Who remembers the summer of 2011 when Netflix, Inc. raised its prices by 60% and lost almost one million customers? Fast forward to October 22, 2013 where Netflix reported adding 1.3 million U.S. customers just in the third quarter ( “Subscribers Fuel Netflix Stock” – WSJ) to eke out HBO by one million subscribers. In addition, its stock price is up 282% since the beginning of the year. How did they do it? Well, according to Brian Stelter, a media reporter for the New York Times (in an interview on NPR) it was simply . . . . “Netflix listened to its customers and has continued to listen to its customers ever since.”
This particular story really struck a chord for me and caused me to reflect on two conversations I had over the last several weeks with potential clients. In both cases, these are former clients that have moved to new companies and are challenged with their “customers” not wanting to “buy” what they are “selling”. Both companies are large and global and up to this point do little to no Strategic Sourcing. These companies are also very entrepreneurial and highly profitable – in other words, if it’s not broke why fix it? The struggle they are having is that they are trying to “sell” supplier consolidation and cost reduction to an audience that could not care less about either of those things. So what do they do? Increase the heat and “create” a burning platform? Put policies in place to force compliance? Plow forward without customer support? Any one of these might work BUT it will be painful and short-lived.
Here’s a thought – do what Netflix did and LISTEN TO THE CUSTOMER! Now, you may be sitting there thinking that your job as a Sourcing professional is to save money and if you are not ALLOWED to save money then, what are you supposed to do? Once again – Listen to the Customer! The skill set required of a Strategic Sourcing professional (analysis, problem solving, relationship management, collaboration, change management, facilitation, project management, negotiation, contracting) allows you the luxury of providing value beyond cost cutter. Here are just a few thoughts for those that are struggling to think beyond TCO:
- Establishing new supply chains in new global markets
- Assuring supply (or substitutes) is available when a weak economy is causing the supply base to shrink
- Monitoring and managing supply risk when the unexpected happens
- Utilizing the existing supply base to help your company develop new products or enter new markets
- Determining ways to extract efficiencies from existing technology
- Finding ways to standardize specifications and streamline processes
- Providing supply market intelligence to accelerate critical decision making
- Extracting additional value from your strategic supplier relationships
If your “customer” is not interested in cost savings (and some are just NOT) then listen to what they do want. Or, like NetFlix, offer them solutions (e.g. original content ala “House of Cards”) that they did not even know were possible. The opportunities are endless . . . . .and you might even find that what once seemed like a sinking ship is now blowing the competition away . . . . . .
Let us know what you think and join in the conversation.