Back in the day, Blockbuster was the unrivalled king of movie rentals, so how did they mess everything up so badly? If you want the quick fix short answer, this is it: The main reason was failing to adapt to change. The market evolved and Blockbuster didn’t. If you wan’t a more in depth analysis read on we highly recommend that you read on.
In the beginning
In the very beginning, Blockbuster was a massive success that revolutionised the video industry. Each branch offered thousands of movie titles and stayed open later than the other competitors. A computer systems was implemented (back then that was pretty advanced) to keep track of stock and to ease the check out process. At its peak, in 2004, Blockbuster had about 60,000 employees and over 9,000 stores. However, due to the aggressive competition from companies such as Netflix, Blockbuster’s success story ended on September 23, 2010 when the company filed for bankruptcy.
Blockbuster at its peak
Could this massive failure have been avoided? Well, Blockbuster at its peak easily had the resources on hand to create a Netflix of its own.
Imagine having the capital to develop and market a new streaming service under a well known and reputable brand. Stores could have gradually closed, more and more subscribers would have signed up for the Blockbuster streaming service and it would all have been a great success story whilst reducing operational expenses and increasing profits.
New markets could have been captured without the need for a single physical asset to be held within them. In hindsight it seems almost ridiculous that this route eluded the top management. That however was the faith of the once giant enterprise. Top management and decision makers took their market position and large customer base for granted. Big mistake. Customers don’t owe you anything and will move on to the next big think without a giving it second thought (and rightly so).
The rise of Netflix
Today Netflix is the boss that Blockbuster could have been, with well over 40 million subscribers and a market cap over 29 billion dollars.
Reed Hastings started Netflix back in 1998 when he was considered the little guy that no one took seriously. Reed was an unsatisfied Blockbuster customer that thought he could do a better job than them. Blockbuster probably laughed at Reed and Netflix in the beginning.
The tragic fact of the matter is, that in the beginning, Blockbuster could have actually acquired Netflix for the mere sum of $50 million. Pennies when you consider the current valuation of Netflix – over $29 billon.
By the time Blockbuster realised the mistake they made, it wast 2004, six years after Netflix launched. By then, Netflix was already a profitable company and Blockbuster didn’t realise it at the time, but it was already dead.
The lessons that we need to learn
Despite missing out on the opportunity to acquire Netflix, even in 2004, Blockbuster still had sufficient resources to make a move, to make a change, to do something but they were far too slow. So what can we learn from all this? The main lesson to be learnt here is that failure to effectively respond to change can be the doom of any enterprise no matter how successful it is. The key is to always seek to keep up with technology. Even if you are currently enjoying brilliant success, always adapt to the changes that the future brings. Otherwise, you might be filing for bankruptcy sooner than you think.
Blockbuster is your classic example of how large companies are far too slow to react and pivot their structure when needed. The chain of command at Blockbuster was too slow and too arrogant when it came to keeping up with modern fast shifting technology.
Sheer size and momentum guarantees nothing at all. You are not unbeatable. Google, Samsung and Microsoft may seem unstoppable today, but they could also be filling for bankruptcy if they aren’t careful. No one is unbeatable. A motivated person with a plan and a vision can take down any giant if he really wants to.
Photo Credit: Josh Smith
It’s no coincidence that Apple is mighty successful and looks like it will continue to be so for the foreseeable suture. Apple, despite being a mega company that’s way larger that Blockbuster ever was, Apple is different. Apple is still nimble. Speed of execution and the fast changes are a huge competitive advantage that are absolutely crucial in today’s world of fast paced technology. Both Steve Jobs and Tim Cook did, and still do emphasis the fact that Apple may be a multi billion dollar giant, but they implemented a corporate behaviour similar to that of a lean startup that is quick to change and adapt. Nokia and Blackberry didn’t share this vision and where are they now? Exactly!
Blackberry, Nokia and Blockbuster at their peak had almost unlimited resources, stores and distribution almost everywhere and customers in abundance and yet, arrogance and failure to adapt brought them down.
Bizzvenue’s top tips for mega corporations
Forget about conservative old school management. Hire outliers, enthusiastic entrepreneurs that are passionate and excited. Put them in a position of power and let them disrupt the status quo. Or you can stay locked into your current structure just like Blockbuster did and become obsolete.
Remember, nothing lasts for ever, even the mega companies that appear to be invincible can eventually be taken down if they fall asleep and refuse to adapt. So what’s the takeaway? You snooze you lose.