In 2000, Blockbuster had a chance to buy Netflix for $50 million. Netflix is now worth $173 BILLION.
Blockbuster Video made four critical mistakes that resulted in the demise of their organization.
- The didn’t understand what their product really was,
- They didn’t understand what their customers really valued,
- They didn’t have a culture of communication, and
- They didn’t have a system to recognize changing trends
All of these critical mistakes were preventable. By having a strategic plan in place, Blockbuster could have overcome each of the mistakes that are detailed below and could have been the dominant player in the movie rental industry today. Now, let’s take a look at each mistake and how they truly impacted the franchise.
Knowing What Your Product Really Is
The first thing to take away from Blockbuster’s failure is knowing what your real product is. A key mistake Blockbuster made was thinking that what their customers were buying was the experience of walking into a store, looking around, physically picking up a movie (and maybe some popcorn, candy and/or a two-liter soda) and going home to watch.
What they missed, though, is that their customers weren’t buying the experience of shopping for a movie; they were just buying the movie. Having a large selection of movies from which to choose was important, but the act of walking into the store, browsing the inventory or getting snacks was not.
Once they were presented with a way to choose from a large selection of movies from their home, such as the early years of Netflix, customers flocked to the new experience. Even Netflix had to change their model to streaming once digital streaming became the current way to deliver movies.
Understanding What Customers Value
Blockbuster also forgot that profit needs to be tied to what customers value.
The ‘Wizard of Ads’ author Roy H. Williams said, “The first step in exceeding your customer’s expectations is to know those expectations.”
This mantra holds true for marketers across every level of business, whether you’re a small business owner or a Fortune 500 executive. Striving to understand your clients and customers is essential. After all – you can’t meet your customers’ needs if you have no idea what those needs are.
One of the best ways to enhance your understanding of your customers’ wants, needs and expectations is simply to ask. If they had surveyed their customers, Blockbuster would have learned how badly their customers hated late fees and they would have learned sooner the customer’s desire for streaming.
Netflix founder and CEO, Reed Hastings, came up with the idea for his DVD-by-mail rental business because he was late returning a video. Legend has it that Hastings had rented Apollo 13 from his local Blockbuster Video store and lost it. The penalty for such an infraction was a $40 fine. Here’s how Hastings told it in Fortune Magazine years ago:
“I remember the fee because I was embarrassed about it. That was back in the VHS days, and it got me thinking that there’s a big market out there.”
Create A Culture Of Communication
Blockbuster chiefs lacked the vision to see how the industry was shifting under the video rental chain’s feet. I’ll bet some members of their executive team did see it, but they didn’t speak out. Their culture kept them from saying anything.
Many organizations out there that want to be more collaborative, have an aligned vision, communicate better or improve trust and accountability. They just struggle with change due to the silos standing in their way of aligning to a vision.
There is good, healthy conflict in every successful organization, and people should be comfortable to venture out of their comfort zones. Your organization should be an environment where everyone is stretched and doing their best thinking.
When there is a lack of conflict or engaged dialogue among the team, it is an indication you are not talking about anything that requires any real discussion. For example, failing to emphasize the hard-to-achieve goals and key performance indicators, not holding people accountable, not talking about the “elephants in the room” or the real issues going on in the company.
If you are not having this type of regular conflict, you have a problem with your “team”, and I recommend reading “Five Dysfunctions of a Team” by Patrick Lencioni. The lack of conflict can be an indication that the foundation of a strong team — trust — is missing.
Develop a System to Recognize Trends
Blockbuster’s fourth major failure was not recognizing trends in its industry. Market-leading firms, such as what Blockbuster was, often fall behind startups because they just couldn’t see the future and adapt. This is what Harvard Business School Professor Clayton Christenson calls the “Innovator’s Dilemma.”
While the first trend they failed to catch onto was having movies delivered to your door via mail, it was far from the only trend they missed. Since then, movies have changed to digital versions, 4K editions and even renting them for only a few dollars at kiosks around the neighborhood.
Finally, Blockbuster was just too late and too slow. By the time Blockbuster realized that the movie rental environment was changing, it was too late to change their strategy. They did try to get into the movie streaming business, but too many companies had successful streaming businesses by then, keeping Blockbuster on the outside.
“Don’t be afraid to change the model,” Netflix’s Hastings said. We say, “Sooner rather than later.”
To feed the strategic planning process properly, the key is using different techniques to mine ideas from all levels of the organization. From frontline employees, ask one simple question: “What should the organization start, stop and keep doing?” From middle management, require the standard Strengths, Weaknesses, Opportunities & Threats (SWOT) analysis.
Demand that your senior team go deeper and broader using the SWT. SWT stands for Strengths, Weaknesses and Trends. Knowing what trends are going to shake up your industry — and having a plan for dealing with them — will help you stay ahead of the competition. This will let you sniff out new rivals who want to take over your turf while you can still do something about it.
What Can You Do?
Now that we’ve looked at the failings of Blockbuster, it’s time to look at what your multifamily operation can do differently. The biggest area to focus on is your strategic planning process. By feeding the process properly, using different techniques to mine ideas from all levels of the organization, you can help your company stand above the rest.
“In preparing for battle I have always found that plans are useless, but planning is indispensable,” said Dwight D. Eisenhower.
By getting ideas from all levels of the organization, you can understand what your customer really wants and needs. You can also create a culture of communication, and show that you are open to change. But this only works if you’re willing to execute and make the change happen.
This is why Ascent and Mike Ballard can be a great help as a coach on strategic planning. By hosting a retreat or planning session with your property management leadership team, Mike can show you the tools and experience to help mine the best ideas and develop a realistic plan for growth.
Ascent has worked with dozens of property management firms, both big and small, and have collected and developed tools to help companies transform. They have seen and experienced the best practices out there today.
For more information on hosting a retreat, reach out to us.