McGrath: The Orderly Migration

This is the next in my series where I deconstruct Rita Gunther McGrath’s “The End of Competitive Advantage”. We are in the section where she lays out various exit strategies for firms that have identified the need for it.

The first exit strategy is the “orderly migration”. You might recall that this is appropriate when there is time to be orderly and the capacity involved is core to the business model of the firm.

So how to do it? Rita uses the successful orderly migration of  Norwegian company, Schisted, a venerable newsprint firm. Schibsted’s CEO correctly predicted that advertising revenue for print media was headed for the toilet. So what did he do? He also anticipated where that money would go — to online advertising platforms. So he created and spun off  such a platform called FINN.no. Nicely done!

Netflix tried to do this as well. Its CEO Reed Hastings correctly predicted that streaming movies would overtake renting DVD’s. But Hastings tried to move customers over to streaming too abruptly and they revolted. Rtia lays out how this might have been done more stylishly, with gradual incentives rather than a sledge hammer.

The bottom line is that orderly migration is like “reverse customer adoption”. Serve the early movers, but let the slower ones adopt at their own pace.

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