Netflix, Blockbuster, and Disruptive Innovation
Adapting from his presentation at the United Synagogue of Conservative Judaism Convention 2015, Robert Isaacs explains what synagogues – and, really, all nonprofits – can learn from the way Netflix continually takes risks and pursues innovation.
This article originally appeared on www.ejewishphilanthropy.com.
Whose business model does your congregation wish to follow: Blockbuster’s or Netflix’s?
Blockbuster Video, of course, owned the movie and DVD rental market. With their scale and large selection, in the late 1980s and early 1990s, Blockbuster put most mom and pop corner video stores out of business. Chances were, if you were renting a movie, you were going to Blockbuster. The problem is, Blockbuster never changed, and they never planned for or anticipated the disruptive innovation that was around the corner.
Netflix began in the late 1990s by offering a way to cut out the video store and rent physical movies through a virtual store. The two models existed side-by-side for a while, but eventually, Netflix took a brave leap by investing in streaming and eliminating the need for a physical product altogether. Taking this step not only represented a threat to rivals like Blockbuster, but Netflix risked cannibalizing its own mail order DVD business. (Fear of disrupting one’s own market share is a reason many businesses choose not to pursue innovation.)
Now, Netflix has further innovated by transforming itself from just a library of content to an actual producer of content. Of course, not everything has been smooth. An attempt to divide the company’s streaming and DVD services into two companies, and dramatically upend existing price packages, upset consumers, ruffled investors, and generated negative press. But by constantly seeking to innovate and take risks, Netflix currently has nearly 70 million streaming subscribers, while Blockbuster has been relegated to business history books.
From Nov. 13 to 17, more than 800 people gathered for the United Synagogue of Conservative Judaism’s 2015 Convention in order to “shape the center” of American Jewish life. I was honored to be a featured presenter. I raised the example of Netflix in my interactive session, “Funding Disruptive Change: How to Pay for the Next Big Idea in an Age of Uncertainty.”
In my session, I led an exploration of what synagogues can learn from Netflix and other companies and industries that explored new possibilities and pursued innovation. Clayton Christensen, a business professor at Harvard University, first published “The Innovators Dilemma” in 1997, introducing the idea of disruptive innovation, or change, into the wider culture. Used interchangeably with disruptive change, disruptive innovation can be defined as emerging technology that unexpectedly displaces an established one.
It is no secret that American Judaism is currently in an era of transition and the institutions that were formed to deal with the spiritual, cultural, and demographic landscape of the past are not necessarily well equipped or positioned to deal with today’s needs. In this context, some have looked to the idea of disruptive innovation and applied it to the synagogue world. The Jewish people have been innovators for thousands of years. As Rachel Cort pointed out in a 2014 piece for ejewishphilanthropy, the advent of monotheism may be one of the most disruptive innovations the world has ever known.
One might say that today many American congregations face challenges not unlike Blockbuster in its prime. For generations, many American Jews felt an obligation to join a synagogue; if a family wanted their child to receive a supplemental Jewish education and become a bar or bat mitzvah the family had little choice but to become members. Today those conditions have changed and many congregations have struggled as a result. But all is certainly not lost and many synagogues have become more creative and have learned to adapt to new realities.
It is a little scary, and certainly risky, to follow the example of Netflix. As I pointed out, by embracing streaming, Netflix invariably ate into its own DVD business.
How can synagogues convince donors – especially those who are very attached to a synagogue’s culture and history – to do things that put the synagogue model at risk? How can congregations convince donors to fund things like an alternative dues model, the streaming of services and religious school, or funding “roving” rabbis who spend little to no time in the actual synagogue building? All of these ideas come with risk and many synagogues feel that they have little room for error. Hopefully, it is clear to all by now that failing to innovate or take calculated risks is not an option; the challenge for each congregation is finding the level of risk and innovation that best suits its culture and needs.
In seeking to fund transformational change, individual donors are your best potential funders but they will need to be convinced that change is risky but necessary. Congregations should certainly explore other options. A healthy endowment allows a congregation to withstand a larger amount of risk. Additionally, you can also look to foundations and federations as potential funders and partners.
How do you convince donors to take risks? By arguing that doing nothing is the riskiest strategy of all. Many have sounded the alarm about the future of the American Jewish community. But know that throughout history, the Jewish people have innovated, adapted, and changed. If our donors fail to act, many of our communities could end up looking more like Blockbuster than Netflix. As Netflix CEO Reed Hastings said, “don’t be afraid to change the model.”