When Netflix CEO Reed Hastings made the bold move of raising prices significantly then changing the delivery of Netflix services (which would later be scrapped), his leadership identity took a big hit. Shortly thereafter, the company lost over 800,000 customers and the stock dropped 35%. This was not a stellar leadership move.
Hastings Failure to Recognize Four Facts
Trust is Fleeting
Customer loyalty is not constant; therefore, an action that will have an adverse effect on customers’ wallets should be taken only after careful consideration as to how it will affect their perception of the company.
Raw Data Does Not Tell The Whole Story
Careful consideration doesn’t mean simply analyzing trends or examining demographic behavior. Gauge potential response by focusing on how customers feel about what will happen. Lead a focus group, distribute a survey, talk with those that will determine whether the move will be successful.
Ask, Ask, Ask Questions
Be curious about what your customers think. Hastings downfall was to be overconfident about how his customers would respond. And don’t simply rely on company executives or personal friends to provide feedback – they are not the ultimate source for objective opinion, your customers are.
It’s How You Say It
The announcements came with little communication about how the changes would benefit customers. By simply telling his customers that the changes were going to happen, Hastings left out a critical marketing caveat – ‘What’s in it for me?”
Review examples of successful leaders and you’ll find core values and abilities that exist within each of them. Certainly, leadership strength comes from being determined and influential, but the ability to be effective requires much more.
In 2004, the Wharton School identified the 25 most influential leaders of the past 25 years. Names like Iacocca, Buffett, Gates, Walton, Ash and Greenspan populated the study. The resulting book, Lasting Leadership, uncovered the following traits of great leaders…
Traits in Great Leaders
- Ability to build a strong corporate culture
- Being a truthful person
- Ability to discover and exploit underserved markets
- Being able to identify “invisible” behavior – in other words, seeing potential winners or faint trends before competitors discover them
- Ability to use price as a competitive advantage
- Adept at managing organizational brand
- Being a fast learner
- Skillful at managing risk
On the flip side, traits of poor leaders, including aggression, poor communication ability, excessive risk-taking, poor governance and a lack of integrity, have contributed to the downfall of once-powerful leaders, such as General Motors CEO Rick Waggoner, Richard Fuld and Sir Allen Stanford. Could Hastings join that crowd?
The American landscape is littered with examples of poor leadership. Most often the downfall of a corporate leader is his perspective of entitlement. Take former Illinois governor Rod Blagojevich, for example: he ruined his opportunity to lead by expecting something in return for a favor. Former Merrill Lynch CEO John Thain felt entitled to a year-end bonus, despite the company’s loss of billions for its customers. Leaders who fail to portray an image of selflessness often stumble when attempting to lead others.