What's Your Blockbuster Strategy?

by Steve McKee

Blockbuster VideoSix months ago the Blockbuster Video store a mile from my house closed. Last week, the store three miles from my house closed. I don’t even know where the next closest location is, so I guess my family has rented its last Blockbuster video.

While I was surprised that both locations near me were shut down, I had read that Blockbuster recently announced it would be closing up to 40 percent of its locations in order to shore up operating profit and reallocate its growth capital. Whether or not the move will save the company is an open question, but it does offer a good case study of the never-ending cycle of creative destruction that continues every day in a free economy.

The video rental business has always been a game of distribution. A generation ago Blockbuster put thousands of mom-and-pop video stores out of business by offering better selection, efficiency and convenience. Today, Blockbuster is a victim of those same forces via a host of competitors, from premium cable to pay-per-view to Netflix to Redbox. As technology rapidly evolved, Blockbuster’s bricks-and-mortar strategy increasingly looked like an anachronism.

The company is trying to evolve by experimenting with its own mail-order, online, kiosk, and even cellphone download options. But it may be too little too late. The lesson for those of us in other industries isn’t if you live by the sword you’ll die by the sword–in business, we all live by the sword. The lesson is no matter how big, strong and successful any of our companies may be, there are always competitors out there honing their blades. And their advances may not come from the avenues we expect.

Stay sharp.


Steve McKeeSteve McKee is a BusinessWeek.com columnist, marketing consultant, and author of “When Growth Stalls: How it Happens, Why You’re Stuck, and What To Do About It.” Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

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