My first apartment after graduate school was across the street from a Blockbuster video store. I remember many winter nights when I would bundle up and trudge through the snow to rent some videos because I did not want to drive anywhere. Worse yet, I also remember those nights just before closing hours when I realized that my video rentals were due, and rushed to make it in time so as not to incur a late fee. In the days before wide-scale broadband services, streaming video, and on-demand television, Blockbuster provided a valuable service.Yet Blockbuster fell victim to disruptive innovation, and last week announced that it is closing the last of its retail stores and distribution centers by early next year. Larry Downes and Paul Nunes blogged about this in "Blockbuster Becomes a Casualty of Big Bang Disruption" for the Harvard Business Review blog:
With the launch of its digital service, Netflix moved from a slightly less convenient but cheaper competitor to the realm of big bang disruption—an innovator offering better and cheaper goods than Blockbuster. For a monthly fee, Netflix customers can watch all the movies and television programs they want, whenever they want, and without ever leaving the house and without the need for physical media of any kind...In markets where customers can shop, buy and consume goods and services digitally, innovation is increasingly being driven not by the marketing plans of even dominant providers so much as the seemingly insatiable appetite of consumers for the newest technology. Companies no longer offer—consumers now demand.
The fact that customers have changed their behavior and expectations of service providers means that corporations need to start thinking differently about the services they provide and the mechanisms by which they provide those services.I admit that after joining Netflix to initially receive DVDs by mail, I have now been a streaming-only customer for years. Though I cannot always watch the specific movie or television show I want on Netflix, I have branched out and found content providers on YouTube and Vimeo that educate and entertain me.Though I had not set foot in a Blockbuster store in years, last week's announcement reminded me of the importance of paying attention to how innovations in your industry may alter where and how your customers are spending their time and money.I cannot say whether Blockbuster would have been more competitive with Netflix if Blockbuster had adopted a digital model sooner. I can say that a key to business continuity is asking the tough questions, such as "What if people no longer [want our service: rent movies, go out to eat, print paper copies]? What other service(s) could we provide?"