Who’s laughing now?

Lessons from Blockbuster’s downfall

 

On a spring day in 2000, Reed Hastings strolled into the Dallas headquarters of Blockbuster Entertainment, LLC. Hastings, founder of an upstart entertainment company, had a simple proposition for the video distribution giant. His company, Netflix, would manage Blockbuster’s online offering, while Blockbuster would introduce Netflix in its 9,000 brick-and-mortar locations. CEO John Antioco all but laughed Hastings out of the office. Later that year, Blockbuster turned down a chance to purchase Netflix outright for a mere $50 million.

17 years and nearly $90 billion later, Netflix has emerged as an economic and cultural monolith, while Blockbuster exists as little more than a warning; a symbol of complacency in the face of change. It’s tempting to attribute Blockbuster’s failures to overconfidence or gross mismanagement, but their downfall wasn’t unique or even unusual. Blockbuster simply fell prey to a mantra that comes to dominate the thinking of many successful businesses, regardless of industry – “if it ain’t broke, don’t fix it.”

After all, the signs were positive. With strong financial returns and an ever-expanding list of locations, Blockbuster’s place at the top of the video rental pyramid was undisputed. Blockbuster had a talented leadership team and a model that had posted consistent growth since 1985. The downfall wasn’t caused by a bad product or operational failure, but a lack of foresight. Blockbuster failed to adapt to the changing marketplace, and paid the price.

A visualization of Netflix's path to dominance

 

Refining the Experience

Netflix toppled an industry giant because it understood a simple truth – technology has forever changed customers’ behaviors and expectations. While Blockbuster stuck with a system that had been working for more than two decades, Netflix looked for a new approach. They identified market trends and developed a new model. They were able to deliver the same product as their competitor while addressing modern customers’ need for speed and convenience.

For consumer shopping for a home service provider, search engines represent limitless choice. While word of mouth is still powerful, its impact is diminished by the choice afforded by search engines. There’s less incentive for customers to stick around because there are so many readily available alternatives. If a customer has to wait on hold, what’s stopping them from simply calling the next company that appears in the Google search? Why leave a message after hours if a crosstown competitor advertises 24/7 availability?

The best way to cement your place in the local market is to focus on the customer experience. Speed, convenience, and accessibility are vital to engaging, retaining, and delighting new customers.

With more millennials entering the home-buying market and technology continuing to alter customer behavior across the board, the need for a modern sales and customer service model is greater than ever. For businesses in pest, lawn, and HVAC providers, the choice is clear: modernize, or fall behind.

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