“Companies rarely die from moving too fast, and they frequently die from moving too slowly.” — Reed Hastings, co-founder and CEO of Netflix
In the early 2000s, Blockbuster, the brick-and-mortar video rental giant, was on cruise control. And why not? Not only had it created significant barriers to competition, not only did it mint money renting VHS cassettes and those newfangled DVDs, but the company also had a surefire secondary revenue stream, this involving hundreds of millions of dollars pocketed on late fees. As Greg Satell, writing in Forbes, notes “the company’s profits were highly dependent on penalizing its patrons.”
Half a decade later, Netflix, a company in the same space but operating with a significantly different business model was approaching its own operational and profitability apex, shipping more than one million DVDs every day from a whopping 35,000 film catalogue.
Life was good for both and yet trouble loomed.
In Blockbuster’s case, the difficulty lay with Netflix, whose aforementioned rental model was taking off like gangbusters. People couldn’t get enough of its superior inventory, the convenience of paying monthly for unlimited rentals and, most importantly, no annoying late fees.
As for Netflix, they were faced with the specter of streaming, the byproduct of improved Internet speeds and cellular networks combined with the ubiquity of smart phones, iPad-like devices and computers. Consumers of film and TV content, it seemed, loved the idea of instant gratification.
So, two companies facing threats, yet only one survived. Why?
Quite simply, Netflix weathered the storm—and grew—because it evolved its business model to embrace and ultimately take advantage of the new media consumption reality. Not only did it phase out mail rentals in favor of a terrific streaming service, it further bolstered its financial prospects by producing original content such as the wildly popular Orange is the New Black, House of Cards and Stranger Things. As a result, Netflix is nearing 100 million subscribers, truly a digital-age juggernaut.
Blockbuster, on the other hand? Its executives brushed off the Netflix threat as inconsequential, even passing on a $50MM offer to acquire the upstart, the mother of all bargains in hindsight. It wasn’t until 2004 that the company’s CEO saw the light and began investing in a digital platform for online ordering and, eventually, streaming. He even did away with one of its biggest cash cows, the late fee. This was all for naught, though. Between reacting too late, corporate infighting over strategy and barriers to competition, Blockbuster was in bankruptcy protection by 2014.
Why examine the fates of these two media companies? Because we, as marketers, can easily fall into the trap that snared Blockbuster’s management team. The pace of change in our digital world—at large, and in the microcosm of marketing—can be dizzying. Which means the most successful business and marketing leaders are shape-shifters, constantly adapting and evolving in the face of new technologies, consumer preferences and perceptions and even current events. Course correction can be a marketer’s best friend, often vital to our success. Just because something was true a year ago doesn’t mean it should be held sacred in perpetuity. As Winston Churchill once said, “To improve is to change; to be perfect is to change often.”
For proof, look no further than Domino’s Pizza.
The story begins back in 2008-09 with Domino’s suffered a one-two gut punch, the first delivered by decreasing sales (coinciding with the Great Recession), the second by the release of a consumer survey stating that, among national pizza chains, Domino’s ranked dead last, tied with Chuck E. Cheese’s. Luckily, Domino’s corporate had been working on an improved recipe featuring an upgraded crust, cheese and sauce. But how to communicate this to the masses?
With the blessing of Domino’s management team, Domino’s open-minded and nimble marketers, led by CMO Russell Weiner, decided to chuck the status quo and replace it with a radically different and risky marketing strategy, one that involved the painful truth. So instead of keeping things in the realm of positivity, the chain ran with ads in which customers voiced their displeasure with the taste of Domino’s pizza and employees admitted changes were needed, even offering a money-back guarantee on the pizza. “What consumers were looking for,” says Weiner in an August 2010 QSR article, “was honesty and transparency because nobody was giving it to them at that point.”
Needless to say, this sort of mea culpa is not business as usual for marketers. But the risk paid off—Domino’s business began to pick up in 2010, capped by a 14.3% quarterly gain. And in the intervening years it continues to grow radically in terms of stores opened, revenue, profits and stock price.
The benefits to marketers who stay open-minded to change and think out-of-the-box are numerous. Which leaves only one question: do you have the gumption to go out on such a limb?