Decision-Making Processes and Failures: Netflix vs Blockbuster

Posted byArt OcainPosted inUncategorized

            Back in the year 2000, Reed Hastings, founder of Netflix, flew to Dallas to meet with the Blockbuster CEO, John Antico (Tyler, 2017).  Interestingly, Reed Hastings chartered a private jet to Dallas because no commercial flights were available on short notice (Randolph, 2019).  Reed and the Netflix team presented their business to Blockbuster (who was turning $6 billion in revenue) for a mere $50 million.  Antico and Blockbuster turned them down, with a lot of arguments showing that Blockbuster did not believe that the Internet craze was a serious threat, so Netflix resolved to bury Blockbuster (Randolph, 2019).  In 2010, Blockbuster declared bankruptcy (Satell, 2014).

Aikido

            The idea of Aikido is to turn someone’s strength into their weakness.  In a model for business strategy, Aikido is when a company offers a product that is “diametrically opposed” to the image and mindset of the competition (BMI Lab, n.d.).  Unlike most other terms discussed here, Aikido is a strategy, not a forecasting or goal-setting technique.  It is most similar to STAR in that it is an approach to a problem.

            In the case of Blockbuster, who excelled in brick-and-mortar video rentals with late fees and was very profitable with a $6 billion revenue, there was so much momentum in their way of doing things.  Blockbuster had the market and had established the level of service for video rental.  Netflix, in true Aikido fashion, entered the market with the exact opposite of what Blockbuster offered.  Instead of a brick-and-mortar presence, Netflix allowed customers to rent movies online.  Instead of late fees, Netflix allowed customers to return without late fees.  Netflix was able to offer the market an opposite solution which was enough to trip Blockbuster and make it die under its own weight.

SMART

            S.M.A.R.T. goals are specific, measurable, achievable, relevant, and time bound.  SMART is a goal-setting method from Peter Druckers’s Management by Objectives which is used to make objectives clear and achievable (Mindtools: SMART Goals, n.d.).  SMART goals are often used to make a goal meaningful and motivating, and the tool is usable by most people and organizations.  Netflix, as well as most dot-com companies, users key performance indicators (KPIs) heavily, which are based off of SMART goals (Marino, 2019).  KPIs measure the “measurable” part of goals.  Sara Marino indicates that Blockbuster’s lack of appropriate SMART goals and KPIs for the dot-com era were a factor in their demise (Marino, 2019).

            Since Blockbuster’s online strategy was non-existent and their business model was faulty and unable to compete with nimble competitors like Netflix, setting goals around launching a Netflix-like project never occurred to Blockbuster.  They never set a goal around it because they did not see Netflix as a threat.

DELPHI Analysis

            Unlike SMART, which is for goal-setting, DELPHI Analysis is about forecasting.  Abhishek Syal, from MIT Sloan and Senior Analyst for Dell/EMC, performed a Delphi Method example on Blockbuster and Netflix, showing that it could be forecasted that the market would follow the dot-com trend (Syal, 2018).  The Delphi Method, developed by RAND Corporation in the 1950s to analyze technology and warfare, has become a statistical forecasting tool to come to a consensus about a future prediction (RAND Corporation, n.d.).  Abhishek Syal’s Delphi Method example shows a clear handoff of market from Blockbuster to Netflix (Syal, 2018).

SWOT Analysis

            SWOT analysis is a planning tool that stands for the terms strengths, weaknesses, opportunities, and strengths.  It is a tool that analyses a business’s internal abilities and hinderances as well as external factors that affect the business (Parsons, 2018).  With investment of time and energy, team involvement, and open collaboration using the tool, a team can honestly assess where it needs to improve, defend, or grow.

            In the SWOT analysis performed by Adam on Free SWOT Analysis, Blockbuster has several strengths as well as weaknesses.  Strengths (internal) include their large market control and low prices, while weaknesses (internal) include lack of planning in global markets and expensive shipping arrangements.  Opportunities (external) include quality improvement and online product development, while threats (external) include problems with movie failures, piracy, and the amount of competition (Adam, 2011).

STAR

            STAR stands for situation, task, action, and result, and is used for dealing with a situation.  STAR is commonly used in behavioral interviews to provide a comprehensive response to a problem (Doyle, 2020).  It is often used to build an answer to a question in a way that is comprehensive.  STAR, like Aikido, is a strategy rather than forecasting like Delphi or planning like SMART.

            Reading the story of Netflix’s meeting at the Blockbuster headquarters in Dallas, the Netflix team did a great job of answering the questions asked of them in a STAR way, although the meeting was largely unsuccessful.

GROW

            Much like SMART, GROW is a planning tool, although it is commonly used in coaching.  GROW is made up of goal, current reality, options, and will to commit (Mindtools: GROW, n.d.)  GROW is meant to determine the tactical path from current state, through evaluating options, to reaching the goal through a way forward.

Conclusion

            Blockbuster, during their demise, had opportunities to acquire or develop business in the online space, rather than firmly holding onto their anchor business model.  Re-evaluation of their goals, a new SWOT analysis, and building a new tactical path through GROW would have helped them plan their way out of failure.  The concept of Aikido, which is a mindset or strategy, allowed Netflix to go up against Blockbuster, seizing the market, by offering exactly the opposite approach to Blockbuster.  Stubbornness, lack of planning, lack of adaptability, and poor decision making led to their failure, rather than seeking out the right solution for their brand and their corporation.

References

Adam. (2011). SWOT Analysis of Blockbuster. Retrieved from https://www.freeswotanalysis.com/entertainment/245-swot-analysis-of-blockbuster.html

BMI Lab. (n.d.). Aikido. Retrieved from https://businessmodelnavigator.com/pattern?id=3

Doyle, Alison. (2020). How to Use the STAR Interview Response Method. Retrieved from https://www.thebalancecareers.com/what-is-the-star-interview-response-technique-2061629

Marino, Sara. (2019). KPIs and Netflix. Retrieved from https://medium.com/@saramarino_31225/kpis-and-netflix-155e8189469b

Mindtools. (n.d.). SMART Goals: How to Make Your Goals Achievable. Retrieved from https://www.mindtools.com/pages/article/smart-goals.htm

Mindtools. (n.d.). The GROW Model of Coaching and Mentoring. Retrieved from https://www.mindtools.com/pages/article/newLDR_89.htm

Parsons, Noah. (2018). What is a SWOT Analysis, and How to Do It Right (with examples). Retrieved from https://www.liveplan.com/blog/what-is-a-swot-analysis-and-how-to-do-it-right-with-examples/

RAND Corporation. (n.d.). Delphi Method. Retrieved from https://www.rand.org/topics/delphi-method.html

Randolph, Marc. (2019). He “Was Struggling Not to Laugh”: Inside Neflix’s Crazy, Doomed Meeting with Blockbuster.  Retrieved from https://www.vanityfair.com/news/2019/09/netflixs-crazy-doomed-meeting-with-blockbuster

Published by Art Ocain

I am a DevOps advocate, not because I am a developer (I’m not), but because of the cultural shift it represents and the agility it gains. I am also a fan of the theory of constraints and applying constraint management to all areas of business: sales, finance, planning, billing, and all areas of operations. My speaking: I have done a lot of public speaking in my various roles over the years, including presentations at SBDC (Small Business Development Center) and Central PA Chamber of Commerce events as well as events that I have organized at MePush. My writing: I write a lot. Blog articles on the MePush site, press-releases for upcoming events to media contracts, posts on LinkedIn (https://www.linkedin.com/in/artocain/), presentations on Slideshare (https://www.slideshare.net/ArtOcain), posts on the Microsoft Tech Community, articles on Medium (https://medium.com/@artocain/), and posts on Quora (https://www.quora.com/profile/Art-Ocain-1). I am always looking for new places to write, as well. My certifications: ISACA Certified Information Security Manager (CISM), Certified Web Application Security Professional (CWASP), Certified Data Privacy Practitioner (CDPP), Cisco Certified Network Associate (CCNA), VMware Certified Professional (VCP-DCV), Microsoft Certified System Engineer (MCSE), Veeam Certified Engineer (VMCE), Microsoft 365 Security Administrator, Microsoft 365 Enterprise Administrator, Azure Administrator, Azure Security Administrator, Azure Architect, CompTIA Network+, CompTIA Security+, ITIL v4 Foundations, Certified ScrumMaster, Certified Scrum Product Owner, AWS Certified Cloud Practitioner See certification badges on Acclaim here: https://www.youracclaim.com/users/art-ocain/badges My experience: I have a lot of experience from developing a great company with great people and culture to spinning up an impressive DevOps practice and designing impressive solutions. I have been a project manager, a President, a COO, a CTO, and an incident response coordinator. From architecting cloud solutions down to the nitty-gritty of replacing hardware, I have done it all. When it comes to technical leadership, I am the go-to for many companies. I have grown businesses and built brands. I have been a coach and a mentor, developing the skills and careers of those in my company. I have formed and managed teams, and developed strong leaders and replaced myself within the company time and again as I evolved. See my experience on LinkedIn here: https://www.linkedin.com/in/artocain/

Leave a Reply

%d bloggers like this: