Saturday, June 1, 2013

Moving Goalposts


The HBR articles about keeping relevant in the market with different strategy types really struck a chord with me, especially after seeing countless companies throughout history fall by the wayside as they fail to provide relevant value as the market changes around them.
My background is in development at software and internet companies in Silicon Valley, so I have seen first-hand how fast the industry can change. If a company's strategy is not constantly evaluated and updated on a regular basis, it is easy for a new competitor to sweep the rug out from under you and swiftly grab up the market share you had spent so long building. In “Reinvent Your Business Before It's Too Late”, Nunes and Breene discuss how important it is to stay on top and in front of your competitors if you want to win out under changing conditions.
Blockbuster provides one very recent horror story of poor strategic planning. Blockbuster started out in 1985 as a simple video rental store, growing over the years into a massive company throughout the United States and abroad, having more than 9,000 stores at the peak of its success (from Blockbuster's Wikipedia page). However, in the early 2000's, a new competitor called Netflix arrived on the scene. Netflix operated under the same basic idea as Blockbuster (rent movies, return them when you're done), but changed the rules to avoid customer's major pain points:
  1. There were no late fees
  2. You could keep the movies as long as you wanted
  3. The selection was far larger than could be found at local stores
  4. You paid a subscription fee, rather an paying for each movie
These changes gave Netflix the strategic advantage it needed to chip away at Blockbuster's hold on the market. In addition, they noticed that people were falling in love with watching videos online. Netflix capitalized on this as well, launching a hugely successful movie streaming platform.
The end result of this is a major failing by Blockbuster to stay relevant to consumers. Because they clung to their retail stores and were so late to the movies-by-mail party, they never had a chance to stop Netflix from becoming the de facto movie rental service of the future.
In the terms defined in “Your Strategy Needs a Strategy”, Netflix employed a shaping strategy. They noticed a market they wanted to enter, but they redefined the rules, carving out their own niche that customers greatly preferred to the previously established options. As a result of Blockbuster's failure to have an adaptable strategy or monitor the market for changing consumer trends, they sunk like a rock, filing for bankruptcy and now owning only around 500 stores from their previously mighty empire.
Note: this is my first blog post (week 2) because I joined the class late.

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