In March 1997, video businesses received the same exact news. The DVD format, sharper than VHS tapes, was now mainstream.
Blockbuster, a massive global movie and video game rental chain, read this and acted correctly.
For them, DVDs took less space, were cheaper to stock, and had higher profit margins. They named their capacity dividend as ‘a better product’ within their same business.
Two brilliant men, Marc Randolph and Reed Hastings in Santa Cruz saw something different entirely. They ran an experiment where they bought and shipped a used CD to Hastings address just to see if it would survive the mail.
The CD arrived the next day intact, at only the cost of a stamp. Because discs could travel, there was no need for physical stores and a geographical location.
Every rental now ran through their system and they began accumulating something no competitor could purchase; what their subscribers liked.
Both experienced the same change in the substrate under their work. Blockbuster reclaimed the dividend as speed and a better product within the same business.
Netflix converted the dividend into a form that it compounded, and that made the entire difference in their business models.
When the substrate beneath your work changes, “faster” is the default setting that keeps you average.
Instead, here’s how you will convert your efficiency gains into a permanent advantage that compounds.