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  • Hassan Younes

Blockbuster’s Complacent Leadership Style – How Streaming Sunk a Video Giant

Updated: May 3, 2020

Complacency can kill even the largest of companies. You’d be able to ask Blockbuster…if it was still around.


All too often, we see complacency as something that can only affect small business owners.

You experience a little success and start taking it easy. You ignore your competitor, your team, and your company until it’s too late.


The business collapses.


Surely, these aren’t issues that affect global behemoths. After all, the reason they achieved so much success in the first place is that they constantly adapt to industry evolutions, right?

Unfortunately, complacency can slay even the giants of business.


And we need to look no further than the sad story of Blockbuster to find out how.


Blockbuster – The Fast Rise and Even Faster Fall

It all started for Blockbuster back in 1985.


That’s when the company opened its first video rental store. Those of a certain age will remember how these worked. You’d head into the store, select a video, and pay to rent it for a couple of days.


When the deadline came up, you’d head back to the store to return the video.

It’s a model that worked for decades until the advent of the internet.


But I’ll get to that in a little while.


For now, let’s keep looking at Blockbuster’s early success.


Rapid expansion followed that 1985 formation and the company found itself going public after just one year. With its huge selection of videos, Blockbuster stood head and shoulders above other rental chains.


In 1994, media giant Viacom acquired the company and the growth continued. At its peak, the company had 9,000 stores across the globe.


And in just two years, it all came crumbling down.


Video Streaming Kills a Giant

In the 2000s, a little startup company called Netflix began to make waves.

In the beginning, they opted to evolve the video rental model. Instead of going to a store, customers could now rent a video online. Netflix would mail it to them and the customer would drop it off at any post office collection boxes later on.


The model worked pretty well. But Blockbuster didn’t see this company as a threat, which is why they chose not to buy Netflix when they had the opportunity.


Then, Netflix switched its focus from video rentals to streaming movies and TV shows over the Internet.


Again, Blockbuster was slow to react. The company believed that this streaming “fad” wouldn’t catch on.


It only took some improvements to internet infrastructure to prove them wrong. With the advent of faster broadband, Netflix went from a niche company to the go-to streaming service for movies.


Blockbuster really started to feel the pinch in 2003.


Between that year and 2005, the company lost 75% of its market value. Netflix’s success prompted even more companies to get involved in the streaming game.


Suddenly, Blockbuster’s rental model seems old-fashioned and inconvenient.

And it wasn’t just the added convenience of streaming that hurt Blockbuster. Many of its competitors stopped charging late fees or operated a subscription model that didn’t need late fees.


Of course, customers loved that. And when you consider that late fees made up $500 million of revenue for Blockbuster, you can see how this took another bite out of their profits.


And so, we came to the year 2010.


On its 25th birthday, Blockbuster found itself embroiled in a bankruptcy battle. Ultimately, its own complacency cost it a share in a streaming market that’s projected to worth almost US$125 billion by 2025.


Today, there’s only one Blockbuster store left in the entire world…


The Mistakes That Blockbuster’s Leaders Made

In the end, it was the cancer of complacency that killed Blockbuster.


The company had all of the resources in the world. If its leadership had just seen, or cared, about the impending threat, the company may have survived.

But it didn’t.


There are many lessons that leaders can learn from the mistakes that Blockbuster made. Here are four that you need to avoid in your business.


Mistake #1 – Failure to Embrace Technology

It’s a common misconception that Blockbuster got caught out by the growth of streaming.

They didn’t.


They knew that it was coming and they even had an opportunity to get in early when Netflix offered them the chance to buy the company.


The problem was that Blockbuster was far too slow to adopt this new technology.

By the time they tried to adopt a streaming model, it was already too late. Too many major players, from Netflix to Amazon, had their claws in the market.


The key lesson here is that new technology is not an enemy that your company needs to do battle with. It’s a tool that you can use to continue the growth of your business.


You can bet that your competitors will embrace new technology. And by doing so, they will serve the needs of their customers far better than companies that don’t adapt.

Speaking of which…


Mistake #2 – Sticking to a Traditional Business Model

The danger of any successful business model is that it can’t stay successful forever.

Despite this, so many business owners think that what worked in the past will always work. It’s this idea that lies at the heart of complacency. You build the business into something that works and then take your hands off the wheel.


That means there’s nobody there to steer the business through evolutions in the market.

For whatever reason, Blockbuster did not believe that they would need to change their model. They thought that customers would always prefer going to a store over mail-order rental or streaming.


This traditionalist attitude sent the business into bankruptcy.


Never make the mistake of thinking that a model that works right now will always work. You must stay aware of whatever changes to your industry lurking around the corner.


Mistake #3 – The Poor Customer Experience

In most cases, Blockbuster operated a 24-hour returns policy.


If the customer did not return a video or DVD within that time period, they’d have to pay a late fee. And as I mentioned earlier, those fees generated $500 million per year for the company.


The problem?


This revenue stream came from a business practice that customers absolutely loathed.

But Blockbuster wouldn’t change it, which left the door open for their competitors. When other companies did away with late fees, a key revenue stream for Blockbuster suddenly became a noose around its neck.


The lesson here is that the customer experience is always important. If your customers feel that a competitor will treat them better, they’ll migrate over.


And the stats back this up.


A third of customers will switch providers after a single negative experience. And that number only goes up with multiple bad experiences.


Always focus on providing your customers with exactly what they expect from your service.

Mistake #4 – Not Understanding Your Customer

The key to providing a great customer experience is to understand what your target market wants.


This is another area where Blockbuster fell down.


The company believed customers relished the opportunity to go to a store, choose a movie, and then take it home.


They certainly got the “choosing the movie” part right. The huge selection that Blockbuster stores offered is one of the reasons why the company experienced so much success.

It’s the “go to a store” part that they got wrong.


A customer’s time is extremely valuable. In Blockbuster’s case, customers decided that going to the store was a waste of time for them.


After all, why would they bother when they could stream the movies they wanted to watch or order them online?


Blockbuster failed to anticipate just how important convenience was to its customers. Again, this meant the company didn’t adapt when more convenient options came along.


The lesson here is that you must never stop trying to understand your customer. Changes in your industry will lead to your customers’ needs evolving.


You have to understand and adapt to these changes to continue your growth.


Conclusion

Ultimately, it was the cancer of complacency that destroyed Blockbuster. And this cancer spread to all areas of the business.


Complacency causes the company to not take the threat of disruptive new technology seriously. This results in them not taking the opportunity to adapt when they had the chance.

Blockbuster also got complacent with their customers. They assumed that the experience they offered in the 1980s and 1990s was still what people wanted in the 2000s.


But the advent of the internet changed everything and Blockbuster didn’t adapt.

The key lesson to take from this story is that it doesn’t matter how big a company gets.

Once complacency sets in, it’s only a matter of time before the giant falls.


Now, I want to ask you a question:


Are you a complacent leader?


If your business has started to struggle, you may have allowed complacency to seep in.

The good news is that I can show you what to do about it. Complacency almost killed my business, just like it killed Blockbuster.


I want to help you to avoid the same mistakes that I made. Head to my website to book me for your next speaking engagement.


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