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Kay Plantes is an MIT-trained economist, business strategy consultant, columnist and author. Business model innovation, strategic leadership and smart economic policies are her professional passions. A former Madison, WI resident, Kay now resides in San Diego, CA. The views on her blog are not those of her employer, IBM.

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September 27th, 2010

Why Blockbuster failed and World Class will win

“We create shapes,” the print on the outdoor ad for World Class Fitness Center works strategically, tactically and creatively.

“We create shapes,” the written message on the outdoor ad for World Class Fitness Center works strategically, tactically and creatively. Aligning these three elements creates business model victories.

Business model strategy. Too often leaders leave the answer to “What business are we in?” to company history, industry practices, management desires or serendipity. What a tragic mistake. Successful business model innovation often starts with rethinking what the business is all about, creating answers that differentiate your business while opening doors to new growth platforms.

Health club users show up and sweat for the benefits of a healthier, more attractive body. World Class’s business definition – we create shapes – reflects this. It’s also broad enough to create new growth platforms. In addition to the traditional health club, with its equipment, trainers and classes, this definition could also include nutritional advice, exercise routines and equipment for out-of-town travel, clothing advice and other services that deepen customer experience and delight.

Blockbuster declared bankruptcy last week, an outcome I forewarned back in April based on Blockbuster’s leadership defining its business entirely too narrowly – video (retail) stores. A broader definition, “Connecting viewers to films and games they’ll love” might have succeeded. Alert to innovative ways to connect, Blockbuster may not have left new markets open for Netflix (direct to consumer via mail/on-line) and Redbox (grocery store and other retail locations) to dominate. New entrants always seek market spaces that leaders ignore.

Too broad a definition, “We connect consumers to digital content,” would have left Blockbuster’s management floating in the wind, directionless. Yes, the potential market size is larger than the other two definitions, but who cares? The right scope for your potential market is the one in which you have, or could affordably secure, assets that give you competitive advantage.

Communication tactics. Great communications should always capture the value promise of a brand – the basis on which you want customers to select you over your competitors. World Class’ “We create shapes” coupled with the picture of a great shape accomplishes this. Go to Blockbuster’s home page and try to find a value promise.

Creative execution. I saw World Class’ outdoor ad while walking on a busy street in Prague, Czech Republic, this summer. The ad’s location – at the very top of a large entryway into a building, surrounded by many other ads – was in my peripheral vision. Yet the image and simple words caught my attention, even in the midst of all the clutter around it. Brilliant. Is it any wonder which website is better: World Class’ website or Blockbuster’s home page? World Class is likely adding new customers and services as Blockbuster’s management works through bankruptcy filings.

Lots of companies get business model strategy right, but fail in their tactical and creative execution, leaving a lot of potential success unrealized. Other companies have compelling communications, but their weak business model strategy portends a failing future. Blockbuster fails on all fronts.

How about your business?

14 comments to Why Blockbuster failed and World Class will win

  • Wow! Thank you! I always wanted to etit articles something like that. Can I take part of your post to my personal blog? Thanks.

  • my God, i thought you were going to chip in with some decisive insight at the end there, not leave it with ‘we leave it to you to decide’.

  • It’s been amazing to watch the Blockbuster train wreck, especially with Netflix and Redbox showing hints at what the future might be. I’ve been wondering if the company was so encumbered by real-estate and debt that any investment in change was shot down.
    Fred H Schlegel´s last [type] ..Creative Approaches

  • I actually liked reading your weblog. These are superb suggestions I definitely will place into apply. My spouse and I were searching for this type of info as we’re just starting a residence undertaking. We will Twitt about this proper away to let all our pals know about it.

  • The company was built by piling up debt, so it was restrictive. But I have seen too many companies find solutions to resource limitations when they are clear on their strategic direction. For example, Blockbusters could have done a “redbox” in partnership with the independent grocery store chains who are always seeking a leg-up on Walmart.

  • hi, that was a nice read, i really enjoyed it.

  • Prag ligger i Tjeckien och är en helt underbar stad. En stad man verkligen måste besöka.

  • Kay,
    Very insightful and timely as always. How do you see the battle between NetFlix and Red Box playing out?

  • Thanks Karlsbron. I have been to Prague and it is truly a beautiful city. I read history of Prague from a Yale Professor (who is from Prague) and I also learned so much about the city and your country’s history. Tragic and impressive on many levels. Thanks for writing.
    Kay Plantes´s last [type] ..Why Blockbuster failed and World Class will win

  • Thanks Bill. I’d have to give a nod to Netflix. They know who their customers are, their movie preferences and they’ve locked up a good deal on TV shows. Leaders should be defining their business for a post-baby boom, all on-line world. Start with a blank sheet of paper to ID what’s best. Then work backwards to where you are today to identify the right next moves for your company. Had Blockbuster done this, perhaps they’d have leased their stores to Walmart for the Walmart’s new “urban” concept!
    Kay Plantes´s last [type] ..Why Blockbuster failed and World Class will win

  • Greetings Kay, I have an undergrad degree in Economics from SMU, five years as a junior consultant for Arthur D. Little, Inc, and spend the last twenty years as a sports publicist for individual athletes. I’m back in school, at 50, earning a MBA in IT and will begin doctoral studies in Jan 2011 for sports management. I have selected your article for an assignment to review why some companies fail at innovation and others do not. I enjoyed reading your point of view. You caused me to pause and think about whether or not I’ve defined my business too narrowly. I believe we are transitioning from the highly specialized movement to “niche” your business to a movement to brand awareness with opportunities to expand via innovation and partnerships; ie Peugeot Citroen.

  • Thanks Arlena,
    I agree that we are transitioning. I think individual products are much less able to compete on their own if the company they are part of does not have some underlying advantages that create the lowest cost position or unique benefits that are hard to copy. Strategic partnerships as you mention can be a key part of creating the advantage. I think business model innovation will become more important over time. I sometimes refer to a business model as the overall sport’s teams capabilities, versus that of one play (product) to win customers. Good luck with your schooling and I hope my blog proves useful again. Best regards, K

  • Greetings Kay, I have followed you on Twitter and will support your views via FB sharing features. Thanks for confirming that I’m on the right. I appreciate the encouragement with my schooling. I admire your accomplishments and views.

  • Greetings Kay, the in-class presentation about the article received rave reviews. I would like to share the PowerPoint and final paper with you. So I’ll vist your site and use the email that you provide. Please send me back your comments. Thanks. This is my very last class before graduating. You would love it. It is called Managing Innovation and Creativity. Cheers.

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