Lessons to Learn From Blockbuster and Netflix

Is your organization looking inward or outward?

Summary
Transcript

Lisa McLeod, author of Leading with Noble Purpose, uses the example of Blockbuster and Netflix to explain the importance of employee engagement and competitive differentiation.

What made Netflix thrive was it provided clarity of purpose, she says in the video. “Without clarity, that North Star of the customer, what happens is your competitive differentiation erodes, your employee engagement erodes, and you eventually become a commodity, and after that, you become irrelevant,” says Lisa.

Watch the video to hear more from Lisa on what leaders can learn from Blockbuster and Netflix.

If you look at organizations that have a strategic vision, that have that clarity of purpose and customer impact, and compare them against organizations that don't, you will see a big difference in financial performance. But what happens is the financial performance is actually a lagging indicator. Where the difference starts is in employee engagement and competitive differentiation, and I'll give you an example.

So, let's look at two companies, Blockbuster versus Netflix. If you remember, Blockbuster was on every corner, Blockbuster was the darling of the stock market, they were doing so well. But Blockbuster was very focused on what I refer to as "quarterly capitalism." Blockbuster was all about, "How can we make money on our existing business model?" Because of that, they were looking inward. The marketplace started to change, Blockbuster's thinking, "How can we get on a better corner? Oh, revenues are down a little bit. I know, let's add candy to the checkout line." Netflix had a longer-term vision. Netflix had a clarity of purpose. Netflix wanted to improve and impact the way people consumed entertainment. Because of that, Netflix was looking outward. Netflix was looking at the customer. They wanted to really revolutionize the way people experienced entertainment.

What happened was, at first, Netflix was kind of in the same game as Blockbuster. They were sending us DVDs to our house, but again, Netflix is looking outward, they've got that strategic vision, they have that clarity of purpose, so then what happens? So then the internet advances, then you can get it on the internet, and then Netflix has programming. Meanwhile, Blockbuster is still trying to put Jujubes at the checkouts.

Without that clarity, that North Star of the customer, what happens is your competitive differentiation erodes, your employee engagement erodes, and you eventually become a commodity, and after that, you become irrelevant.

It's critical, even when times were good… See, Blockbuster had a chance when times were good, but they didn't do it. They were so focused on that business model. But even when times are really good, that's when you need to have clarity about, "This is our North Star. We have a clear and noble purpose and this is how the world is going to look when we're done." That's the vision.
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Lisa McLeod

Lisa McLeod began her career at Procter & Gamble, where she was a sales leader, sales managers, and sales training. She went on to become the Vice-President of Vital Learning --an international training company - before founded he...

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