The Importance of Innovation

In 2009, Blockbuster reported a loss of $558.2 million, in 2008, $374.1 million, and in 2007, $85.1 million. To put that into perspective...that's over a billion dollars lost in the past 3 years. In response to their gaping financial wounds, Blockbuster plans to close up to 545 of their retail locations and cut back significantly on advertising.

I never like to be the one to say I told you so, but this is what happens when people are late on the shifting trends in human behavior. In another retail business, Barnes & Noble, faces falling profits because of digital readers and online booksellers, forcing them to create their own contraption, much later than Amazon released its Kindle, and with much less hype than Apple will release its iPad.

With the internet and the instant gratification of knowledge being at ones fingertips, people are accustomed to being able to do everything from their home. And if they can get things instantly, like an on-demand video or an ebook downloaded directly to their digital reader, they're going to spend their money in that manner. They're not going to scour through a retail outlet for a product that might not even be available.

But what happens when a company is late to a party? They're not the belle of the ball. When people think of mail-service video renting they think of Netflix. They don't think of the blue and yellow of Blockbuster, and won't if the chain plans to cut back advertising. When most people order books online, they think of Amazon, not Barnes & Noble. They don't think of the Nook, they think of the Kindle and the iPad.

Blockbuster plans to place "Express Kiosks," like Red Box to compete with that source of video rental, but once again they're late. Red Box has its vending machines outside the most popular convenience store chain, 7-11, which are located everywhere and the perfect place for someone looking for an impulse $1 movie rental. So once again they're late.

There was a time when Blockbuster could have capitalized on its strong brand name to create a monopoly on these new technologies and services. But for some reason I feel like there was someone in the board room saying, "Oh, people won't go for that. Those businesses will never last." And I'm sure that same executive is asking himself every night, "How did we end up in such a dire situation?"

The answer is change. You must always be open to it, and when new technologies and methods are available...give them a serious thought. Because if it's convenient...it's going last.

-- Steve Creswick
Ad Doctor