That's the final sentence of an intelligent and sobering article in the Oct 18 edition of The New Yorker, written by James Surowiecki and entitled, "The Next Level." In the article he charts the rise and fall of 'category killer' stores like CompUSA, Circuit City, Toys R Us, Barnes & Noble and, now, the defunct Blockbuster. The reason for their rise was their ability to stock incredible volume and scope of a single category of goods at unbeatable prices. The reason for their demise is their inability to cope with the Internet.
This is an all-too-familiar cycle. You would have thought that business leaders would have wised up to the fact that technology invites disruption, which in turn invites new titans of business that know how to cater to a shift in the balance of power. But we never seem to learn. Perhaps we haven't quite grasped what, precisely, it is that we need to learn in the first place?
According to Surowiecki, the lesson is to identify and challenge the "internal constituency problem." This is where lots of employees - including those in the seat of power - were instrumental in building up the business and executing on a business model that they invented - and made them wildly successful - and now have a hard time believing has come to an end. To put it in terms of what happened to Blockbuster, they had built up a successful business based on physical presence and dismissed the Internet business as 'niche'. Even as Netflix made inroads into their market, they clung to the belief that "clicks and mortar" was a better strategy; in fact, they blinded themselves with this belief, because it confirmed their world view. For many other businesses in the same boat, this phrase alone created a false sense of security by creating psychological blinkers. As for customers, it hasn't been proven by any business that having both a physical and Internet presence offers competitive advantage in the film rentals market.
Blockbuster's very strengths became its weaknesses. Their investment in traditional stores made it "Late on everything - online rentals, Redbox-style kiosks, streaming video." A big chunk of their business model was based on exploiting late fees from which they collected half a billion dollars a year. But customers only put up with this, because they had no alternative. As soon as competition came along, they couldn't wait to take advantage of better services and competitive rates. It's risky to build up an empire based on slavery. Those late fees had built-up such animosity that Blockbuster was doomed.
Netflix built their distribution system from scratch and streamlined the costs of shipping physical product. Now, they are rapidly porting their business over to streaming rentals. But they are entering a crowded market with Amazon, Apple, Google, cable companies and the like. The question remains as to whether they will pull this off successfully - given how late they are to the party. Will they end up roadkill like Blockbuster?
Writers are familiar with the phrase, "Shoot the puppy." This is when they have a scene that they love too much to excise, even though it's getting in the way of the story and forcing all sorts of bad decisions to be made to preserve it. In marketing, it means to dare to do the unthinkable. In life, it simply means to kill our darlings. We all need to know when it's time to let go.
At the end of the day, we must make ourselves aware of the danger in dismissing technological and sociological shifts. This is why we must consider destroying our businesses in order to save them.