Executive Summary
Films and short-form videos have been in existence since the early years of the invention of the internet. Because of monetized views and clicks related to digital-based films, broadcasters, filmmakers, streaming service providers, and other digital apps have been fascinated with the war of finding subscribers. As such, the concept is fueled by the strategy of acquiring new and unique production series into the mainstream media with the virtue of appeasing the audience into subscribing to their short films. Therefore, it is valid to argue that online streaming can deliver new audiences for short videos and, at the same time, bring the same career magic to video-content creators. The current case study utilizes the new venture, Quibi, to illustrate strategic business planning and possible failures in cases where venture planning is inappropriate.
Quibi is a short-form online streaming service provider based in the U.S. The firm, which was launched in early April 2020, has an app designed for short-form video streaming for people to enjoy exclusively on their smartphones. Led by the well-known Jeffrey Katzenberg, a veteran Hollywood CEO, and Meg Whitman, a form HP CEO, the short-film production firm was designed to be a hit based on the invention of their new technology, Turnstyle technology, where films were formatted to fit both landscape and portrait modes. With close to $1.75 billion raised for overall Quibi’s budget, coupled with the inclusion of top-of-the-tier Hollywood filmmakers and actors and actresses, the firm was projected to succeed (Mullin, Flint, and Farrell, 2020). However, due to poor strategy implementation, the company was forced. Strategic planning is an extensive concept that has been presented in the main video streaming practices of today’s businesses (George, Walker, and Monster, 2019). In this case, Quibi’s main strategic plan was to utilize the glitzy short-content streaming service, sign up A-list actors, and use top marketing to attract advertisers to their films. However, one of the major failures of the firm was the missing subscribers.
Though the company blames its failures on COVID-19, the available evidence points toward poor strategic business models. For instance, the corporation experienced what is known as a stuck-in-the-middle problem due to the availability of competition, Quibi’s prices were too high as compared to their competitors, and the fact that Quibi was facing a lawsuit from a competitive and well-financed technology firm, Eko, over the app’s Turnstyle technology added more problems.
Additionally, the company’s decision-making processes were also flawed. For example, there was evidence of poor business assumptions based on experience and negative momentum building as startups. Based on the problems illustrated, the industrial-organizational theory emphasizes that there is an influence of the business environment upon the organization (Konzelmann & Wilkinson, 2017). The theory postulates that organizations that cultivate a strategic business fit within the company’s forces often thrive. Further, the contingency theory states that managerial performance in a business corporation is a joint result of environmental elements and a company’s strategic actions (Maletič, Maletič, and Gomišček, 2018). Using these analyses, it is evident that Quibi’s venture planning as a startup lacked appropriate contingency planning, hence its failure. As such, the firm could employ the use of resilience and fail-fast strategies to find an appropriate market niche that suits its content.
Findings
Problems
Startups are often faced with complex decision-making situations in their day-to-day business modeling and strategic planning. According to Katzenberg, in the wake of the COVID-19 pandemic, many U.S film consumers spent more time watching TV rather than the short films on their mobile phones provided by Quibi (Mullin, Flint, and Farrell, 2020). However, this was not the case as many of the U.S short-form video subscribers also consumed a lot of their time on mobile film apps during the devastating period of the COVID-19 pandemic. Notably, Quibi had a definitive stuck-in-the-middle problem and not an entirely pandemic issue. For instance, the fact that Quibi charged $5 per month for its content and its $8 per month subscription without adverts was nonsensical (Alexander, 2020a). Precisely, the firm was charging for its services yet the entertainment individuals were getting some valuable content for free on such platforms as TikTok, YouTube, and Twitch. This was coupled with the highly hyped TV shows and movies audiences were cheaply paying for on Netflix, Amazon, and Disney Plus, thus leaving the company’s extra charges not exactly something to be desired. Moreover, quality premium short-form videos were being delivered by such video producers as Netflix and HBO or at free charges on TikTok.
The fight over Quibi’s main technology, the Turnstyle technology, was also a major problem that might have resulted in the closure of Quibi as a company. The legal matter did not provide any positive platform for the existence of Quibi in its short lifespan in the entertainment industry. For instance, facing a lawsuit from a competitive and well-financed technology company, Eko, over the app’s Turnstyle technology was demanding and time-consuming creating a difficult environment for decision-making processes that justifies its operation (Alexander, 2020b). Notably, the lawsuit was against the same technology that Quibi prided against its competitors, the seamless portrait and landscape mode transitions. Despite the legal processing facing the firm not entirely being the reason for its failure, having to fend off a legal challenge to its key technology was more problematic for the already growing market competition.
The failure to integrate or invest in media marketing and social sharing was a noticeable problem for Quibi. For instance, the only video clip that went viral based on Quibi short-films were adopted from a customer’s phone’s recordings. Moreover, the company did not launch its app with the capacity of subscribers to make screenshots or share clips. Evidently, without these features in the app design, customer’s engagement and discovery of the apps’ attractive usability was difficult. There was a lack of clear understanding between the future of entertainment and the application of mobile devices in Quibi’s operations. Consequently, the interactivity of turning entertaining content into features across individual social media networks was challenging.
In addition, the marketing of the app and the short-form videos were poor. There was little to no advert for Quibi on TV or other well-established such social media platforms as Instagram and TikTok. Furthermore, the presence of the expensive Super Bowl advert, which was available before the launch of the firm’s app, failed to validate what Quibi was all about, thus leaving potential subscribers more confused (Easton, 2020). Arguably, the reason Quibi and its various mobile-based series never established themselves was because no one in the exterior of the Media Twitter knew about their presence.
Decision Making Processes
In startups, different decision-making processes apply to diverse situations. In the case of Quibi and based on the types of problems highlighted above, the firm’s managers employed an intuitive decision-making process to base their business assumptions on business outcomes. This form of decision-making model has emerged as one of the most sort types of approaches in business management. According to Rasheed et al. (2018), intuitive decision-making refers to making certain decisions yet with no conscious reasoning and based on pure assumptions. Though Quibi used intuition decision-making process, Rasheed et al. (2018) claimed that the method often leads to errors in prediction and estimation during decision-making processes. Therefore, this form of the decision-making process was not a complete set as it contained performance issues.
Most startups spend a substantial amount of time building a unique and uncontested niche in the market. For instance, iROKO built its niche on Nollywood movies and succeeded (Jewell, 2017). However, in Quibi’s case, the problem with this strategy is that the niche market is only casually dissimilar from what was already on offer. As such, the firm was not avoiding competition but was instead of finding itself under attack from multiple market providers offering the same content, at a relatively cheaper price. Therefore, since offering paid-for premium content was automatically going to subject it to stiff completion, Quibi’s executives employed the intuition decision-making process with the hope that A-listed short-form videos would set them apart.
Moreover, the Quibi’s performance indicators and projections in their venture planning decision-making process were entirely based on three assumptions: (1) A-list Hollywood actors will entice numerous subscribers, (2) spending more on promotion will build business momentum, and (3) the perception that short-films of 5-10 minutes are what is needed by customers. All these decision-making assumptions could only be true if the customers were offered quality and thrilling content.
Solution Adopted
As a startup venture, Quibi utilized the scaling-up approach to address its problems. For instance, the firm, with its multibillion-dollar investment, understood that through content and marketing, they were able to build momentum. However, the scaling-up approach as a solution to the already poor venture planning was failing. Categorically, the company invested about $1.1 billion in its first annual year for the production of its short-form video series, equating to $100,000 per minute (Stadler, 2020). However, despite the scaling-up approach as a solution, the firm’s shows were still not good enough to draw viewers to the app. Moreover, some of its short films seemed only to copy the available short films found on HBO.
Another value-based solution adopted by the company was product leasing. In this case, the firm realized that most of its top-content products had no place in the then market, thus the use of product leasing was meant to reduce losses. Conversely, the use of product leasing meant that the long-term option of making money was reduced. Moreover, using the business resiliency approach, the company relented and slowly started adding support for the Company yielded and slowly started adding support for Apple’s AirPlay and Google’s Chromecast, aimed at encouraging more customers to cast their shows from their phones (Easton, 2020). However, the solution was short-lived as using the approach only disabled its Turnstyle technology, the only market feature setting its shows apart from the rest.
Critical Evaluation
Due to the increase in uncertainty and the complexity of withstanding losses for startup ventures as Quibi, the development of business resiliency is integral for future business continuity. Although new firms are built from scratch and hence do not have challenges related to management, uncertainty linked to the market and other aspects of the business model are profound (García-Gutiérrez and Martínez-Borreguero, 2016). According to García-Gutiérrez and Martínez-Borreguero (2016), most startups lack the necessary knowledge in such areas as marketing and finance and face difficulties associated with attracting enough financial and human capital. Though with enough starting capital, Quibi lacked the human capital (the subscribers for its content).
Industrial-organizational Theory
The performance of many businesses, especially for startups is built upon the utilization of strategic business planning. To effectively understand the concept of strategic planning, a theoretical framework is important for the evaluation of decision-making processes and in the prediction of future performance in cases of environmental uncertainty. According to Konzelmann and Wilkinson (2017), business organizational theory highlights the impacts of the industry environment upon the organization. Furthermore, the theory asserts that firms that cultivate a strategic fit within the industry’s forces often thrive and succeed; and that the company’s cost-effectiveness is determined by the fundamental experiences working within the external environment (Konzelmann and Wilkinson, 2017). In the case of Quibi, the industry’s key forces include the subscribers and the provision of the uncontested market niche.
Moreover, the adoption of product leasing indicated that the company was not ready to adapt to the current market situations. Using this illustration, Dess et al. (2021) claimed that the theory is predetermined by its supposition that a company’s continuity depends on its aptitude to acclimatize to a business’s forces. Further, Dess et al. (2021) concluded that a firm’s business strategies, assets, and proficiencies are factors of the company’s environment. Hence, in the context of this theory, Quibi failed because of its lack of business resiliency and constant pivoting.
Even though business startups have many impediments, they often possess the elasticity of not factoring in established customers. In this case, such firms can sightsee and experiment on any business model to address any possible challenges in the market (Hopkinson et al. (2018). For instance, since they do not have ready customers for being startups, they possess the ability to take any risk in business by exploring radical ideas. However, established companies need to be more creative about expanding their innovative knowledge and ideas using the available business models and should not base their strategies on assumptions. However, Quibi based its project on the three illustrated assumptions without prior analysis. In the development of a business model, it is best to test all the assumptions and concepts as quickly and as cheaply as possible (Fjeld, J2017). One should be able to experiment through a trial and error approach until product that meets customers demands and preferences are established.
Contingency Theory
The second insight from the firm’s failure was palpable. Startups are often recommended to acknowledge the trial and error approach rather than making strong experience-driven assumptions early on (Harms and Schwery, 2020). Apart from the industrial-organizational theory, Maletič, Maletič and Gomišček (2018) delivered the contingency theory and asserted that high monetary outcomes are linked to firms that focus on mounting a strategic and favorable fit within their business environment. According to Maletič, Maletič, and Gomišček (2018), the theory oversees an incessant correlation between a firm and its environmental factors at diverse levels of strategic execution. Furthermore, Midiwo and Ombui (2018), argued that for a corporation to be effective, the managers need to be proactive in their dealings in such a way that they operative where their opportunities and threats are analogous to their strengths and weaknesses. In this regard, Quibi failed the theory by, though using the available opportunities such as the use of short films, a niche that was neglected by most filmmakers, ignored the threat offered by its competitors.
Discussion and Recommendation
From the aforementioned solutions adopted by the owner of the filmmaker Quibi, its launch without the capacity of viewership to connect to TV was disastrous. However, the fortune of the firm could be turned around for the better. As such, the company could have considered capacity expansion which would increase its general viability. For instance, the short-form filmmaker should have included TV integration and the capacity of customers to share its content on social media platforms. Using expectancy theory, Barba-Sánchez and Atienza-Sahuquillo, (2017) argue that human behavior is a derivative of conscious decisions among substitutes with a mindful-based effort to exploit pleasure and minimize pain. However, deterring Quibi off from TV and other social media platforms as Twitter was a bizarrely archaic method for a service that envisioned reflecting the unique features of contemporary media consumption.
Moreover, although the company should continue with its development of short-form video production, it could do well with an expansion of its repertoire to other forms of unique short-form content. This would fit Quibi’s brand on-the-go mobile-friendly desires while generating brand new prospects that could further set it apart. This form of strategic management is known as niche-differentiation strategy. According to Firoz Suleman, Rashidirad, and Firoz Suleman (2019), niche differentiation strategy is aimed at delivering a highly differentiated service or product to a given set of specialized customers, in this case, the subscribers, that has specific needs. Importantly, the service can employ business pivoting or resiliency where they could further raise the company’s profile through partnering with pivot directors of other firms that are doing well in the short-film industry. Besides, there are uncountable top-tier short videos without a huge public profile that Quibi can champion and bring to the larger public. Hence, the concept of business pivoting is necessary for improving a firm’s revenue and surviving the market extremities.
Conclusion
Whereas many business startups have many setbacks, they possess the flexibility of not factoring in preexisting customers. In this case, they can explore and experiment on any business model to address any possible challenges in the market. For instance, since they do not have ready customers for being startups, they possess the ability to take any risk in business by exploring radical ideas. However, preexisting enterprises need to be more creative about expanding their innovative knowledge and ideas using the available business models. In this case, Quibi had such a conclusive stuck-in-the-middle problem as high prices for its subscriptions, the failure to integrate media marketing and social sharing, and poor content creation. Despite adopting both industrial-organizational theory and contingency theory of business model, startups are often recommended to acknowledge the trial and error approach rather than making strong experience-driven assumptions early on as witnessed in Quibi. As such, by overdoing its experiment in business, the firm lost its stability by overextending its resources too quickly. However, through capacity expansion and niche-differentiation strategy, levers and pivoting points are established, thus partnering with pivot directors of other firms that are doing well in the short-film industry.
Reference List
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