Failure Analysis/Change Strategy Essay
Failure Analysis/Change Strategy
While there is no guarantee of the success of a business, there are indicators that can be learned from analyzing organizations that have failed to those that succeed. In this paper, we compare two organizations, Blockbuster Video and Netflix that exemplify effects of leadership, vision, strategy and planning, and the importance of customer satisfaction that influence the success or failure of a business.
Mission, Vision, and Objectives
The mission, vision, and values statement defines an organization’s brand, culture, and customer experience. Blockbuster was founded by David Cook in 1985 and quickly went public a year later. In 2004, Blockbuster had up to 60,000 employees and over 9000 stores that provided home movie and video game rental services through video rental shops (Forbes, 2011). It’s mission and vision was 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” and to “offer customers a value-priced entertainment experience, combined with the broad product depth of a specialty retailer with local neighborhood convenience” (Farfan, 2015). Its objectives were to provide a large number of copies and broad selection of movie titles, operative conveniently located highly visible stores, offer superior and consistent customer service, optimize pricing to local market conditions, and nationally advertise and market the brand name (Farfan, 2015).
Netflix was founded by Reed Hastings in 1997 is now the world’s leading entertainment network of streaming movies with over 57 million members in 50 countries (Netflix, 2015). Its mission statement is to “grow our streaming subscription business domestically and globally. We are continuously 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 (Netflix Company Profile, 2015). Co-founder and CEO expressed Netflix vision for the future and objects to become the best global entertainment distribution services, license entertainment content around the world, create markets that are accessible to film makers, and help content creators around the world to find a global audience (Netflix Company Profile, 2015).
Indicators of Business Failures and Success
Comparing successful organizations, such as Netflix, to a failed organization, such as Blockbuster, allows us to identify predictors and understand critical elements that lead to the success or failure of a company. In our case, the role of leadership, strategy and planning, vision, and customer service played a role in the failure and success of both companies. A recent survey by the Turnaround Management Society indicates that most crises are caused by top management and include management continuing with a strategy that was no longer working for the company, underestimation of changes in the market and lack of adaptation, a loss of vision and a disconnect with customers (Lymbersky, 2014).
The Blockbuster Board, made several poor choices in hiring incompetent leadership who did not understand their business. The company had a lack of vision and could not decide whether they were in entertainment or retail. Most detrimental to the Blockbuster brand, was the refusal to recognize and adapt to changing technology that affected their market. All these poor choices compounded on Blockbusters problem of disengagement with their customers by not attending to customer demand and their un-customer friendly policies of charging late fees. During the same period, Netflix provided continuity in leadership, had a strong strategy built around adapting to rapidly changing technology that supported video streaming, created a strong sense of vision and connected intimately with its customer’s demands and incorporated customer friendly pricing strategies of fixed monthly pricing with no late fees.
Organizational Behavioral Theory
Netflix and Blockbuster were companies with a vision one that had a vision of the future and one that did not understand how fast technology was vastly approaching. Netflix saw that technology was coming and wanted to stay ahead of the game with video streaming, DVD-By-Mail, and producing popular series only seen through Netflix similar to a cable network. Blockbuster started with video rentals and ended with video rental, and expanded their stores into outlets for books, toys, and other merchandise. When YouTube erupted in 2005 Netflix realized that they need to jump on the video streaming and allow customers to get the movies they wanted directly to TV’s, computers, mobile phones, and other devices. Blockbuster did try a similar outlet as Netflix but failed to understand customers did not like late fees, are hidden costs. Blockbuster forgot to adapt to the changes in technology, and this is what ultimately caused the company to file Chapter 11 bankruptcy and close its doors.
Technology within the movie and movie rental industry has been a significant factor since VHS tapes, and Netflix saw an opportunity and ran with it. With the ability to see the future and adapt to changes within their industry they are succeeding. With Blockbuster not understanding technology, consumers wants, and industry changes they failed. Decision making of management and leaders with in an organization is how Netflix succeeded and how Blockbuster failed. When a business loses focus on what business they are in they are doomed to fail. Blockbuster did not keep its focus on movie rental they started to think and make decisions like a retailer and that was the beginning of an end of the blockbuster era. Netflix knew the future of DVD-By-Mail was going to short lived and decided to focus on the internet and technology to succeed in the industry. If Blockbuster would have stayed focused on movie rentals and not retail they would still be in business.
The Role of Leadership
The leadership and corporate structure of Blockbuster and Netflix were identical however each organization demonstrates the critical component of
an organization to adapt and change its strategy and build a culture that supports a clear vision. When leadership makes decisions, or neglects to make the right choices, then the company will fail. Blockbuster’s leadership was dysfunctional and refused to adapt their strategy or have a clear vision of their business.
Netflix organizational structure is the same as a matrix and consists of the board of officers. The key component that made Netflix a success was the leadership and their ability to take risk, adapt, and have a solid vision that understands consumer demands. “We compete very broadly for a share of members’ time and spending, against linear networks, pay-per-view content, DVD watching, other Internet networks, video games, web browsing, magazine reading, video piracy, and much more. Over the coming years, most of these forms of entertainment will improve.” (Netflix, 2015). As a company grows, their culture allows freedoms in leadership, management, and innovation. Evidence of this is displayed in Netflix’s insight to move from mailing out DVDs to embracing the streaming world, on the World Wide Web. The introduction of this opened profits for Netflix that Blockbuster refused to embrace.
“The irony is that Blockbuster failed because its leadership had built a well-oiled operational machine. It was a very tight network that could execute with extreme efficiency, but poorly suited to let in new information” (Satell, 2014). As a company grows it’s business and a great customer base, there is always a need for growth and adaptation. Netflix even gave Blockbuster a chance to merge with them when the internet streaming hype hit, but Blockbuster declined. Better and faster connections, transactions, and easier purchases on-line, are what made Netflix blossom and Blockbuster fail. Blockbuster refused to adapt or take advantage of opportunities that would have aligned them for the future.
The Change Process
Vital Areas of Change
Vital areas of change include strategy and planning that supports a growth platform, establishing a strong sense of vision, and reconnecting with the needs of the customer. The first vital area of strategy and planning includes embracing innovation and adapting to a changing business environment. When the advent of something new, such as the Internet, introduces itself into the business world, all businesses must be able to manage their existing business force and integrate the new concept. The company should be keeping stores open in areas that are profitable, while leveraging its marketing and brand to introduce new streaming distribution channels.
The second concept of change is to establish a strong vision and culture that supports the vision of the organization. When a company fears growth in any direction, whether it is expansion or introduction of a new idea, it will only lead to failure. The company needs to examine its market space and see where some finely tuned execution might provide another business opportunity for growth and success. One must analyze the impact the change is going to have on the organization as a whole and embrace that change. One must incorporate into the business all changes that will positively affect the future successes of the company.
Finally, is to never forget about the customers and their demands. Policies should be implemented that are customer friendly and meet customer demands. For example, a better pricing strategy would be something to initiate immediately and the organization should make changes based on customer desires. Customers will end a relationship with a company who does not supply or cater to their needs and wants. All businesses need to realize that a growing customer base leads to success. Power and Political Issues (Whitney)
John Kotter’s 8-Step Plan (Mirsada)
Baskin, J. S. (November 8, 2013). The Internet Didn’t Kill Blockbuster: The Company Did It To Itself. Retrieved from http://www.forbes.com/sites/jonathansalembaskin/2013/11/8/the-internet-didn’t-kill-blockbuster-the-company-did-it-to-itself/ Farfan, B. (2015). Blockbuster Company Mission Statement. Retrieved from