Two business news stories caught my attention this week: Netflix’s change in their pricing model and Facebook’s change in News Feed and user interface.
In the past, it was difficult to see how change (and the reaction to it) played out nearly instantly across the globe. Companies made internal or external changes and people took time to embrace, adapt or resist change. Nowadays, the effects of change management (or lack of it) are nearly immediately apparent, especially with internet-based businesses.
First, Netflix. I’m not a subscriber, but many friends and family are. How shocking it must have been that the company (from relatively out of the blue) increased the price of renting by 60%! They broke their business in two – DVD (by-mail rental) and internet rental now cost a minimum of $7.99 each. If you hadn’t heard, nearly 1 million people canceled their subscriptions (mostly from the DVD side), causing a drop in its stock price by 19%.
Conversely, Facebook. Who isn’t on Facebook these days? I enjoy it, but find constant change in navigation and user interface both interesting and unnerving. Today, Facebook changed how News Feeds are delivered to the site visitor. One main new component – Facebook is telling me what posts I would enjoy and find more newsworthy than others (how dare they?!?). There are lots of complaints in my feed and online about these unannounced changes. Some friends are even saying they won’t use Facebook anymore…but they’re announcing this to friends, ironically enough, on Facebook. Some are even looking into moving to Google +.
The big lesson here for those planning and executing changes: no surprises! I am fond of saying “Humans Like Maps,” meaning that people like to know where they’re going. By not giving appropriate time for users, customers, or internal staff to learn about, absorb the message and react to it, strong community reactions are inevitable.
Yea, even those who may find value in the change may be upset at how it is delivered, creating more barriers to change.
Thinking about these recent examples, Netflix customers have options: cable and internet to deliver movies (though the selection and time it takes to download require sufficiently more effort). Most DVD customers believe they have other options now than DVD and will switch to new cable and internet offerings. They may be hurting themselves in the process ($7.99 to rent any movie you want still sounds like a good deal to me), but people that have been treated poorly often will hurt themselves more (higher prices, more difficulty) in an effort to hurt those that hurt them. Hurting yourself to hurt others is kinda stupid, but we’re human after all. Emotion trumps logic most of the time.
The Facebook community is limited, however, in what they can react to…largely because the community is (at this point, anyhow), the only place where everyone I or anyone else has ever met, loved, danced or took a test with is located. Voting with one’s feet is next to impossible. Even though Google+ is an option, the mass of people doesn’t exist there yet to be useful. So, reacting to change is much more like you would see in an internal corporate setting: vote with your feet (leave the organization), or swallow the change, learn how to manage and move on (with a lot of resentment).
Both Netflix and Facebook can manage change better; surprising your constituents with such a large perceived change – whether they be customers or your internal staff – rarely ends well.