Although the company’s fall has steadily been in the works for years, it will become a classic text book example of how new, disruptive technologies can take down what seemed like an invincible business giant. What happened is pretty simple. While this industry leader continued to expand by opening dozens and dozens of new video stores around the country, upstarts like Netflix understood that the entire model supporting video distribution was about to change forever. Because of this, it innovated by bridging the gap by offering consumers a better distribution method (receiving DVD’s through the mail) and more importantly, it understood that the creation and distribution of content via the web would soon trump everything else. So, it signed a variety of deals to secure content partnerships where consumers could stream online video so much easier.Then, of course, we all became customers of Amazon and Apple because their customer-centric content offerings brought that much more convenience to consumers across the globe.
Blockbuster is a victim of its own success. It failed to see these emerging trends. And, while the company also made a variety of bad decisions along the way, ultimately, it just waited too long to jump aboard this bandwagon. That lack of strategic vision, foresight (or just plain complacent attitude) made Blockbuster an extremely late entrant into a competitive field. Thus, it never could capture significant market share, all the while it continued to consistently plummet with its traditional video business.Clayton Christenson, the renown author of Innovator’s Dilemma, professor at Harvard Business School (and a former Peppercom client), wrote a lot about how companies need to constantly look into the future to understand the power of new game changing technologies. He believed that the difference between success and failure was pretty simple. These technologies could be leveraged to reinvent or change companies’ business models to meet the coming demands of consumers. In these cases, upstarts like Google, Netflix or Amazon could actually topple their largest and most successfully long standing competitors. Or, these technologies would only serve to disrupt and ultimately kill those businesses because they became irrelevant to their customers.
My guess is that Clayton (or some other professor) at Harvard Business School will be discussing Blockbuster in class today, as a prime case in point of how disruption worked this very week.