Innovation Kills

The announcement of the shutdown of video rental giant Blockbuster in 2013 was a great example of the what the introduction of innovative technology could do to companies in a competitive market (Downes & Nunes, 2013). Blockbuster was valued at approximately five billion dollars in 2002 and had over 10,000 stores in operation at that time (Downes & Nunes, 2013). Blockbuster’s business strategy held strong for many years and they were profitable in the video rental business. However, the lack of innovation in the Blockbuster business model posed a great risk to the company. Step one in scenario planning is to “frame the challenge” and identify the applicable challenges in the organization’s industry (Wade, 2012). Delivery of multimedia was a developing industry and other players were emerging with innovative solutions to appeal to the consumer.

In 1997, Netflix was a small start-up company that based its business strategy on the distribution of DVDs to customers through the use of the U.S. Postal Service (Downes & Nunes, 2013). The convenience of this methodology rivaled Blockbusters brick and mortar stores with an advantage of not having the late fees that Blockbuster imposed. At that time, the technical infrastructure of internet connectivity was not conducive for internet-based media streaming. However, in 2007, Netflix caused significant damage to Blockbuster with the offering of stream video service directly to the home and Blockbuster did not (Downes & Nunes, 2013).

Driving forces are identified by forces that have potential to bring significant change in the future to an industry or business (Wade, 2012). The technological and societal driving forces played a vital part in the development of streaming video success in the U.S. and the world. The end-to-end experience was substantially different in comparison between the two competitors. The end-to-end experience between Blockbuster and Netflix were similar in the earlier part of 2000’s when both companies were offering the delivery of DVDs to their customers. When streaming video was introduced, this experience took a drastic turn for the better in favor of Netflix (Downes & Nunes, 2013). A company needs to think about the end user’s total experience in delivering a product that meets or exceeds their expectation (De Bonte, 2014). This experience includes what they see, feel, hear, and do with the product from beginning to end. In the case of Blockbuster, customers still had to leave their home to receive their multimedia and still be subject to late fees which required a trip back to the store. In-home video streaming changed the end-to-end experience in terms of convenience and availability that Blockbuster could not compete with given its expensive liabilities of retail stores (Downes & Nunes, 2013).

The area of innovation for this researcher deals with the delivery of information and content to users. Blockbuster provides a great example of the power sociotechnical drivers have in the industry and how they can ultimately take a company from five billion dollars to bankrupt in a short amount of time (Downes & Nunes, 2013).

References

De Bonte, A. F., Drew. (2014). Scenario-Focused Engineering. Redmond, WA: Microsoft Press.

Downes, L., & Nunes, P. (2013). Blockbuster Becomes a Casualty of Big Bang Disruption. Harvard Business Review Digital Articles, 1-4.

Wade, W. (2012). Scenario Planning: A field guide to the future. Hoboken, NJ: John Wiley & Sons, Inc.