Netflix and the Myth of Transparency in the Modern Age

A few days ago, Netflix announced that it would not, after all, split the company in two. You know the story -- recognizing its future is in streaming media, Netflix set out to create separate companies for its DVD and Streaming businesses.

When the company met with a very bad reaction from customers (and a lot of other constituencies), it retracted the plan. Some press described Reed Hastings a "chastened", among other words.

There are probably a number of lessons here. But, I believe the lesson in this episode is that transparency in the new media age is a myth. Netflix was attempting to be the ultimate in transparent: acknowledging to the market that its future was not in DVDs and a new company needed to be formed. It wasn't hiding that fact or playing games. Just taking steps and moving ahead.

A lot of people say that in today's world of 24/7 communications, the market figures everything out and you might as well just admit what you are doing and not try to manage your communications. Netflix did just that and was roundly punished for it.

The reality is it's critical to be a bit cagey in today's world. Or alternatively, do what you want to do but don't acknowledge or admit it. We have seen Facebook, Amazon, Google and many other companies do that repeatedly in recent years. And despite exclamations to the contrary, some of these moves might be a just a little evil.

Netflix was actually trying to not be evil. And it was vilified.

No Hype

This morning, I was reading an interesting analysis of Katie Couric and Meredith Viera with their respective 1-year anniversaries upcoming. It was yet another reminder of why hype usually hurts those who are supposed to be the beneficiaries. In essence, the point was that Meredith Viera has had the chance to grow into her role on the Today Show (as has Charles Gibson on ABC) while Katie Couric was under such a microscope on her and faced huge expectations, it would be nearly impossible for her to succeed.

You will notice, if you have read this blog before, that our view of the world is that hype is a bad thing in communications -- particularly in the world of young, start-up companies. This is an important reminder today when young entrepreneurs see Google and Facebook and believe they, too, can benefit from lots of attention. Some do; most don't. Here are some of the reasons why:

1. With lots of hype, comes lots of expectations. Even the most established companies are challenged by meeting expectations that have been magnified by a unidimensional view of a company's strategy and plans;
2. With hype comes lots of scrutiny. Have you heard the expression "you can only know the dynamics of a relationship if you are in it"? The same goes for start-up companies. It's easy to second-guess a company unless you really understand what's going on inside and all of the pressures the company and executives face on a daily basis.
3. In a fast-changing world (and even sometimes when things are not moving so fast), it's good to be in a position to learn and refine your strategy and execution as you move along.
4. Every company needs to learn about their product. Particularly when you are first coming to market, it's important to learn from what the market is saying to improve the product. It's hard to do that when everyone is watching and the slightest change leads to big questions.
   
5. The simplifications that result from (and sometimes contribute to) hype lead to long-term misunderstanding.
6. There are more.

To be fair, I really should enumerate the benefits:

• A lot of attention can lead to quick visibility which can lead to quick consumer product adoption, if the product is really good. (See 4, above. Also, as a note, I have often thought that one of the great sources of Starbucks' success is that they combine great marketing with great products.)
• If you are interested in doing a quick-flip financial transaction, hype can certainly create an opportunity to achieve a higher valuation in the near term (but there are other ways to do that, as well).
• Anyone want to suggest some more benefits?

So, what should a young company do, if they aren't supposed to hype themselves?

1. Create a strong perceptual goal and a plan to help the market understand it.
   
2. Create a good, substantial, and easy to understand story that can form the foundation of long term communications.
   
3. Build strong relationships and understanding among influencers in the market.
4. Develop an ongoing flow of news that helps people understand who you are, where you are going, and why you are important.
5. Be prepared to learn from what you are hearing from the market and refine as you move forward.
6. Be patient and plan to work hard. Very few people get something for nothing.

But, don't get me wrong. Attention for a company is not a bad thing --when handled in the right ways. It just leads to an important reminder: Most of all, build a great company!