There’s a popular adage that “imitation is the sincerest of flattery.” Well, it amazes me how often I hear “it’s like Netflix for…” as a new company is being touted as innovative because it has borrowed (what it thinks is) the Netflix model. Generally speaking, it’s a great idea to consider borrowing a successful business model from one industry to apply to another, but there needs to be thoughtful consideration as to what the core of that business model is, so that it is not misapplied.
The Netflix model is a great example of business model innovation, which disrupted the entire movie rental market by providing customers with convenient, inexpensive entertainment. The model has resulted in numerous imitators, renting children’s toys, audio books, dresses, magazines, and beyond.
One of the big risks that many “it’s like Netflix for…” companies take is that they have borrowed some of the processes (e.g. creating rental queues online and home delivery of products) without thinking of the business model as a whole. The success of the business model depends on the integration of the customer value proposition (CVP), profit formula, and key resources and processes (see the Four-Box Business Model Framework). At the heart of the Netflix model is the customer value proposition: convenience and cost savings. Careful consideration should be given to what the benefit to the customer really is, in terms of what important and unsatisfied jobs are being addressed. For instance, if not convenience or cost-saving, is the value in time-saving or variety?
A big red flag that a model is being misapplied is if there is a weak customer value proposition, because the tradeoffs for the target customer are too high. Think for a moment about something that you own that you would hate to rent, or about something that you would want to select in store, not select over the Internet. Chances are the things that first come to mind are likely not a good fit for the Netflix model. When it comes to borrowing business models, it simply is not enough to think that because it worked in one industry it will work in another.
Could these interpretations of the Netflix model work for some of these companies? Sure. It’s too early to say whether these businesses will individually or collectively succeed, but here are a few questions that entrepreneurs looking to borrow a business model should think about:
- Is whatever you are borrowing going to help fulfill your target customer’s important and unsatisfied jobs-to-be-done?
- Will this model be unique to your industry? If not, are you at risk for becoming just another “me-too”?
- What are you really competing against? Will your would-be-customers be willing to accept the tradeoffs your model presents?
If done properly, drawing from business model analogies in different industries can be a way to spur business model innovation. Consider which aspects of a business model you are borrowing and whether those fit with your vision and the customers for whom you are trying to create value.
