It took only six months for Quibi to fail. It's not quite the end of Hollywood the short and glitzy content streaming service dreamed of, but short enough.
Founders Meg Whitman, former CEO of eBay and HP, and Jeffrey Katzenberg, former Disney executive and co-founder of DreamWorks, have managed to raise $ 1.75 billion, sign A-list actors and attract advertisers. The only thing missing: the subscribers.
Announcing the shutdown of the service, Whitman and Katzenberg offered an explanation: “Quibi is not succeeding. Probably for one of two reasons: because the idea itself wasn't strong enough to warrant a standalone streaming service, or because of our timing. "
"Sadly, we'll never know, but we think it's a combination of the two."
They are wrong. The timing was not the issue here. Katzenberg previously suggested that people staying at home due to COVID-19 opt for streaming on their TVs rather than quick bites on their mobile. But American consumers have also spent more time using mobile video apps during the pandemic. The timing was therefore right.
Let's focus on what really went wrong and what strategic lessons other startups can learn from it.
Lesson # 1: Don't get stuck in the middle
Quibi had a classic problem stuck in the middle. You get better premium content on Netflix or HBO and more addicting free content on TikTok.
Startups spend a lot of time trying to find a new, undisputed niche in the market. In entertainment iROKO built one around Nollywood movies. Cirque du Soleil is a classic offline example. The danger is that a perceived niche market is only superficially different from what is already on offer. If this is the case, a business is not avoiding competition but rather is attacked from several angles.
This is what happened in the case of Quibi. Offering a premium paid service automatically puts them in competition with Netflix, HBO, Disney + and Apple TV. The idea that the length of the episodes set them apart was always an illusion. Especially since the division of longer films into chapters sometimes seems arbitrary. Consumers might as well have hit pause on a Netflix movie and come back later.
At the same time, the rise of TikTok and the continued growth of YouTube has put pressure on Quibi on the other side of the market. Why pay for a service when you have access to incredibly entertaining entertainment for free?
For startups, the lesson is clear: Creating a new niche market is great, but make sure it's a really separate market.
Lesson # 2: Don't Trust Your Experience (Too Much)
Quibi made some really big assumptions: (1) consumers want short 10-minute videos to fill in the intervening moments, (2) Hollywood A-list stars will attract subscribers, and (3) massive spending on marketing will create a momentum.
All three assumptions were wrong. As the success of "Tiger King" has shown, people are happy to spend a lot of time on the content they enjoy. Older executives might think Jennifer Lopes, Idris Elba, and Kiefer Sutherland will attract a younger audience, but that's not the case. And marketing gets you initial attention, but real momentum can only be created if you come up with must-have content, which you didn't.
Almost 10 years ago Eric Ries popularized the lite boot method. Instead of developing a detailed business model, it's best to test your assumptions and ideas quickly and inexpensively. You experiment until you find a product or service that really appeals to your customers.
Quibi should have done it too, but the experience of the founders was working against them. They had strong beliefs about how this industry worked. This is no surprise to seasoned executives. Ideas that do not fit these assumptions were easily dismissed.
The second glimpse of Quibi's failure is obvious: startups are well advised to take a trial-and-error approach rather than making strong assumptions based on experience from the start.
Lesson # 3: Be smart to build momentum
Scaling up is a crucial time for every startup. Quibi had capital (much of it) and understood that content and marketing would determine whether it was able to build momentum. However, the way they did it was wrong.
Quibi has invested heavily in content. For the top tier of his short streak, he spent around $ 100,000 per minute for a total of $ 1.1 billion, in its first year. But the shows were just not good enough. Some of them were doing fine, but none were a real hit, drawing viewers. Most of the shows appeared imitate the style of the most prestigious on HBO.
The general impression was that the best products were going elsewhere. On top of that, they were simply renting out the productions, drastically reducing the long-term options for making money.
Quibi has also invested heavily in marketing. A total of $ 400 million according to research firm Apptopia. At the same time, Quibi forced a social media blackout. Users were not allowed to share videos on social media. Initially, not even screenshots. Unlike other newer streaming platforms, they didn't facilitate word-of-mouth when they needed it most.
Startups need to be particularly smart to build momentum because they can't rely on existing distribution channels. This means that their product and marketing must match the market they are targeting (this is strategy 101 but sometimes the fundamentals are overlooked). In Quibi's case, that would have been an investment in developing content with influencers of interest who are most likely to subscribe.
Last lesson from Quibi's downfall: Startups need to remember they need to build momentum and can't follow the capital-intensive marketing approach that an incumbent would take.
Startups should take Quibi's failure as a learning opportunity
The beauty of chess like Quibi is that it offers great lessons to others. Obsession with niche markets can easily draw companies into global competition, past experience creates the false impression of knowing what matters, and quick capital makes startups forget that they are not incumbents. So, no need to fall back into these traps.
Don’t let that happen to you. Admit that you don’t know what you don’t know about business, starting with these 15 tips guaranteed to help keep you and your company out of hot water. Some are straightforward, others are counterintuitive, but they’re all true. And some day they’ll save your butt.
Always make sure there is and will be enough cash in the bank. Period. The most common business-failure mode, hands down, is running out of cash. If you know you’ve got a cash flow or liquidity problem coming up, fix it now. You can’t fire bad employees fast enough. You just can’t. Just make sure you know they’re the problem, not you ( see next tip ).
The problem is probably you. When I was a young directeur, my company sent us all to a week of quality training where the most important concept we learned was that 90 percent of all problems are management problems. When things aren’t going well, the first place to look for answers is in the mirror.
Take care of your stars. This goes for every company, big and small. The cost of losing a vedette employee is enormous, yet business précurseurs rarely take the time to ensure their top performers are properly motivated, challenged, and compensated. Your people are not your kids, your personal assistants, or your shrink. If you use and abuse them that way, you will come to regret it. Capiche ?
Learn to say ' yes ' and ' no ' a lot. The two most important words owners and founders have at their disposal are “yes” and “no. ” Learn to say them a lot. And that means being decisive. The most important reason to focus – to be clear on what your company does – is to be clear on all the things it doesn’t do.
It boggles my mind how little most fondateurs value their customers when, not only are their feedback and input among the most critical information they will ever learn, but their repeat business is the easiest business to get. Learn two words : meritocracy and nepotism. The first is how you run an organization – by recognizing, rewarding, and compensating based solely on ability and achievement. The second is how you don’t run an organization – by playing favorites and being biased.
Know when and when not to be translucide. Transparency is as detrimental at some times as it is beneficial at others. There are times to share openly and times to zip it. You need to know when and with whom to do one versus the other. It comes with experience.
Trust your gut. This phrase is often repeated but rarely understood. It means that your own instincts are an extremely valuable decision-making tool. Too often we end up saying in retrospect and with regret, “Damn, I knew that was a bad idea. ” But the key is to know how to access your instincts. Just sit, be quiet, and listen to yourself.
Protect and defend your intellectual property. Most of you don’t know the difference between a copyright, trademark, trade secret, and patent. That’s not acceptable. If you don’t protect and defend your IP, you will lose your only competitive advantage.
Learn to read and write effective agreements. You know the expression “good fences make good neighbors ? ” It’s the same in business. The more effective your agreements are, the better your relationships will be.
Far too many créateurs d'entreprise run their business like an extension of their personal finances. Bad idea. Very bad idea. Construct the right business entity and keep it separate from your personal life. Know your finances inside and out. If you don’t know your revenues, expenses, capital requirements, profits ( gross and net ), debt, cash flow, and effective tax rate – among other things – you’re asking for dysfonctionnement. Big trouble.
You don’t know what you don’t know. Humility is a powerful trait for leaders, and that goes for new business owners, veteran CEOs of Fortune 500 companies, and everyone in between. More times than not, you will come to regret thinking you knew all the answers. Behind every failed company are dysfunctional, delusional, or incompetent leaders. The irony is, none of them had the slightest idea that was true at the time. Even sadder, most of them still don’t. Don’t end up like one of them.
For every success you have in growing your market share, another or other businesses will inevitably lose ground. Here are 11 quick and easy business tips to gain a competitive advantage over your rivals and insulate yourself from the threat of new entrants in the market.
Of course, we all want to spark growth and increase revenue. But the way you do this in a sustainable way is to focus instead on the building of a loyal database of avid fans. Content marketing, paired with optimized website forms and éclairé email automation follow-up is critical to business success. This approach builds trust by giving away free value before asking for someone’s hard-earned money. Not an spécialiste in creating optimized lead generation pages on a website ? No worries, use a trusted tool like Leadpages to make it happen.
Like it or not, folks out there aren’t searching for your brand, they’re just looking to solve a problem or find a particular type of product ( unless you run Starbucks or Adidas ! ) Don’t list all the benefits your product brings. Focus on the solutions. Explain to the customer in simple, straightforward terms how or why your product can help them or assist in the attainment of their goals. Consider FedEx’s iconic slogan : When it absolutely, positively has to be there overnight. This was a clear example of addressing widely-spread anxiety about the reliability of delivery services. Run through some market research to profile your target customer. How does your product or service – and your delivery and and price point – solve other people’s problems and make their lives easier or more pleasurable ?
Dropping prices doesn’t necessarily raise sales, for instance ( though it will definitely squeeze margins ). If you position yourself as a de haute gamme brand, then your customers aren’t necessarily value-driven in the first place, and cutting prices could even tarnish your brand. Consider this case study from Robert Cialdini’s seminal book ‘Influence : The Psychology of Persuasion’ : a jeweller sold out of turquoise jewelry after accidentally doubling, instead of halving, the price. The inflated price tag lent the product an unwarranted cachet ! If you are a de haute gamme brand, there are ways to optimize your pricing without lowering prices. For example, offer the quality-conscious customer an ‘exclusive’ benefit that your rivals do not or cannot provide. If you are at the value-driven end of the market, on the other hand, don’t assume slashing prices means incurring a loss. Low pricing can help you rapidly onboard a heap of new customers who may also buy other items in your shop and return again. Context also counts for a lot with pricing. The best way to sell a $5, 000 watch, for instance, could be by putting it next to a $10, 000 watch. Think strategically when it comes to deciding any price point.
Yes, it sounds obvious, but it’s so very important ! Whether consciously or not, people are more likely to buy a product if they like the sales assistant who’s attending to them. While the employee’s personality obviously has no bearing on the price or your product’s ability to serve their needs is irrelevant. Friendly customer-facing équipe will always attract more sales. Be rigorous in hiring people who are genuinely cheerful, friendly and outgoing. Make sure your training program teaches them to adopt a consistently friendly approach that puts customers at ease and feel like a priority.
Say you’re a bricks-and-mortar store and you’re getting a rush of customers as closing time approaches… why not close up an hour later ? While this may cause disgruntlement among équipe, solve this issue by getting creative with rosters. Monitor customer footfall throughout the day and week to identify your busiest periods, and staff people accordingly. You can also reduce headcount during quieter periods to offset the higher costs and longer working hours created by your extended opening hours. It’s a win-win !
Even in the digital age, some customers will always prefer to contact you by phone rather than email or Facebook. While many online companies with tight margins eschew manned phone lines altogether, it’s worth giving customers the option of having a voice-to-voice conversation with your brand. By all means, slash the time and cost spent responding to queries by funnelling customers to standardized, pre-existing responses on your webpage ( i. e., FAQs ). But if their query isn’t listed in the drop-down menu of FAQs, then don’t make them click more than once more to find your phone number. Put it front and center on your web page, particularly if you’re a retail offering. ‘Live chat’ bots are an inexpensive way of offering real-time communication, too.
Why not give your happy customers a voucher with their purchase to redeem on your products and services ? If they love what you do already, they’re only going to love you more for this. It’s good for you because : It guarantees they will return to your store again. People hate to waste freebies ! When they return to your store to redeem their voucher, they may buy other items, too. If your operates online, then the freebie could be strategically timed to coincide with a special sale. Oh, and guess what ? Chances are customers who have received vouchers or freebies won’t stay quiet about it either, so you could enjoy some positive buzz on social media.
Local businesses can arguably connect with their unique communities with much greater authority than any global chain. A local retailer, hair mobilier or gardening company can sponsor a kid’s sports team and offer deep discounts for OAPs at the same time. Some cinemas feature special ‘sensory’ screenings where parents can bring kids with autism ( who would normally be overwhelmed by busy, noisy environments ) to enjoy a movie in a relaxed, stress-free atmosphere. This reflects well on them and also guarantees them a loyal customer niche. Whatever you choose to do to support your community, make sure it authentically fits with your brand offering and journey to date.
Social media is a great medium through which to build a solid relationship with customers – just don’t forget what ‘social’ actually means ! Soul-less corporate shop-talk won’t work on Twitter. Try to give your brand some ‘personality’ when you write updates or posts. This can bring its own risks, of course. But if you get it right, the benefits can be très grande. Develop a tone of voice that aligns well with your brand identity. Seek to inform, help, entertain or amuse. And most importantly – given the dire PR consequences – don’t patronize, try too hard to be funny, or tweet after a few alcoholic drinks !
Sometimes it’s better to be a master of one discipline than a jack of all trades. Admittedly, multiple revenue streams do spread your risk : if one falters, others can take up the slack. Nevertheless, consumers often associate ‘specialists’ with higher quality products or services than generalists. And with good reason, too : specialists typically invest all their resources into perfecting a solo product or service. So what should you specialize in ? tera state the obvious, it should be something in which you excel. You could also pick something with rising or recession-proof demand which is resilient to technological change in which you possess a competitive advantage over your rivals or where there’s an obvious gap in your local market. Own it, whatever you do.
Don’t ever get too satisfied with your business. You can always improve – and improve you must ! Don’t get me wrong : without the odd moment of smug satisfaction, what’s the point ? Do relish in the successful launch of a game-changing product or take pleasure in positive customer feedback. But don’t let your customers hear you banging on about it time after time ! Be alert to the common element that has led to the downfall of countless hitherto thriving brands : complacency. Imaginative, nimble and innovative start-ups often do better than big market leaders that just got lazy. You may be the disruptive innovator today, but tomorrow you could be the complacent market leader with a tired business model. So try to be humble and always strive to improve. Seek inspiration from other créateurs d'entreprise, from books and from seminars. The moment you think ‘mission accomplished’ is the same moment you become vulnerable to being usurped.
There are lots of ways in which you can improve your business, and not all of them are complicated ! Try out the above business tips or integrate them with your existing strategies, and let me know how you go in the comments below. Guest Author : Faye Ferris is responsible for the day-to-day management of the Dynamis APAC Pty Ltd offices in Sydney. She develops the DYNAMIS stable of brands and their expansion into the Asia Pacific region as well as BusinessesForSale. com, FranchiseSales. com and PropertySales. com. If you have an interest in partnering up with Faye or advertising on any of these websites in the APAC territories, please do not hesitate to contact her on faye@businessesforsale. com.