As a technology person, I have always been fascinated by the seemingly blind position Blockbuster took in the Netflix situation. The technology progression seemed natural for Blockbuster but somehow, they managed to botch every single ounce of market share they had in a space they dominated for a decade or more.

My wife and I were faithful Blockbuster members. We were signed up for all the special promotions, we rented videos religiously and paid late fees (renamed restocking fees) even more religiously.  I vividly remember seeing the very first Netflix commercial. “Get DVDs in the mail, no need to go to the store, just return them when you’re done, no late fees!” Hmmmm, no late fees, I thought, surely Blockbuster is going to respond to this and we are going to get a great deal out of it.  After all, they are the big boys and have more funding and more smart minds to figure this thing out.  COME ON BLOCKBUSTER!

The response… crickets.  There was literally no response from blockbuster for a very, very long time. I would have thought the CEO of blockbuster surely would have chartered a plane to the home of the CEO of Netflix and stood outside the door with a blank check. But no, not so. When Blockbuster finally “retaliated” ions later, Netflix responded with an upgrade to its service right away, and the final nail in the coffin: Redbox.

But what was the real issue? What really happened here and what can we learn from it? What similarities are there with the current Taxi situation? Well, let’s explore that taxi thing in another post, for now, let’s focus.

First off, my initial thoughts were incorrect, I thought Netflix and Redbox “snuck up” on Blockbuster, hit them from behind like a robber stalking an old lady at the ATM machine at 10PM.  This turned out to be false, Netflix approached Blockbuster directly, Blockbuster essentially ignored them.

Lesson 1: - Don’t Ignore Your Competition

We have seen examples time and time again of companies that have totally ignored the competition.  Whether it’s a result of feeling cocky in their positions as industry leaders or feelings of superiority, when you ignore your competition, bad things can, and most often will, happen.  The thing most industry leaders have in common is that they were once a struggling startup, with their eyes set on the industry leaders, so watch out.  

Many moons ago I worked for Microsoft and it was during the period that the founder and CEO Bill Gates was hauled into court to explain and defend himself, and his company, against the United States Government. He was present in court constantly and I remember just watching the whole ordeal unfold. He basically had to explain why he was crushing the competition and how it may be an unfair advantage.  I recall having the thought that he was fighting for this company as if it were a struggling startup and it made me feel pretty proud to be working for the guy, he did not ignore the competition.

Lesson 2: Don’t Ignore Your Competition’s Technology

Netflix, while very unsophisticated at first, clearly had better technology than Blockbuster when they hit the scene.  Here was the ability to send the product directly to the house and for you to create a queue that will automatically send you your next DVD.  For those millennials that are reading this, you may be saying to yourselves “what’s the big deal? What’s so special about that technology? Seems pretty basic.” You will have to take my word that this was a big departure from the norm.

Picture this, you and your significant other decide you want to see a movie, but stay home.  You get dressed, and travel to the movie store.  You browse for the movie you had in your mind only to realize it’s not on DVD yet. No worries, you continue to look and there is an entire display of “THE latest movie.” You think to yourself, ”ok great, I’d like to see it, looks like it’s pretty popular.”  You approach the kiosk only to find out they have all been rented. You go to the store clerk and ask her to check the bin to see if anyone has returned the movie today.  She spends a few moments checking to see, and says no, it’s not there.  She checks the computer and says one is due back today, you decide to wait around a few moments to see if it comes while you are waiting.  In the meantime, you browse around the store and after your third trip down the sci-fi aisle you decide screw it, I’m renting Matrix 3, your wife hates it and you end up fighting the rest of the night.  On top of that you forget to return it on time and pay a late fee.  Netflix, through it’s easy return policy and queue to order movies, was in a sense helping marriages and fixing home budgets simultaneously!

What Did We Learn?

Pay close attention to technology trends, even those that seem simple.  When they threaten your livelihood don’t complain, just change.  There are plenty examples of companies responding to changes in the market and doing it very well. Historically we can name AT&T and Microsoft and younger players such as SAP deserve a mention as well. Ignoring competition and technology trends are fast tracks to extinction. Therefore, stay vigilant and aware of things such as machine learning, cloud technologies, AI (both artificial intelligence and what I call automated intelligence). 

Just complaining about change and ignoring the trend may land you a seat on the bench watching from the side line, and possibly the unemployment line.  On the flip side, staying on top of true market shifts could catapult your organization to the next level.