“Another one bites the dust” (or 2) – Blockbuster, Nokia, Movie Gallery/Hollywood video

by | Sep 22, 2010 | Current Affairs, Defend & Extend, Film, In the Whirlpool, Leadership, Lifecycle, Lock-in, Music, Web/Tech


Summary:

  • Video retailer Blockbuster (and competitor Hollywood Video) are now bankrupt
  • Video rentals/sales are at an all time high – but via digital downloads not DVDs
  • Nokia, once the cell phone industry leader, is in deep trouble and risk of failure
  • Yet mobile use (calls, texts, internet access, email) is at an all time high
  • These companies are victims of locking-in to old business models, and missing a market shift
  • Commitment to defending your old business can cause failure, even when participating in high growth markets, if you don’t anticipate, embrace and participate in market shifts
  • Lock-in is deadly.  It can cause you to ignore a market shift. 

According to YahooNews, “Blockbuster Video to File Chapter 11.”  In February, Movie Gallery – the owner of primary in-kind competitor Hollywood Video – filed for bankruptcy.  It’s now decided to liquidate.

The cause is market shift.  Netflix made it possible to rent DVDs without the cost of a store – as has the kiosk competitor Red Box.  But everyone knows that is just a stopgap, because Netflix and Hulu are leading us all toward a future where there is no physical product at all.  We’ll download the things we want to watch.  The market is shifting from physical items – video cassettes then DVDs – to downloads.  And both Blockbuster and Hollywood Video missed the shift. 

Blockbuster (or Hollywood) could have gotten into on-line renting, or kiosks, like its competition.  It even could have used profits to be an early developer of downloadable movies.  Nothing stopped Blockbuster from investing in YouTube.  Except it’s commitment to its Success Formula – as a brick-and-mortar retailer that rented or sold physically reproduced entertainment. Lock-in.  And for that commitment to its historical Success Formula the investors now will get a great big goose egg – and employees will get to be laid off – and the thousands of landlords will be left in the lurch, unprepared. 

As predictable as Blockbuster was, we can be equally sure about the future of former powerhouse Nokia.  Details are provided in the BusinessWeek.com article “How Nokia Fell from Grace.” As the cell phone business exploded in the 1990s Nokia was a big winner.  Revenues grew fivefold between 1996 and 2001 as people around the globe gobbled up the new devices.  Another example of the fact that when you enter a high growth market you don’t have to be good – just in the right market at the right time.

But the cell phone business has become the mobile device business.  And Nokia didn’t anticipate, prepare for or participate in the market shift.  From market dominance, it has become an also-ran.  The article author blames the failure, and decline, on complacent management.  Weak explanation.  You can be sure the leadership and management at Nokia was doing all it possibly could to Defend & Extend its cell phone business.  The problem is that D&E management doesn’t work when customers simply walk away to a new technology.  It may take a few years, and government subsidies may extend Nokia’s life even longer, but Nokia has about as much chance of surviving its market shift as Blockbuster did.

When companies stumble management sees the problems.  They know results are faltering.  But for decades management has been trained to think that the proper response is to “knuckle down, cut costs, defend the current business at all cost.”  Yet, there are more movies rented now than ever – and Blockbuster is failing despite enormous market growth.  There are more mobile telephony minutes, text messages, remote emails and mobile internet searches than ever in history – yet Nokia is doing remarkably poorly.  It’s not a market problem, it’s a problem of Lock-in to a solution that is now outdated.  When the old supplier didn’t give the market what it wanted, the customers went elsewhere.  And unwillingness to go with them has left these companies in tatters.

These markets are growing, yet the purveyors of old solutions are failing primarily because they stuck to defending their old business too long. They did not embrace the market shift, and cannibalize historical product sales to enter the new, higher growth markets.  Because they chose to protect their “core,” they failed.  New victims of Lock-in.

Implementing Market Shifts – Google, Android phone, eWallet

by | Dec 14, 2009 | Current Affairs, In the Rapids, Innovation, Leadership, Web/Tech

"The Google Phone, Unlocked" is a Seeking Alpha article detailing the early release of a Google phone planned for market introduction in 2010.  Will this be successful or not?  Legitimate question – given the success of Apple's iPhone.  And the answer to that really has nothing to do with cell phone technology.  It has everything to do with the downloadable applications.  The market for phones has shifted to where applications are rapidly becoming more important than the phones themselves. 

Which is why "Android to become eWallet" on MediaPost is an important article.  Mpayy is offering an app that supersedes both credit cars and debit cards.  It's Paypal on steroids.  This app allows users who want to buy something to use their phone to instantaneously pay for something.  Users can perform an eBay style transaction with immediate payment.  And they can do this buying products in the Burger King, or Starbucks, or Target. 

Two things are emerging that represent significant market shifts to which all businesses must react.  Firstly, mobile devices are much more than phones.  They are more than laptops.  They allow people to do a lot more things than they previously could, and these activities can be immediate.  From reading a CAT scan, to finding the closest pizzeria and downloading a coupon, to paying for a Pepsi at the convenience store.  This represents substantially different use of technology.  Those who remain Locked-in to old fashioned credit card/debit card technology – or internet transaction technology – will be left behind as users move quickly to mobile phone payment.

And, secondly, those who rapidly incorporate these opportunities will have advantages.  If you're making your business more internet friendly you are likely fighting the last war.  To be successful in 2012 it will be important you are able to offer real-time transactions buyers can access from their mobile device.  People will want to find you, find your discounts, and pay you from the device in their hands.  They will want to complete their business seamlessly using their mobile device – without a call, without a browser transaction.  Those who make life easy for customers will increasingly win – and making life easy will mean access via the mobile device

It is increasingly ineffective to build future plans based upon completing projects started last year – or the previous year – or a few  years ago.  Customers don't care about your enterprise system implementation that is X years into implementation.  Customers are running fast – really fast – toward using new, low cost and easily usable technology.  This is a substantial market shift.  And your scenario plans must incorporate these shifts, expect them, and use them to move beyond Locked-in competitors by implementing these shifts fast and effectively.  That allows you to Create Marketplace Disruptions which create superior rates of return.