Lean

What Happened to Blockbuster Nights?

By Ron Pereira Updated on July 9th, 2019

Do you remember how you felt walking into a Blockbuster store to rent some movies on a Friday night?  I do.  It felt wonderful… curiosity mixed with anticipation created a powerful elixir.  Add in some junk food (for the kids of course) during checkout and the weekend was set!

Now, I phrased the question in the past tense since, unless you live in Bend, Oregon, your Blockbuster nights have changed a little.   Most of us now simply press a few buttons on our remotes and stream our favorite movies without leaving the couch.

So what happened to Blockbuster?  If you Google or YouTube this question you’ll find all sorts of theories.

The most popular theory is that they had the chance to purchase Netflix and turned it down.  You’ll also hear theories of how Blockbuster never figured out how to balance a subscription model with late fees that, apparently, resulted in big bucks for them back in the day.

And, if these theories aren’t enough, I recently heard Blockbuster’s former CEO, Jim Keyes, explain that the real reason they filed for bankruptcy was they simply couldn’t pay down their debt due to the financial crisis that struck in 2009.  Apparently they intended to do some refinancing but once the recession hit they were in a serious jam.

Now, I won’t pretend to have done exhaustive research on Blockbuster’s situation… and I certainly don’t have all the facts.  But, here’s my two cents for what it’s worth.  It seems to me that Blockbuster did make some poor cash flow management decisions that ultimately did them in.

But I also believe they missed another, extremely important, point.  They simply outran their own headlights and made some key, strategic, decisions based on what they thought would happen.  In Scientific Thinking speak we’d say they made some big decisions outside their threshold of knowledge.

Case in point… in 2008 when Jim Keyes, Blockbuster’s CEO at the time, was asked about the future of digital entertainment he commented, “Let everybody fight it out, kill each other, and spend lots of money on set-top boxes tethered to big screen TVs.”  Keyes preferred a portable solution as the heir apparent to the DVD.  Specifically he envisioned people coming into Blockbuster stores to load their favorite movies onto flash drives.

When Keyes was asked whether he felt threatened by Netflix or RedBox he commented, “Neither RedBox nor Netflix are even on the radar screen in terms of competition. It’s more Walmart and Apple.”

Of course it’s easy to sit back now and poke at Mr. Keyes and his leadership team for these apparent blunders… but they aren’t alone.  Just look at the camera industry and you’ll see similar strategic mistakes when digital photography entered the scene.  Google Kodak’s story for an example of a company who developed the first digital camera in 1975 but didn’t actively market, or develop, the technology as they felt it may jeopardize their lucrative film based camera business.

So what is there to be learned from these “case studies” we study and slowly shake our heads at?  First, sound cash flow management is obviously important… but it’s not sufficient.

The thing that seems to sink companies more than anything is when leadership teams make strategic decisions based on what they think is going to happen.  Blockbuster didn’t think streaming video would catch on like it did.  Kodak didn’t think digital photography would take off like it did.  And many other companies failed because they didn’t think this or that would happen.

Now, you may be predicting I’m about to say we should all stop thinking so much!  And, as crazy as it sounds, you’re partially right.

We often talk about being “lean thinkers” or “thinking scientifically.”  So, to be clear, I’m definitely bullish on the whole thinking thing.  But what we need to be careful of is what we think about and how we think about it.  Instead of believing we know what people want, or how the world will evolve, we’d all be better off taking a page from the “Lean Startup” movement who propose building MVPs (minimally viable products) in order to see how customers behave and what can be learned.

Put another way…. our thinking should direct us towards experimentation, learning, and progress instead of hoping and praying we’re right.

If our success/livelihood depends on being “right” all the time we’re almost certainly doomed to failure.  Instead of trying to be “right” I propose the way to success in business, and life, is through experimenting and learning with open minds and humble hearts.  And staying out of serious debt will also help… so do that too!

Ron Pereira

Ron has more than 20 years of experience in various manufacturing, supply chain, and senior leadership roles. Ron has held the titles of process engineer, engineering manager, master black belt, and director of manufacturing & continuous improvement. In 2002 Ron was the first American to win the Nokia Global Six Sigma and Overall Quality award in Helsinki, Finland. Ron holds a bachelor's degree in automated manufacturing and an MBA in technology management.

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