Why don’t established successful companies acquire startups that create or implement new technology that threatens to cause disruption?
This is a great question.
In my opinion, it is because companies without a vision for the future and a mission to make their customers experience better over time lose sight of why they exist.
Look at the example of Blockbuster.
Their original mission was to provide people with affordable entertainment in the comfort of their own home.
The technology of the day, when Blockbuster was founded in 1985, was VHS videotapes and cartridge video games for systems like Nintendo.
Eventually, DVD’s replaced VHS and Discs replaced the old cartridges for the multiple video game systems. This didn’t affect the way Blockbuster did business, they simply updated their inventory.
Once streaming technology started to change the way people accessed entertainment and affected the way Blockbuster did business the whole thing fell apart.
Remember, the original mission was to provide people with affordable entertainment in the comfort of their own home. Video-on-demand should have been a natural iteration for Blockbuster.
But, then there is the reality!
Can you imagine being the CEO of Blockbuster in 2005 and telling the board that if they don’t approve laying off 84,000 people and systematically closing over 9400 locations in the next 5-years the company would be bankrupt?
Can you imagine trying to explain why dismantling everything that had been built for the last 20-years was the only way forward?
Can you imagine trying to convince the board that all that infrastructure should be replaced with a technology that allowed customers to watch as many movies as they want all month long for the price of one movie rental in the past?
That is exactly what they needed to do, but that is not what they did.
Clearly, the management and the board of Blockbuster were committed to keeping the $37 Million in assets they owned in place.
They were more committed to what they wanted than to what their customers wanted.
I remember driving to the Blockbuster, only to find that all the copies of the movie I wanted to watch were rented, wandering around the store aimlessly looking at other movies, picking something else, paying $6 for one rental, driving home, watching it, and forgetting to return the movie and having late charges.
As a former customer of Blockbuster, at that time I would have gladly paid $30 a month to avoid all that. When Netflix came along with an alternative for $7.99 a month it was an absolute no-brainer. Even today, paying $10.99 a month is still less than half what I was spending at Blockbuster each month back in 2005 and my experience is so superior.
It’s easy for us to look back and see how obvious it should have been for Blockbuster to make the decision to transition to video-on-demand but in the moment for the management and the board, it clearly wasn’t so obvious.
The lesson for us today is that if we want our businesses to survive disruption by new technology and innovative competitors bent on changing the status quo it is imperative that we go back to the fundamentals.
Why are we in business in the first place?
How can we constantly be improving the customers buying experience?
What new technology is becoming available that we can leverage to provide our customers with something that they don’t know they want or need yet?
Ask these questions every day or face the very real possibility that your business will not be here, perhaps sooner then you think.
Would you like to discuss how we can teach you how to develop a customer experience that creates massive results for your business?
No, I’ll just keep struggling on my own.