In 2011, when Netflix infamously tried to get customers to switch from DVDs to streaming video by suddenly hiking prices 60% for plans that combined the two, the company lost 800,000 customers and its market capitalization plummeted 75%.
Although some companies’ legacy business models exist comfortably beside their new digital business models, many companies face watching their new creations nibble away at their existing customer base. The alternative is worse: watching competitors do it for you.
While you grow your new revenue model to attract new customers who are innovators and want to take advantage of new trends, you still have to manage your existing revenue stream, even though it’s shrinking.
If your digital offering is superior to your legacy offering, it makes sense to pursue disruption immediately. If it is inferior, introduce the digital offering gradually to keep pace with its maturation and/or its perception in the market.