Failure Analysis/Change Strategy

While some companies have clearly defined mission, vision and objectives, others create vague, or lack defined statements for the public to recognize. The mission, vision and objectives of a company are not only useful, but help to explain the purpose and goals of the company to the inquisitive public. Two companies we have decided to study are competitors of online, DVD and electronic game rentals, Blockbuster and Netflix. While each company has had its own form of success, others have had tremendous failures and are not bankrupt.

Blockbuster is one of two companies we discussed to understand the dynamics and goals. Blockbuster's defined mission articulated that it was “to provide its customers with the most convenient access to media entertainment, including movie and game entertainment delivered through multiple distribution channels such as our stores, by-mail, vending and kiosks, online and at home” (Investor, 2010). There is belief that Blockbuster offered “customers a value-prices entertainment experience, combining the broad product depth of a specialty retailer with local neighborhood convenience” (Investor, 2010). Additionally, Blockbuster's vision was focusing on “offering programs that are an alternative to those offered by mass merchant retailers and online subscription providers” (Investor, 2010). Finally, the objective of Blockbuster was to “become a leading global provider of in-home rental and retail movie and game entertainment” (Investor, 2010).

Next, Netflix, one of Blockbuster's early competitors is assessed. According to its own website, the defined mission of Netflix is “to grow our streaming subscription business domestically and globally. They are continuously improving the customer experience, with a focus on expanding our streaming content, enhancing our user interface and extending our streaming service to even more Internet-connected devices, while staying within the parameters of our consolidated net income and operating segment contribution profit targets” (Farfan). Upon further examination of their website, Netflix defines its vision as “the world's leading internet subscription service for enjoying movies and TV programs" (Farfan). Additionally, Netflix's objective is to "become the best global entertainment distribution service licensing entertainment content around the world creating markets that are accessible to film makers helping content creators around the world find a global audience" (Farfan). Along with the convenience of online access, Netflix appears to outmaneuver Blockbuster in creating online accessible videos and gaming rentals.

Blockbuster, LLC: A Fallen Company

Blockbuster, LLC began in 1985 with an idea to allow consumers to pay a rental fee to obtain newly released videos and games at a minimal cost. Consumers would pay the rental fees, or wait to buy the released movies at a higher cost. For many years, Blockbuster was the way to entertaining the household on Friday nights. But all of this changed as Blockbuster began to underperform as compared to its competitors of the future, namely Redbox and Netflix. "This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment," said Joseph P. Clayton, DISH president and chief executive officer (Retrieved from http://www.blockbuster.com/newsPr.html).

Even so new leadership means new vision, innovation, strategy, business models, and potential barriers. The leadership of Blockbuster changed over the years bringing in new visions for the company and reinventing the model with a convenience store strategy, such as offering “impulse” purchase items like candy and other movie necessities. In other words, the stores did not have much else to offer its customers other than movie rentals. It is the belief of the team that the company began to lose focus on what it was really created to do and did not have an issue with renting/selling the movies, but getting the customers to continue to shop there. The company thrived on membership fees for movie and game rentals but customers who did not pay in agreement counted as an accounts receivable problem for the company. It was not the product they sold/rented, but the service that was provided behind the product was missing.

Industry Changes and Leadership Failures-Blockbuster

While Blockbuster’s leaders were creating strategies to improve the immediate concerns with falling revenue, the home entertainment industry was changing. No one was paying close attention to what the real cause was for revenue decreasing, convenience and accessibility. Pay-per-view, On-demand options and internet viewing capabilities were becoming accessible to the average consumer. It was no longer necessary for you to leave your home to watch a movie at will. Leaders should not only motivate their employees to perform better; they must watch the changes going around them. They must be lifelong learners. Not just learning to understand ways to improve current conditions, but also studying current and predicted industry changes. Failing to do so is a primary reason for Blockbuster’s decline. Blockbuster failed to make small organic changes that would have kept them relevant as technology allowed for more flexibility in movie watching options. The leadership was more transactional, reacting only when needed. They reacted only when the standards were not met, which was too late (Robbins & Judge, 2013, p. 383).

Contingency Theories-Netflix Success

Contingency Theories depict how aspects of leadership circumstances can change a leader’s influence and success. These theories encompass different variables, such as predictor, situational, dependent and mediating. Commonly, mediators are secondary characteristics, which establish a person’s performance, and embrace group-level characteristics, which can establish team performance. The variables include task commitment, external coordination resources and support, cooperation and mutual trust, and ability and role clarity (Yukl, 2013). The mediating and situational variables facilitate understanding toward how the impact of a leader’s behavior changes performance results.

Mediating variables play an essential role within the success of Netflix. For instance, task commitment. Reed Hastings, Founder and CEO of Netflix expects his employees to be ultra high performers. He employs highly efficient people, and each one places the firm’s interest first (Mccord, 2014). The listed variables impact Netflix management through its implementation of adaptive leadership and transparency and these variables are influential toward ensuring favorable results.

Role of Leadership

According to Yukl (2013), "Leadership is the process of influencing others to understand and agree about what needs to be done and how to do it, and the process of facilitating individual and collective efforts to accomplish shared objectives” (p. 7). In consideration of the many definitions of leadership, the given definition is appropriate for Netflix. Hastings (Netflix Founder and CEO) had a desire to construct an Internet movie service that would be the best in the world. With Netflix’s continuing evolution boasting over 40 million subscribers globally, its impact is extensive not only on technological firms but also television, delivery and creation content (Netflix.com). Blockbuster was acquired by Viacom in 1994 and remained under the corporation for 5 years. However, Blockbuster lost revenue in its retail stores across the U.S.; turning a profit was just not there. The company filed for bankruptcy in September 2010 and began to close many stores because of the debts incurred on store leases. In 2000, Blockbuster had the chance to acquire Netflix, its competitor, but did not.

An essential ingredient in organizational growth, decision-making, developing followers, and structuring is leadership. Structure dictates resource allocation and the development of policies and objectives. Modifying strategies lead to modification within the organizational structure. Netflix operates within a functional structure, which is identifiable through formalization extents, thus making each function dependent upon consistent manners of functioning. Decision-making power often rests at the top of the hierarchy. The business functions in this structure may include finance, marketing, purchasing, and human resources (David, 2012). Human resources are a vital component within Netflix’s organizational structure as the firm seeks high performers.

Netflix contends on a different playing field: virtual vs. brick and mortar. The organization developed a distinctive approach to how society observes and uses media outside of the traditional realm. That distinctiveness is evident in how they hire, motivate, and manage their workforce. For instance, after the firm ceased using traditional performance reviews, the implementation of the 360-degree review went into action. Afterwards input from employees became vital in identifying elements that their colleagues should end, begin, or continue (Mccord, 2014). When management invites employee interaction or input within the decision-making process, it produces empowerment; individuals become more motivated and satisfied.

The organization’s innovative culture consists of shareholders, employees, management, and the outcomes of the increasing success of Netflix. An intricate part to the organization’s success is within a culture that values excellence, high performance, top pay, context instead of control, advancement, and freedom and responsibility (Blodget & Spector, 2011). Within Netflix culture, managers encompass freedom within managing his/her team in the absence of micromanagement. Operating in this manner advances a culture, which conveys trust, creativity, and independence.

Part #2: Identify Vital Areas of Change

Organizational change is critical to the evolution and success of a company. It is perceived that Blockbuster failed previously due to an inability to effectively compete with such competition as Netflix and Redbox. In order for Blockbuster to be successful in today’s marketplace there must be an effective change in the areas of marketing and leadership. In terms of marketing, Blockbuster must revamp its image and branding strategy. An example of this would be to go back to basics, and identify the key components that made Blockbuster successful in its early years. Once those components have been identified they should be modified to fit the targeted consumer base and implemented into the new advertising scheme. Next, there should be a change in leadership. The success of the company solely rests with the ability of leaders to motivate and inspire employees to drive the company’s key goals and mission. This area of change should start with the Chief Executive Officer “CEO”. The new CEO should be viewed as a charismatic and innovative leader that can aid in reshaping the company’s mission and business strategies to make it competitive.

Barriers to Change

Change is not always easy. This is especially true when the change is reactionary versus visionary. Jack Welch implemented the top-down strategy to stimulate the changes at GE. Described by Tichy and Sherman as a “three-act drama”: awakening, envisioning, and rearchitecturing,” (Mintzberg, Lampel, Quinn, & Sumatra, 2003, p. 172). First, what and why the company is failing must be determined. Once you understand the problem, you can start envisioning the successful company. This new organization will not look like the current one. New skillsets will be required.

Leaders must be clear on how the company must be implemented for the change to actually work. Speaking with employees will help make the changes easier. Many times, employees are those who directly interact with the customer and have a better understanding of what their needs are. There will be resistance to the changes, especially by those that are not interested in expanding skills and cross-training in new areas. Explaining how the changes will increase job security and promotion opportunities could help ease the resistance. Empowering the employees to be proactive in their roles, will also limit negativity.

Part 2: Strategy—measuring up to John Kotter

As the CEO of Blockbuster, the team agrees that using the “Eight Steps to Transforming Your Corporation” created by John Kotter (1995) is the best approach to transforming the company. The first responsibility to transform any company is to assess the market and conduct a SWOT analysis to determine what needs to be changed and how. This can be done using a working team that has been carefully assigned with executive leaders who can create the new vision of the company, pilot the vision, and then plan for the vision to be communicated to its stakeholders. Following these steps would be the focus on educating the employees of the new vision, and empowering them to suggest what is working and was it not. Allowing this helps the CEO and stakeholders to plan for new ideas and suggestions to create a better product or offer a better customer experience in the retail stores. Looking at all of the changes made, the CEO and executive leaders can consolidate the improvements, add credibility to the new changes and fully implement the changes.

References

Blodget, H., & Spector, D. (2011, July). REVEALED: The Secrets To Netflix's Success. Business Insider. Retrieved from http://www.businessinsider.com/netflix-culture-management-presentation-2011-7?op=1

David, F.R. (2012). Strategic Management: A Competitive Advantage Approach, Concepts and Cases (14th ed.). Upper Saddle River, NJ: Prentice Hall.

Netflix.com (2014). About Us. Retrieved from http://www.netflix.com/MediaCenter

Farfan, B. (n.d.). Netflix Movie Rentals Mission Statement - A Vision, A Promise and Nine Values. Blockbuster Movies. Retrieved June 28, 2014, from http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Netflix-Movies-Mission-Statement.htm

Investor Relations Information. (2010, January 3). Blockbuster Movies. Retrieved June 28, 2014, from http://investor.blockbuster.com/phoenix.zhtml?c=99383&p=irol-faq_pf#38556

Kaplan, G. (2012, May 16) . . . Retrieved June 29, 2014, from http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCkQFjAB&url=http%3A%2F%2Fphx.corporate-ir.net%

Mccord, P. (2014, Jan 20). How Netflix reinvented HR. Businessline Retrieved from http://search.proquest.com/docview/1490574625?accountid=458

Yukl, G. A. (2013). Leadership in Organizations (8th ed.). Retrieved from Vital Source Bookshelf.

Mintzberg, H., Lampel, J., Quinn, J. B., & Sumatra, G. (2003). The Strategy Process:Concepts, Contexts, Cases, Global (Fourth Edition ed.). Prentice Hall. Robbins, S. P., & Judge, T. A. (2013). Organizational Behavior (Fifteenth ed.). Boston: Princeton Hall.