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Lessons from Blockbuster's Demise

Sonny Steward, left, Amanda Steward, right, and Alma Gonzales, back to camera, prepare DVD's to be mailed from Blockbuster Inc.'s distribution center in Dallas
Donna Mcwilliam
Sonny Steward, left, Amanda Steward, right, and Alma Gonzales, back to camera, prepare DVD's to be mailed from Blockbuster Inc.'s distribution center in Dallas

Blockbuster was doomed to failure the moment Netflix came along: that's one narrative arc that has been appearing ever since the video rental giant started staggering.

And it's gained not a little traction since Blockbuster's bankruptcy filing last week.

Which is a shame, because it happens to be untrue.

Are there lessons in Netflix's rise that execs can learn from?

Of course: and the company will likely become something of a case study for anyone even remotely connected with a start-up. (In fact, it's already there).

But the real lessons come from studying the role Blockbuster played in its own demise. Granted, the company had problems—including a massive physical footprint that made it very difficult to pivot to a new business model. But it also had something that Netflix didn't: an existing customer base and strong brand recognition. Had the firm recognized Netflix as a threat early enough—or paid heed to changing consumption patterns—it could have fought the company off. Or just acquired it.

So what can those seeking to prevent an existing company from meeting a similar fate take from the case—other than a fatalistic view that their demise is inevitable?

Well, as already suggested, the major lesson is that it didn't have to happen that way. And the minor lessons essentially come down to paying attention beyond the confines of your own company:

Seek alternative perspectives

One of the problems with working within an industry for any length of time is that you can get bogged down in the details of that industry, and lose a sense of how the bigger picture affects what you do. While there's no easy remedy for that, keeping up with news and perspectives from outside your industry—whether they come from people in other areas of your company, or from somewhere else entirely.

Keep up with developments in other industries

Obviously the folks at Blockbuster knew every nuance of the movie rental business. What they didn't grasp was the transformative power of the internet. Had they had more of a grasp on emerging technology, they might well have been able to stave off the threat from Netflix before it emerged.

Don't get too comfortable

It's difficult to compare Blockbuster's position in the 1990s to its subsequent decline and not come to the conclusion that complacency played a big role. While there's no one way to ensure that you're not falling victim to the same kind of thinking, treating any potential competitor as a threat is a good starting place. And figuring out what it is customers like about that competitor can be a good starting point for overhauling your own business model to ensure that it doesn't become obsolete.

Phil Stott is a staff writer at Vault.com in New York. Originally from Scotland, he has also lived and worked in Japan, South Korea and Eastern Europe. He holds an MA in English Literature and Modern History, and a Masters in Research in Civil Engineering, both from the University of Dundee.

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