Blockbuster filed for bankruptcy in 2011, closing its last stores in 2013, in the face of competition from Netflix, Vudu, Hulu, Amazon.com and the cable / satellite providers. Dish Network bought Blockbuster's streaming service from the bankruptcy court for $321 million. In contrast, Netflix' market cap is worth over $24 billion today - and Blockbuster could have bought it in 2000 for a mere $50 million.
The Blockbuster executives didn't fail from a lack of market intelligence. NetFlix was founded in 1997 and began video streaming in 1999, followed by Vudu in 2004 and Hulu in 2007. And Blockbuster didn't even enter the DVD-by-mail business until 2004, long after Netflix had proven its success. Forbes blogger George Anderson wrote in Blockbuster Beyond the Grave:
“The fascinating issue for me is that Wayne Huizenga and his executive team were well aware of the risks from digital distribution of media and discussed it at times,” wrote loyalty marketing expert Bill Hanifin in a recent RetailWire online discussion.Given their lack of action, they clearly operated under two critical - fatal - assumptions: not only would the near-term future be like the present, but also that they would have enough time to respond to a "real" competitive threat, before a crisis hit. But by the time it did, it was too late.
We all have assumptions, of course. They help us interpret the barrage of new information we are bombarded with daily. And they work, so long as underlying conditions remain the same. But all assumptions are susceptible to cognitive bias, particularly anchoring, where humans rely too heavily on the first piece of information they receive, using that as the basis for subsequent decisions.
But assumptions often fail us in times of radical change, when they need to be tested to ensure continued validity. Unfortunately, senior executive decision makers are the most resistant to challenging their assumptions. Because of their long years of experience, they "know" the business, the customers, the competitors, the technology and the industry. In turn, this leads them to lend more credence to facts or information that reinforce their world view (confirmation bias).
Given human nature, changing long- and deeply-held assumptions requires a crisis. As English author Samuel Johnson said, "nothing so focuses the mind as the possibility of being hanged in a fortnight."
But rather than awaiting a real crisis, forward-looking organizations create "crisis" experiences, where decision-makers collectively evaluate intelligence, develop new insight and assess the strategic and operational risks of changing customer needs, new forms of competition, changing technologies, new discoveries and emerging government policies, in structured situations.
They can then decide to weigh anchor - or even break the chains - and navigate to a new destination, before the storm hits.
