Blockbuster Bankruptcy, Yet Again, Highlights How It's Not Easy To Just Copy The Disruptive Innovation
from the and-there-we-go-again dept
Late last week, there were a ton of press reports about how Blockbuster was preparing to declare Chapter 11 bankruptcy in September. It’s not shutting down, but just trying to restructure its debt, get out from under a bunch of store leases and try, try again. That said, this is yet another example of the fallacy of the claim of many that if you have a good idea some big company will just come along, copy it, and be successful. It also demonstrates the huge difference between idea and execution.
Netflix had a good idea and executed well on it. But for years everyone thought it was only a matter of time until the company got destroyed, because all these bigger (at the time) companies were just going to copy Netflix and win. First it was Wal-Mart. The retail giant started a service that seemed almost identical to Netflix way back in 2002. Everyone thought there was no way an upstart like Netflix could compete with the likes of Wal-Mart. Fast forward two and a half years and Netflix took over Wal-Mart’s online DVD rental business, because Wal-Mart’s offering couldn’t compete.
In between those events, in late 2004, Amazon stepped into the market (oddly, Netflix itself broke the news), by starting a Netflix-clone in the UK, though everyone expected them to bring it to the US as well. Even those who thought Wal-Mart didn’t have the digital know-how to compete with Netflix figured that Amazon had a strong likelihood of success given its e-commerce success. Jump forward to 2008 and Amazon, which never brought the offering stateside, dumped the DVD rental business in Europe.
And, of course, there was Blockbuster. It came out with a Netflix-like offer around the same time that Wal-Mart did, and while it held on for much longer, it was just never able to build up the same sort of userbase that Netflix did, and now the company is going to declare bankruptcy and try to restructure once again.
It’s really a fascinating case study. If you just looked at the simplistic analysis of “oh no, big company will crush small innovative company,” you had to imagine that at least one of these firms would destroy Netflix along the way. Wal-Mart is a retailing giant, and even if it didn’t have the digital chops, it had more money and distribution process efficiencies than Netflix could ever dream about. Amazon similarly had cash and distribution scale, along with that digital knowhow. And then Blockbuster had the relationships with Hollywood and a massively powerful brand name when it came to rentals.
But none of them were able to execute in this market nearly as well as Netflix, which really did focus on making the consumer experience top notch from very early on. None of this means that the small company always beats the incumbent. Certainly some big companies are able to step in and crush upstarts. But it’s not nearly as easy as some people make it out to be.