As discussed in "The Coherence Premium," "Most companies don’t pass the coherence test because they pay too much attention to external positioning and not enough to internal capabilities. They succumb to intense pressure for top-line growth and chase business in markets where they don’t have the capabilities to sustain success." This point could not be more relevant after the recent shutdown of MoviePass, the company that offered a Netflix for Theaters like model under the parent company Helios and Matheson Analytics.
As a former MoviePass consumer, the product offering seemed too good to be true - for $9.99 a month, one could watch unlimited movies at any theater. In the case of MoviePass, they were correct with their assessment of a market opportunity. The app was wildly popular amongst teen and college aged kids, giving a demographic that was fleeing the theaters for subscription based television a reason to visit their local theater. However, they failed to align their company strategy with their internal capabilities. Namely, the business model was not able to gain enough users quickly to makeup for the low cost of subscription. In addition to that, MoviePass's faulty engineering enabled customers to exploit the application. For instance, in order to manage demand MoviePass would only allow customers to see certain movies at certain times with their pass (usually not newly releases or shows at popular movie times). This enabled moviepass to purchase the tickets at a discount from the theater who was looking to fill up seats. Unfortunately, the moviepass app did not have these checks in place, so a user could simply buy a ticket for another movie, credit one's moviepass card with a "full movie fare" and then use it to purchase a premium ticket - all on moviepass's dollar.
Moviepass failed to effectively develop an "engine of value creation" or "a system of three to six capabilities that together allow a company to compete in a differentiated way." Particularly, they did not evaluate their capabilities system effectively since they assumed over aggressive growth and were unable to supply their customers in a profitable manner. When the company started hemorrhaging cash and realized they were unable to sustain their customer base at the current pricing, they tried to raise the price of the service, but decreased the quality of the service (less movies to watch, less times, less theaters) which caused them to lose more customers, sending them into a downward spiral. Moviepass did not correctly assess their financial capabilities (Faulty Financial Engineering - one of the 7 ways to fail according to the HBR article) and when they started to have problems they ignored the customer and their original value proposition and scrambled to fix their bottom line with methods that degraded their service.
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