Q2 2022 results from Netflix and Disney showed Disney with more streaming subscribers than Netflix. The chart below shows how the numbers evolved until this amazing milestone:

This is an interesting case of an incumbent company, Disney, being able to face the competition of a disrupting tech company, Netflix.

During my career, and specially during my years leading Gympass and Lopes digital initiatives, I’ve been learning about the power of digital to potentialize the results of a company. When I heard about Disney’s results compared to Netflix, I wanted to check if my learnings apply to this situation, and it seems they do.

Lesson 1: the digital product is not at the center

There are 3 types of companies, as I explained in this article:

• Digital: The product sold by the company is the software or technology developed by the product development team. AWS, GMail, Instagram, etc.

• Traditional: The product sold by the company has probably existed for many years without the technology, but the company is beginning to understand how technology can power the product. Banks, airlines, media companies, etc.

• Digital-born traditional: The product sold by the company could exist without the technology, but the technology greatly enhances the product. Netflix, Youtube, Amazon, etc.

When analyzing Disney and Netflix we are comparing companies of 2 different types, Disney as a traditional company and Netflix as a digital-born traditional. For these types of companies, technology and the digital product are not the core business. They are potentializers of the core business. So, when we discuss digital transformation we need to have business experts together with technology experts working together to figure out how to use technology to potentialize the business. It’s not technology subordinate to business, neither business subordinate to technology. It’s a collaboration.

Some traditional companies make the mistake of placing IT subordinate to the business, which I have already shown in another article that doesn’t work. On the other hand, some digital-born traditional companies may think that technology is more important than business, which is also wrong, and that brings us to Lesson 2.

Lesson 2: core business experience matters as much as tech experience

Technology is very important. It can change how we do business. It can disrupt how we do business. Blockbuster, once the leader in video rental, was disrupted by Netflix, a digital-born traditional comnpany.

However, technology alone is not enough. A deep understanding of the business is also needed.

Lopes is the biggest real estate company in Brazil, a company founded in 1935 that made a follow-on offering in the stock market in late 2019 to raise funds to invest in their digital transformation. I.worked at Lopes between 2020 and 2022 leading this digital transformation and learning a lot in this journey. Lopes is a traditional company, and is facing the competition of 2 very well funded digital-born traditional companies called QuintoAndar and Loft. Lopes has a lot of experience in the real estate market. Both QuintoAndar and Loft had to acquire this experience. Both acquired very traditional real estate companies in order gain this real estate business experience.

Disney was founded in 1923, and it has A LOT of experience in the media and entertainment market. Having the ability to combine this core business experience with technology experience is a sure path to good results, as it was for Disney in its streaming endeavours.

Lesson 3: technology investment takes time (and costs a lot)

Investment in technology takes time, due to the technology uncertainty, as I explained in this article with examples from Amazon and Nubank. Both Amazon and Nubank are digital-born traditional companies and they understand that investing in technology takes time.

For traditional companies it’s a bit more difficult to bear this long time investing without having clear results. This uncertainty makes people from traditional companies uncomfortable, which is natural. To be able to cope with this uncertainty, people from traditional companies need signs that the investment in technology – which is not low – will generate results in the long run.

Disney seems to be investing in internet technology for quite some time. Since its first website from 1996:

In 1999, Disney acquired Infoseek, a search engine, and Starwave, a web content producer, and started to gain some knowledge about internet. In 2015, Disney launched a streaming service in the United Kingdom called DisneyLife to test the streaming market. During 2016 and 2017, it acquired BAMTech, a streaming technology business. ESPN, a company acquired by Disney in 1996, launched Espn+, a streaming service, in 2018. Disney acquired Hulu, another streaming service, in 2019. Then, in November 2019, Disney+ was launched, and 2,5 years later, Disney was able to have more subscribers than Netflix in its 3 streaming services (Disney+, Hulu and Espn+). It may look that it’s a 2,5 years endeavor but if we consider that Disney has been investing in digital and internet since 1996, it’s more than 25 years!!! And it costs a lot, BAMTech acquisition alone was $2.58B, besides all other acquisitions, and investment in people, infrastructure and tools.

Summing up

• Disney’s recent result report showed a number of streaming subscribers bigger than Netflix. An interesting case of an incumbent being able to face the competition of a disrupting tech company. This gives us 3 interesting lessons on digital transformations:
• Lesson 1: the digital product is not at the center.
• Lesson 2: core business experience matters as much as tech experience.
• Lesson 3: technology investment takes time (and costs a lot.

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