The Demise of Blockbuster is Now Complete! Will AI Become Your Demise too?

From GW’s Strategic Manager Workbench….

No CEO likes to hear what I always tell them: like a person, every company, no matter how large, is destined to die. That’s why the strategic role of a CEO is to keep developing the management team in order to keep the company breathing as long as possible.

One of the critical steps in implementing Strategic Management within a company is to develop and execute a strategic plan, and one key step in doing so is identifying the quadrant of a company’s life cycle it is within, because each quadrant requires a different strategy.

Like a person, there are four stages or quadrants of a company’s life cycle. The Emerging quadrant is when a new company is most vulnerable, and where 80% of all failed companies occur. That’s where “traction” for a new company’s products and services helps move the new company to the 2nd quadrant of its life cycle, the “Growth” quadrant, because it’s “After Traction” that is so much more important than the period of traction within the emerging quadrant.

If a company is to be successful and achieve high growth, it is within this growth quadrant that a change in the form or nature of a company occurs, into a completely different one, through implementing strategic management. We call it the company’s metamorphosis, and it proceeds the entry into the 3rd quadrant, the Maturing Quadrant, where the bulk of a company’s time in existence occurs.

Finally, the Aging or Dying quadrant is where Rest-In-Peace occurs. It’s over.

As the company grows within these four quadrants, only the emerging and maturing quadrants are affected by pricing. In the emerging quadrant, a CEO must realize the concept of price inelasticity, where a competitor’s pricing has little or no impact on getting to the growth quadrant. While in the maturing quadrant, the concept of price elasticity must be mastered, where a competitor’s pricing has a major impact on exiting to the aging or dying quadrant.

Such was the case with the “too large to fail” company, Blockbuster. Remember Blockbuster? and its market segment of physical media in the entertainment industry?? Their business model was to have a brick-and-mortar store for renting and distributing CD’s on every corner within a city and it was a multi-billion dollar company.

Blockbuster only had one small competitor for CDs in those early days, Netflix, whose business model was to subscribe consumers to physical CDs and distribute them through the U.S. Postal Service. Netflix could not get out of the emerging quadrant because its main competitor, Blockbuster, who was in the mature quadrant, kept matching Netflix’s lower prices.

While there’s another management tenet here involved with changing business models, similar to the entry of Uber into the taxi industry, that will be covered in a future post. Suffice it to say that Netflix failed in the physical media market segment because it could not get traction because of the price elasticity that Blockbuster recognized in the maturing quadrant.

Two things occurred that hastened Blockbuster’s rush from the maturing quadrant to the Aging/Dying quadrant.?

First, Enter Redbox, at $1.00 per CD, in a vendor machine in front of all major retailers.

Second, the change in the business model from physical media to streaming media.

The final demise of Blockbuster occurred today. It was announced in the WSJ that the owner of Redbox has filed for bankruptcy with nearly $1 billion in debt.

My question for your CEOs?? Will you be in charge when your competition goes all-in on Artificial Intelligence, while you still do not understand how it can play in your strategy?

I urge you to contact me to discuss our AI program for CEOs and executives, where we explain that AI is not just using ChatGPT, but resolving your productivity issues in your core processes.

Suivez-Moi!

GW

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