I was reading last week about Blockbuster Video (and thinking about one of our local video chain locations that is closing their doors) and had an ‘ah-ha’ Economics Lesson.
Not too long ago, Blockbuster was the ‘hot’ video company. They had a healthy market share, people were comfortable investing in them (their stocked peaked at $19 per share vs. 30 cents today), and they were in virtually every mid-sized community.
They focused on beating competitors on price and on perfecting their delivery of service… good practices, but not the only guarantee of success.
And then along came Netflix… they offered a service that was “outside the box”. DVD’s by mail; no late fees; keep the videos as long as you liked and customers did not have to drive anywhere.
Blockbuster eventually copied Netflix, but as is often the case, it was too little too late. So while Blockbuster today is facing bankruptcy, Netflix is trading their shares at $70 per share.
But this is not the end of the story… with Video-on-Demand; on-going upgrades in technology; and who knows what else on the horizon, the question becomes will Netflix continue to adapt to a changing landscape or will they fossilize within their current successful business model and become the next Blockbuster within the next decade?
Innovation is very disruptive. It is squishy, difficult and sometimes fragile work. The economic lesson for us is this: as the economy recovers, I find many business owners and managers thinking that there will be a return to “business as normal”… that we will be returning to how things were three + years ago.
The reality though is something different… while the economy is recovering and opportunities are forth-coming, the successful companies of this decade will be those who adjust and adapt to the new and emergent needs of their potential customer base.
The challenge is not only currently offering goods and services at a reasonable price, but also providing new and innovative services that people want which may be packaged differently than they have been in previous years.
That is the great economic lesson for all us business owners. To continue to adapt and change, regardless of how successful we currently are so that we may continue to be a viable business provider for this next decade.
