Fall of a Giant

ADAPTABILITY AND INSIGHT ARE KEYS FOR LONG-TERM SUCCESS

No matter what industry you are in, or how big your company is, business opportunities are out there and always will be; what can be difficult is learning how to recognise and grasp them.

It’s very easy to get bogged down with day to day operations and the thought of shaking things up too much can be overwhelming. But spotting trends, trading in new markets, and taking calculated risks can help businesses expand and become leaders. Of course, there is nothing wrong with doing something tried and true and making sure that it’s done to a high standard, but there will always be others looking to chip away at a market share by offering an improved product or a lower price. Staying adaptable and looking at trends can help keep ahead of the competition.

For businesses that are already thriving, it can be easy to relax and not worry about innovation or adaptability. Those businesses should look at Blockbuster, a business that seemed too big to fail, and did anyway.

Founded in 1985, Blockbuster epitomised everything a business should do when looking to grow rapidly. The founder David Cook researched heavily the video and then gaming rental markets, he had experience analysing data, he planned for the future by swiftly opening a warehouse to store stock which enabled him to rapidly open new locations, and he made sure that each store held stock that reflected their area’s demographics. So far, so perfect. At its peak in 2004, Blockbuster had over 9,000 stores across the globe.

There were many things that contributed to its downfall, failure to buy out Netflix when they had the chance certainly didn’t help.

However, what sealed the fate of the video lending giant was its efficiency. Blockbuster had grown to be the market leader incredibly quickly, and was such a well-oiled machine that it was difficult to allow new ideas in. Fear of profit loss, lack of insight about the way the market was heading and general mismanagement all contributed to its rapid decline. In 2004 Blockbuster was valued at $5 billion, they filed for bankruptcy in 2010, and today only one store remains open in Bend, Oregon where they offer movies and amusing comments on their official twitter account.

Blockbuster built their profit margins on exorbitant late fees, alienating their customers. They had a rigid structure to their operations and risk adverse board, and it seems they weren’t able to adapt and spot opportunities, or at least unable to do so in a timely fashion.

What can be learnt from the fall of a giant? Customers are key; if Blockbuster hadn’t penalised him with a $40 late fee back in 1998, Reed Hastings might never have created Netflix. If customers were loyal to the brand, they might not have recommended other services to their friends, affecting their market share.

Talking to peers, clients and suppliers about their experiences in the general market or with a specific company will highlight their pain points. If Blockbuster had consulted their clients and listened to their concerns, while recognising they weren’t too big to fall, they might have restructured their operations to create a profit without late fees. Their customer base might have been more loyal.

There is no such thing as too much information; gathering data about the competition, where the market is going, and potential future trends will all help to identify innovative, useful and timely ideas or products. If Blockbuster had done this, they might not have laughed Hastings out of the office when he offered Netflix for sale and they might have noticed sooner the shift in peoples’ preferences for how they watched movies and TV.

Spotting opportunity isn’t just about finding the ‘next big idea’; responding to customer’s needs, adapting rather than innovating and changing processes can all offer opportunity. Businesses that can adapt to a challenging situation are more likely to thrive. Even without purchasing Netflix, Blockbuster could have had a future with the right management and flexibility.

It’s very easy to be complacent, especially when times are good, but no company is too big to fall. Removing client’s pain points, looking out for future trends, utilising available resources and being adaptable to change are key to capitalising on opportunities. Research into what the competition is doing and where the industry is moving will make it easier to spot something innovative that will find its place in a jostling market.