
Quickly looking at Netflix’s 20-year growth journey, which can be considered a textbook example of relentless innovation and change:
- Initial Disruption
Netflix initially broke into the market with an unlimited borrowing and extensive selection DVD rental service, offering a completely different business model from the then market leader Blockbuster. This helped Netflix build a user base, brand recognition, and financial strength.
-> Blockbuster’s original profit model involved charging per individual movie with additional hefty fees for overdue returns. However, Netflix’s innovative business model successfully carved out its niche in the DVD rental market. - Disruptive Streaming
Knowing that DVD rentals might not be sustainable, Netflix used its existing customer base and financial strength to negotiate for online streaming rights for popular movies and series from major rights holders, launching a service completely different from traditional cable TV networks. This expanded Netflix’s user base, transformed its brand, and continued to enhance its ability to acquire additional series.
-> Netflix launched a new business that would disrupt its original business model by directly offering online streaming content, with a low monthly fee, allowing selection of favorite series or movies anytime, anywhere, without the extra cost of cable TV, providing an emerging profitable model. - Investing in Original Content
With a large user base and strong finances, Netflix began investing in original programming, gaining full control over its content, capable of producing entire seasons of programs without having to cater to the whims of rights holders.
-> Previously, purchasing broadcasting rights was limited by rights holders who would set different licensing fees for different countries, potentially preventing Netflix from broadcasting the same content globally. However, by producing original content, Netflix broke through geographical restrictions, allowing content to be broadcast globally, magnifying the returns on content investment. Netflix can thus offer paid services in any country on the planet through the internet.
What’s Next for Netflix?
Do you remember Blockbuster? It’s one of the relics of a bygone era. Before the advent of online streaming, from the 1990s up until the early 2010s, the mainstream way to watch movies or TV shows at home involved heading to Blockbuster stores to rent DVDs (or even VHS tapes earlier on). At its peak, Blockbuster boasted over 80,000 employees and about 9,000 stores worldwide. However, by 2010, Blockbuster officially declared bankruptcy, having lost the competitive battle with Netflix.
During the battle between Netflix and Blockbuster, there was one decision by Netflix that stood out, which I’d like to discuss with all of you. That decision was Netflix’s choice to simply watch Blockbuster bleed out, opting to do nothing.
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Hey everyone, hello! Last week, we talked about HBO’s reluctance to dive into the online streaming platform too early, and the quite rational reasons behind this decision. However, these reasons might have been precisely what Netflix anticipated about HBO, thus using these “rational” reasons to dominate the online streaming platform alone. For those who wish to revisit our previous newsletters, you can click the link provided.
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The Masterstroke: Counter-Positioning
What exactly is “Counter-Positioning”? In simple terms, it occurs when a startup adopts a business model that is “opposite” to that of the established market leader, in such a way that if the market leader were to follow suit, it would damage its existing business. This often leads the incumbent to make one of three decisions:
- Delay adopting the new business model,
- Implement it half-heartedly,
- Or a combination of both (delaying the decision and then implementing it half-heartedly),
Eventually, this leads to a gradual decline in market share, inability to counteract the startup, and finally, the incumbent decides to align with the startup’s approach—usually too late.
Why, then, if counter-positioning is so disadvantageous, are market leaders reluctant to change immediately?
Paul Graham, known as the father of Silicon Valley startups, famously encouraged new companies with the phrase, “Do things that don’t scale.”
The context behind this advice is that many founders of startups initially want to engage in efficient and scalable activities. For instance, when a company is newly established and aims to acquire users, the first thought might be to buy online ads, collaborate with influencers, or advertise on Facebook or other social media platforms because these are the fastest and most scalable methods. A Facebook post can buy exposure and even customers for as little as 500 units of currency, making it one of the most effective and scalable actions. However, Paul Graham suggests that the best method is for founders to personally reach out to and find customers. Although this is the slowest and least scalable method – given that a founder’s time, contact reach, and promotional scope are limited, hindering rapid growth and replication – Graham believes this is precisely what startups should do: engage in unscalable activities.
One of the best examples of this approach is Airbnb, the globally recognized home-sharing platform that allows hosts to rent out their spare rooms or properties. Airbnb listings range from farmhouses and castles to beach huts, treehouses in the mountains, and common suites in cities. In the past, there were even students from National Chengchi University who listed dormitory beds on Airbnb.
Currently, Airbnb is valued at approximately $80 billion, generating billions in revenue each quarter. However, in its early days, Airbnb faced numerous difficulties. No investors were willing to back them, and they had to fund their venture by selling their own designed breakfast cereals. Before reaching its current status, Airbnb made many efforts that can be summarized as “doing the unscalable to make 100 people love you.”
Making 100 People Love Airbnb, Not Just 10,000 People Like It
No one wanted to rent out their rooms, and not many were willing to use such a service. Airbnb’s co-founder and CEO mentioned that in the early days, they did many unscalable things to make 100 people love Airbnb, rather than making 10,000 people just like it.
Flying from the West Coast to the East Coast to personally serve hosts Airbnb co-founder Brian Chesky would fly from the West Coast to the East Coast to visit each host. He would even book their rooms via Airbnb and live with them for a few days, adding the first reviews for them on the Airbnb platform.
Moreover, Brian Chesky once asked hosts: “What if we had a button that, when pressed, would immediately bring a photographer to your home to take professional photos?” The hosts loved the idea. So, Chesky borrowed a good camera from a friend. The hosts were amazed to see Chesky himself turn up with a camera, never expecting the founder to be their photographer! Chesky did much more than just photography, including personally delivering the rental receipts to the hosts.
If one person is moved by your actions and falls in love with you, that love can spread. This is also the essence of “growth.” Accepting customer suggestions and finding opportunities for growth Initially, Airbnb was only about renting rooms and not entire houses. In a 2010 interview, Brian Chesky mentioned that renting out entire homes was a suggestion from one of their hosts. This host was the drummer for a well-known American singer who often toured. He didn’t just want to rent out a room or an air bed but the entire house. Chesky said this was an option they hadn’t even considered, which later became one of Airbnb’s main businesses.
To make customers fall in love with Airbnb, it’s necessary to establish standards that go beyond 5 stars.
Brian Chesky, to create an experience that would make customers fall in love with Airbnb, continuously thought about how to achieve a six-star rating from customers. Below are the exercises they did for understanding and achieving this.
5-Star Service: You land from your plane, exit the airport, and arrive at your Airbnb accommodation where the host is already waiting for you. This is a 5-star experience.
6-Star Service: In addition to the above, the host personally picks you up from the airport.
7-Star Service: In addition to the above, the car that picks you up is a luxury car filled with your favorite flavored chips and refreshing coconut water.
8-Star Service: Upon landing at the airport, a grand parade welcomes you.
9-Star Service: The moment you disembark from the plane, there are 5,000 screaming fans below with banners welcoming your arrival. This is referred to as a ‘Beatles-level welcome.’
10-Star Service: Upon arrival, you find Elon Musk waiting outside your room, inviting you for a trip to space.
This wasn’t just wishful thinking. In an effort to ensure hosts could provide superior accommodation quality, Airbnb provided a series of courses, value-added services, and rating methods for hosts. Just like in the early days when they would personally photograph hosts’ homes and assist hosts in providing breakfast to ensure guest satisfaction, all these efforts were aimed at facilitating hosts to provide 6-star or even 7-star services.
This is a World Without Magic
After learning about Airbnb’s story and Paul Graham’s “Do things that don’t scale” philosophy, it becomes clear that there is no magic in this world. Airbnb mentioned that they had many public launches, which went unnoticed due to their small size at the time. There was no magic in any of these launches; none of them were successful on their own. Success came through continuous interaction with customers, understanding what could be improved, and deeply winning the love of 100 people before gaining more users. (Similar to the story in the 7th newsletter issue)
Paul Graham expressed that believing simply launching a new product will gain users is a combination of egocentrism and laziness. It’s the belief that something great has been built, coupled with the desire to achieve success through a single broadcast release. However, gaining users and love is always a gradual process. Merely doing one extraordinary thing isn’t enough. Exceptional efforts are necessary, and any strategy that neglects the effort, such as trying to gain users through a large launch event, is inherently doubtful.
It’s precisely because a company is small and starting that it can deeply interact with customers, something that super-large companies (like Apple or Google) can’t do. By doing these unscalable things and being loved by a small group of people, you can build internal momentum and truly know if the users love the product. Otherwise, focusing solely on advertisements only reviews whether the ad itself is liked, not whether the product is genuinely loved by users.
Of course, this Airbnb story is only applicable during the startup phase. At that time, they could spend ample time and energy on unscalable tasks. When Airbnb grew to a company of 100 or 1,000 people, it became challenging to adopt the same strategy. Making the right decisions early on allowed them to survive and grow into a large tech company. In hindsight, doing those unscalable things to make 100 people love them was indeed sensible.
What If My Job Was a Product
How does this story relate to me? Whenever I see these company decisions, I wonder how they relate to me. I haven’t started a business, so these decisions seem like just motivational anecdotes. However, if I start to view managing my own job as a form of entrepreneurship, seeing my work as a product,
If my job was a product, I need to think further about what 6-star, 7-star, or even higher star services in my work might be (and I certainly don’t think it’s endless overtime… I welcome any ideas you may have!).
If my job was a product, I wouldn’t expect each completion of a task to be met with roaring applause, praise, or a salary reward. This is always a gradual process, and making work extraordinary requires continuous and exceptional effort.
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A VR program that allows people to spend a total of 130 hours a week experiencing life in the metaverse – VRChat. Users can experience two lives through a physical body in VRChat, which raised $80 million in Series D funding in 2021. This article will introduce VRChat’s fundraising and its commercial potential.