The Fiora Perspective: Learning from Past Mistakes and Making Informed Decisions

Images: Coleman Bentley

At Fiora, we believe that the path to innovation and progress often involves revisiting past case histories, uncovering lessons that can help shape future decisions. One such case that has been a constant source of learning for us is the story of Blockbuster, an efficient business model that was once the epitome of movie rental success. However, a critical lack of external focus and the inability to assimilate outside influences led to its ultimate downfall. Interestingly, Blockbuster had a chance to buy Netflix, a then-emerging platform that later revolutionised the movie and TV industry, but they declined (hindsight is a wonderful thing).

The intriguing question that arises from this is, 'Why?' What was the rationale behind such a seemingly ill-judged decision? What went through the minds of the board members when the opportunity arose? How did the balance of gut feeling and logic play out in their decision-making process? These are the thought-provoking questions that our transformation team at Fiora constantly grapples with and debates. By diving into these queries, we aim to comprehend the intricate components of an organisation, leading us to informed decisions that are aligned with external influences and future trends.

We view the Blockbuster case as a significant lesson in the importance of external focus and adaptability in business strategy. In the following sections, we explore this lesson in greater depth, unraveling the intricacies of Blockbuster's downfall and illustrating how this understanding shapes our approach to digital transformation. Over the years, numerous case studies have attempted to decode the downfall of Blockbuster. However, our exploration diverges slightly, delving into the company's failure from the perspective of consumer centricity and digital thinking. We argue that Blockbuster's intense focus on its own needs and values, coupled with a lack of outward-facing digital thinking, contributed significantly to its demise.

Blockbuster's business model was predicated on a brick-and-mortar store strategy, complemented by late fees. This approach worked well for a while, (perhaps through lack of choice?) but it was fundamentally flawed due to a lack of consumer centricity. A model that generates over 20% of profits from penalising its customers — for late returns, nonetheless — seems inconceivable in today's business landscape. Yet, that was the approach Blockbuster rigidly adhered to.

Despite technological advances and evolving consumer habits, Blockbuster remained steadfast in its operational strategy, neglecting to adequately adapt to the digital age. When the industry shifted towards convenience, personalisation, and instant gratification — largely due to the emergence of online streaming platforms like Netflix — Blockbuster was caught off-guard.

This single-minded approach created a sort of organisational myopia, wherein Blockbuster prioritised its immediate business needs over those of its consumers. This resulted in a business model that was increasingly out of sync with consumers' expectations. As more consumers shifted towards the convenience of online streaming, Blockbuster's late fees and in-store rentals became increasingly unattractive.

Moreover, Blockbuster's approach to digital transformation was lukewarm at best. The elements of digital thinking — strategy, people, processes, culture, collaboration, data, and technology — were seemingly misaligned or, at worst, ignored. A successful digital transformation requires a company to align these elements towards a consumer-centric goal.

Blockbuster's lack of a comprehensive digital strategy that incorporated all these elements resulted in a disjointed and ineffective approach. The company made a few attempts to join the online bandwagon — such as launching an online DVD mail rental service — but these initiatives were too little, too late, and lacked a cohesive strategy.

Furthermore, the company's culture seemed to resist the need for digital transformation. This resistance stemmed from the top and trickled down, inhibiting any significant shifts towards digital thinking. Coupled with the lack of effective collaboration between different functions within the company, this led to a failure in translating technological advancements into valuable consumer offerings.

Blockbuster's downfall offers a cautionary tale about the importance of consumer centricity and digital thinking in today's business landscape. The company's single-minded approach and reluctance to adopt a holistic, outward-facing digital strategy led to its inability to meet evolving consumer expectations. The lesson here is clear: businesses must put their consumers at the center of their strategy and embrace digital thinking to stay relevant in the face of technological advancement and changing consumer habits.