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Failure Analysis Strategy Change Essay

Movies have always been a past time enjoyed by many. As the technology continues to grow, many video stores are going out of business and digital or online movies are rising in popularity. Blockbuster Video and Netflix are businesses that have been affected by these changes. Blockbuster opened in 1985 with the mission statement of “Our corporate mission is to provide our customers with the most convenient access to media entertainment, including movie and game entertainment delivered through multiple distribution channels such as our stores, by mail, vending and kiosks, online and at home. We believe Blockbuster offers customers a value-prices entertainment experience, combining the broad product depth of a specialty retailer with local neighborhood convenience” (Farfan, 2010).

Blockbuster continued with the vision statement of “At Blockbuster, diversity means valuing differences. It’s corporate value that must be continually developed, embraced, and incorporated into the way we do business” (Farfan, 2010). Blockbuster operated with more than 7,400 stores worldwide and also operated through 1,600 franchise stores. As technology started to change, customers began streaming movies from the Internet as well as using kiosks, such as Redbox, for movie rentals. Competition became a large factor in Blockbuster and the failing of the company, but a large part of the failure was due to manage changes and misunderstanding of the business as a whole (Dunston, 2014).

Blockbuster Failure

In 2006 and 2007, Blockbuster was approached by the CEO of Netflix, Reed Hastings, asking them to acquire Netflix. Hastings knew that Netflix had not formulated a plan to stop Blockbuster from stealing their customers, at the rate of a million per year. Blockbuster decided that the company did not need Netflix because Blockbuster had a stronger and larger growth, but then a change that was never expected happened. A new CEO was named for Blockbuster after a boardroom dispute. The man appointed CEO didn’t fully understand the business and what Blockbuster needed in order to remain above the competition, especially Netflix. The CEO started changing plans for the company and even pulled out the Internet efforts that had been in place for Blockbuster. Within 18 months, 85% of the capital value of the company had been lost; within in 2 years, it was completely gone (Dunston, 2014). Netflix

Netflix views themselves as “freedom of on-demand and the fun of indulgent viewing” (Netflix, 2014). Netflix also focuses on the convenience of the no-hassle, online cancellation and offer movies and TV series network. Technology and good leadership is how Netflix became the leader in the industry (Halal, 2010).

Netflix executives understood that the emerging technology was rapidly changing the delivery of movie rentals. CEO, Hastings, developed “strategies involving Internet streaming, convenient customer service, and the virtual organization to deliver it cheaply and flawlessly” (Halal, 2010). Another part of Netflix’s technology strategy was to avoid the burden of having to go to a video store for customers. Customer service is key to a successful business, so Hastings used a monthly subscription to allow customers to have access to unlimited rentals, including no late fees. Instead of the hassle of renting movies, the focus is providing convenience.

With the mission statement and vision of “ Our core strategy is to grow our streaming subscription business domestically and globally. We are continually improving the customer experience, with a focus on expanding our streaming content, enhancing our user interface and extending our streaming service to even more Internet-connected devices, while staying within the parameters of our consolidated net income and operating segment contribution profit targets,” shows that the company wants the best for the company as well as their customers (Netflix, 2014). NetFlix Organizational Theories

In reading many articles online about the success of NETFLIX the two organizational behavior theories that have been seen in this company have been decision-making and system approaches. Netflix’s huge decision to become a virtual DVD rental via online instead of going to actual in-store purchases like Blockbuster, has placed them at the top of the food chain. The technological advances alone for Netflix has change the industry forever, they took the systems approach by understanding the company’s input and output process and integrated the drive in developing new adaptive capacities and innovation. Blockbuster’s organization theory of scientific leadership placed a great deal into how the company ran it’s in store business and how the objectives and decisions were placed within the company. If Blockbuster could focus more on the click feature like how Netflix did, and not dismiss the idea that it would be a revolutionary change in the industry and within Blockbusters stockholders.

Roles of Leadership and Management

Per Netflix (2014) it has a “functional organizational structure, which aims at its functions themselves, rather than by customer segments or regions”. They have a CEO; Reed Hastings has 6 departments that have managers within them that run it. The organization beyond those 6 managers is not as structured as the top echelon is, they run their departments as they see fit. The CEO has instilled in their managers the management style of “Context, not Control” (Siegler), implying that very little control is given to employees, rather employees are held responsible for their actions and are expected to work efficiently and independently. Because of this idealists approach to management and how successful the company has been with it, they have found that they have no need to change their management style yet.

Organizational value within Netflix has been on promoting the “stunning colleagues” (Netflix.com, 2014), and their importance in a great workplace. They have 9 values that they show is priority number 1 at Netflix, “ judgment, impact, curiosity, innovation, courage, passion, honesty and selflessness (Siegler). The basic values that they believe as a company are workplace efficiency, emphasis on effective over effort, management best practices, retention practices, and large emphasis on a large salary, rather than stock options and bonuses. They believe that this creates an environment that promotes productivity, and efficient work environment, which shows in colleague retention and overall happiness at Netflix.

Part 2: Leading Organizational Change

As the CEO of Blockbuster it is my responsibility to evaluate the organizations structure as well as the power and political issues within the company. The CEO can be disconnected to what is going on at the operations level of the company if he or she does not put forth the effort to be involved. As the CEO I will be involved in the operations of the company and be a leader employees can look up to. To implement the organizations change I will use a strategy based on John Kotter’s 8 step plan for change. John Kotter’s 8 steps are “establishing a sense of urgency, forming a powerful guiding coalition, creating a vision, communicating the vision, empowering others to act on the vision, planning for and creating short-term wins, consolidating improvements and producing still more changes, institutionalizing new approaches”(Mintzberg, Lampel, Quinn 2003).

As the CEO of blockbuster I see that technology is changing and we must keep up. If we do not keep up with the technological advances we are doomed to fail. I see the company as a technology company and not just a movie rental company. I do not want Blockbuster to just survive, I want Blockbuster to thrive. Blockbuster will start investing in new internet technologies and streaming services. We will align ourselves with major motion picture studios to ensure that we get the newest movies and offer our customers the best services possible. Upper management will actively seek new opportunities and new world markets to expand our services. All employees will be encouraged to provide new ideas and mediocrity will not be accepted. Every aspect of the company will be evaluated and our services will provide our customers with the greatest movie streaming value.

Dunston, Dain (2014). When Blockbuster Forgot What Business They Were In. Retrieved from www.daindunston.com

Farfan, Barbara (2010). Company Mission Statements – Complete List of World’s
Largest Retail Missions. Retrieved from www.retailindustry.about.com

Halal, Bill (2010). How Netflix Beat Blockbuster: An Exemplar of Emerging Technologies. Retrieved from www.billhalal.com

Mintzberg, H., Lampel, J., & Quinn, J. B. (2003). The Strategy Process: Concepts, Contexts, Cases (4th ed.). Upper Saddle River, NJ: Prentice Hall

Netflix Long Term View (2014). Retrieved from http://ir.netflix.com

Netflix Capstone and Final Report (2014). Retrieved on January 7, 2014. http://mgmtclarity.files.wordpress.com/2010/04/capstone_final_report.pdf

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