Gary Burnison, the CEO of Korn/Ferry often tells the following story: Image you are a typical nine year old kid in Kansas who is experiencing a typical, long, hot, partly cloudy summer day. Between you and the endless horizon are golden, shiny fields of wheat that reach your shoulder. The day is a scorcher. In the distance are towering, puffy cloud columns that, over time, blanket the afternoon sun.
The 9 kid knows exactly what is coming in 1-2 hours. Namely, you will begin to feel a cool breeze in the air, followed by the blackening of the sky. The cool breeze will give way to an eerie, still calmness. The animals in the grassy field nearby will start to scamper for the barn.
What do you do? Well, there is one thing for sure: you don’t just stand there. You know what is coming: loud thunder, lightning, a torrential downpour, and maybe even a tornado.
Blockbuster opened their first store in 1985, renting movies for VHS tape players. They experienced explosive growth as consumers had a very inexpensive (compared to going to a theater) and convenient (in the comfort of their home) way to watch a movie.
Ten years later, in 1995, two important “towering, puffy cloud columns” appeared on their horizon. First, DVD’s were invented. They could easily hold an entire movie, and DVD players quickly became hot selling items. Second, a small company in Seattle named Real Networks made big news by digitally streaming the broadcast of the Yankees versus Mariners baseball game to PC’s. That was the beginning of streaming programming over the internet.
Unlike the 9 year old Kansas boy, Blockbuster ignored the warning signs. They just kept opening stores. As its peak in 2004, Blockbuster had 9,000 stores and 60,000 employees.
Back in 1997, two years after the introduction of DVD’s and the Real Networks streaming service, a company called Netflix was formed. It offered movies on DVD’s by mail for a very low price, since they had none of the capital and labor costs of Blockbuster (no stores or store personnel).
Very recently Blockbuster announced the final chapter in its demise: all remaining stores would be closed. Meanwhile, Netflix is now the giant in the exploding world of digital streaming of movies, while watching without concern the decline of its once dominant DVD-by-mail business.
The learning is obvious: the skillful leader makes sure the organization watches carefully for the trends and triggers that signal opportunities and vulnerabilities, and then puts in place the plans to get out in front. After all, that’s what the 9 year old kid did!