why blockbuster failed – what business are you in?

Posted on October 4, 2010

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the keyquestion facing media industry today is not whether to stop google dfrom crawling your site and putting up paywalls  but “what business are you in?”

it seems innocious, but ina rapidly changing industry with a variety fo replacement products the unique value you have for yoru audience becomes harder to define. in a world of choice – why would they choose you? especially in two sided markets where you are selling and audience, you not only have to engage your clients (advertisers) but also you non-paying customers – the audience.

this is an interesting article from plantes company.

“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?

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