Lack of Process Innovation in Blockbuster
A lot of attention to process innovations can be an obstacle for efficient business growth. Likewise, completely avoiding process innovations can also be disastrous for a business. You must have heard that successful movies are often referred to as “blockbusters,” but do you know the blockbuster company itself is now considered as one of the most prominent examples of business failures?
Back in 2004, Blockbuster was generating an amazing revenue of $6 billion and Netflix was struggling really hard and was still considered a scrappy start-up then. After six years, the tables completely turned Netflix became a $2.2 billion company and Blockbuster went bankrupt. And today, Netflix’s worth is more than $28 billion and Blockbuster has become a story of past.
Where did they wrong? How could a company so vast go in oblivion in just a few years? Let us understand how process efficiency completely took over process innovation?
Where Exactly Did Blockbuster Go Wrong?
Blockbuster’s leadership could not recognize the pace of change in the video rental market due to disruption. A few years earlier, Netflix CEO, Reed Hastings proposed that the two companies should work together. Netflix could handle brand’s digital presence and promotion, and Blockbuster could promote Netflix in the stores.
But unfortunately, Blockbuster denied Netflix’s proposal. In spite of embracing the changes along the way, Blockbuster stuck to its rigidity. It completely refused to take a cue from Netflix.
Simply speaking, they didn’t just refuse Netflix’s proposal but they also denied the customers’ preferences at that time i.e., to stream movies from their living room’s comfort zone in spite of renting.
Blockbuster ignored everything and focused on maintaining just the status quotient (quo), inventory, and double down on the physical stores. By the time they realized their mistakes, it was way too late.
Why is Innovation So Important?
To gain and maintain a competitive edge, innovation is crucial. It becomes even more critical when your competitors are introducing new ways or technologies to transform the market. Any big and successful business can also be down to ashes in the absence of innovative leaders and ideas.
Could Netflix’s Proposal actually Save Blockbuster?
The Netflix’s model obviously had some compelling and interesting aspects, but it also comprised some of the obvious disadvantages. Some of which are:
- It didn’t have an actual retail location, so it was difficult for people to spot it.
- Moreover, the customers received their videos by mail. This process was slow and bulky. Hence the service was not good. People weren’t left with the choice to just pick up a movie way back home at night as Blockbuster provided.
Even with these obvious disadvantages, customers still liked the idea and service, and recommended it to their friends. Some were rigid in the beginning; they had the habit of browsing movies at the stores and randomly selecting one. They liked picking the movies right at the moments.
But with time, more and more of their friends started talking about Netflix. Hence, due to the spread of word of mouth, people started trying Netflix and got convinced.
Blockbuster realized soon enough that Netflix is one of their threats, so they thought to modify some of their policies.
Lack of Effective Process Innovation in Blockbuster
Traditional improvement practices often ignore the most important thing: “Process improvements”. Without which the overall organization maturity isn’t enhanced. For a better process improvement approach, the most important question is ‘Which process needs to be improved?’
Every organization has a list of challenges but finding out which challenge should be focused immediately is the important aspect. Blockbuster failed to recognize them soon enough! Hence, went bankrupt.
Blockbuster did try its best for survival. After identifying Netflix as a tough competitor, they came up with a strategy to beat Netflix at its own game. They launched their own platform to rent videos online and return them to the stores called, ‘Total Access’. It gained immediate attention. And actually, gained more subscribers than Netflix.
So, what went wrong again? This time their strategy failed because of the cost factor. The cost of the program was about $400 million, which the investors didn’t seem to like much. Things became worse when in 2007, due to a salary dispute, Antioco, the CEO, then was fired. His new replacement, Jim Keyes, completely reversed the strategy and shifted the focus to retailing again and thus the company went bankrupt three years later.
How BPM Strategies Could have Saved Blockbuster?
They should have gone for Continuous Process Improvement. Continuous Process Improvement (CPI) is used to ensure the survival of your business and attempts in the long-term. By consistently re-evaluating and developing business processes, your organizations will be more resourceful, advanced and responsive.
Process mapping is a way by which collection of activities in a process that transforms one or more inputs into one or more outputs are put together. Implementing process mapping, they could have got a basic market idea and requirements soon enough to work on.
A process map gives us a way of visualizing what a business does by taking into account roles, responsibilities and standards. Through process mapping, one can determine the function of a business entity, responsible authorities, the standard of a business process, and ultimately how the success of a business process can be determined.
Identify the Process Bottlenecks and Eradicate Them
Unplanned or unmanaged organization leads to poor business processes, and this ultimately affects the overall business growth and every individual involved in it. At the primary level of BPM, one individual might notice one part of the process, from beginning to end.
There are 2 ways of implementing a new process design: systemic and non-systemic implementation. Systemic implementations require you to use particular software or tools for implementation whereas, non-systemic implementation doesn’t require anything as such.
They required an effective systematic approach for the bottleneck identification.
Conclusion: Our Learning from The Case-study
The fall of Blockbuster is a sheer case of not identifying the market needs at the right time, and trying ineffective ways for process innovation. They suffered from acute case of fear of failure that prevented them from modifying the processes and finding innovative ways to resolve issues.
Many organizations don’t take continuous process improvement seriously at all levels of the organization, and it has very less chances to be effective. The overall result of the Continuous Improvement exercises or projects should be framed within the management system itself. This ensures driving new, improved working ways, else it remains as yet another good idea that is implicit in nature and only known by word of mouth.
Let’s work together to make your business smooth and efficient. Reach out to us for any queries and help in managing and making your business process better.