Where does the impetus for change come from?

“We too, are standing on a “burning platform,” and we must decide how we are going to change our behavior.” Stephen Elop — Nokia CEO 2011

Elop was the CEO of Nokia and this was an excerpt of a speech he gave internally at Nokia. Nokia was facing stiff competition from Apple, Android and others. We all know how this ended for Nokia. Poorly. Not every company is at a “burning platform” moment but history is becoming more and more littered with companies who failed because they couldn’t transform their business to address the problems they faced, whether from disruptive market forces, technology, or for a myriad of other reasons. Most recently our global pandemic has decimated numerous large and small businesses alike.

In the case of Nokia, Mr. Elop points out that among the many problems and competitors they had, the key issue was that each of their competitors was building an ecosystem, where Nokia had been building devices. Here’s a Forbes article for further reading but the point is that companies need to be more nimble and prepared to transform their business.

One of my favorite examples is Blockbuster which was the place to get a movie when I was a kid. In the 90s, there was a Blockbuster in every strip mall. They owned movie video distribution as they’d adopted a model similar to Starbucks. Create a consistent brand and service, market the heck out of it, and overwhelm local mom/pop shops with shiny, clean locations. Like Starbucks, Blockbuster was ubiquitous. Small video stores existed, but Blockbuster drove many out of business, bought others, or simply outdid the competition. One of the key features was the sheer number of the latest releases. They’d stock a dozen or more copies, such that if you wanted to see the latest video releases, you could be sure that Blockbuster had it, where your local small video store may not.

Then along came Netflix.

Netflix had a very different delivery model. They started with an online service where you chose DVDs (not VHS) and had them shipped to your house. You watched the video when you wanted, and dropped them back in the mail when you were done, at which time, the next videos in your queue would get shipped. There was no late fee. The smaller, flat DVDs were easily mailed and Netflix likely saved money on real estate — they didn’t have retail locations. When I first tried Netflix, the asynchronous nature of the service was sort of weird. You would set up a queue which you had to manage but often you’d get a movie you had chosen some days after you wanted to view it. Blockbuster provided immediate satisfaction. You popped over to a store, found a movie you wanted to watch, maybe grabbed some food to cook or take-out and that was your evening.

There is a robust podcast on the topic of Blockbuster vs Netflix here. The podcast delves deep into the internal strife that Blockbuster was experiencing, starting with the antagonism between, Carl Icahn, a board member, and John Antioco, the CEO. In 2007, it actually looked like Blockbuster was doing well. Netflix had offered to buy Blockbusters subscribers and subscriptions were going up. They were short of the number they needed to break even though so money was being spent marketing to gain subscribers and a huge sum had been spent to gain parity with Netflix and support their digital presence.

Playing catch-up can be exhausting.

Two years earlier, in 2005, while I was at frog, Blockbuster came to us and wanted to enhance their online presence and the race to parity was their priority.

We pointed out numerous visual issues with their site including:

The Blockbuster ticket logo was set against a blue background which obscured the visual of the logo. It gets lost in that circle graphic.

The dimensional graphics (back then, designers weren’t calling it skeuomorphic) were slower to load, took up a huge amount of screen real estate, and were challenging to render consistently across browsers.

The placement of navigational elements like Movies and Games tabs and the less noticeable ‘sign-in’ link to the right get a little lost in the header of the screen. Sign-in is an important call to action as the sites functionality hinged on subscriptions.

Also, their product was movies, yet look at how small the movie thumbnails appear, in contrast to the rest of the page? There were numerous other issues.

Design is not just what it looks like and feels like. Design is how it works. — Jobs

Importantly, we were more concerned with how the site and service worked, rather than the poorly presented visuals. In a document we shared a number of ideas Blockbuster could implement to surpass Netflix and other competitors.

1. We specifically told them that streaming was the future and strongly suggested that they should consider this but they flat out refused to see that this was a viable business. And to be fair, we likely didn’t present a cogent business argument or show them a prepared roadmap to make it successful.
2. We told them to “build a destination and community” at a time that was ripe for online social interactions including a “Blockbuster block party” where a group could share a movie and chat about it the next day.
3. We suggested a much deeper categorization of movies in order to encourage more rentals. Movies organized around viewers mood, current events, or collated around actors or directors. These are all standard features today.
4. We suggested multiple users for a single account to delineate content that was inappropriate for certain users which has become a standard feature on all the streaming services today.
5. The key suggestion we recommended was to “leverage Blockbusters physical stores to enhance the movie rental experience.”

This last one would have been difficult to pull off given the trouble they had convincing the franchise owners to participate, but it’s perhaps the most compelling. Blockbuster had a physical presence and Netflix did not. This was very much a service design strategy, but Blockbuster wasn’t prepared to implement this deep a revision. Blockbuster was asking franchise store owners to accept mailed DVDs back into the stores for returns. Not only were the staff not trained for this, the store owners knew that the online service was taking away business. Because the stores weren’t owned by Blockbuster, the store owners resented this.

Back to 2007 and Icahn succeeded in ousting Antioco. His successor discontinued efforts in the online business, instead focusing on the stores. They lasted a couple more years and declared bankruptcy in 2011. Ironically, you can view a documentary called The Last Blockbuster on Netflix.

Also in 2007, Netflix introduced streaming. This was the right idea but note that it cannibalized its DVD mail service. They were willing to take that risk and take advantage of the technology. They innovated and grew. In 2013 Netflix introduced their own content, another bold move but not unprecedented (HBO had been delivering great originals for years) and they followed this up with the delivery of a full series all at once which became binge-watching. Previously, you’d made it a “Blockbuster night” but now you might, “Netflix and chill” — which has a very different definition.

Blockbuster had the motive and the opportunity to revise its position, was on the path to success and mismanagement conspired against it. Could design have helped them? They had a small internal development team for their site when we worked with them. Much of what they’d developed was supported by vendors like frog. There was maybe one internal designer on their team and one vendor who’d been responsible for their original website design and another for the backend work.

Some of the tenets of design hold that you can prototype, test and iterate towards innovation. That failure is learning. That there is risk in change but perhaps more risk NOT to change.

It’s reductive to point to Blockbusters demise because they didn’t have design. Infighting at Blockbuster among the CEO and Icahn, competition from Hollywood Video and Redbox, and a host of other issues led to its downfall. Design can be an important tool, and all organizations can benefit from design but it’s not a panacea.

Perhaps most critical to any transformation is the openness to the idea. Your mindset at the top and throughout your organization must be open to the possibility or necessity of a change.