Editor's note: We have heard a lot about the legend of industry giants, and the rise and fall of giants is often dramatic, from rise, prosperity, prosperity to decline, each stage is ups and downs. However, whether it is a review article or a textbook case, when it comes to technological innovation of large enterprises, it is often easy to simplify the reality, ignore important details, and attribute the failure of the enterprise to the lack of foresight of the leaders at that time, the great threat brought by technology, and the negligence of preparation. But if a big company in the industry one day collapses, the reality is generally more complicated than outsiders think. This article is compiled from Medium's original article titled "The Demise of Blockbuster, and Other Failure Fairy Tales."
Blockbuster's brick-and-mortar store closed.
Now, no matter what business conference you're attending, you may hear a "lamentable" but very familiar story: there was once a giant company that was once the industry leader, but when the new technology came, it failed to catch up at the right time, so it fell into the long river of history, and has never been silent. The protagonists of the story—leaders in large corporations—are generally portrayed as dull, old-fashioned, failing to realize the "obvious" business winds and technological directions that preceded failure.
The biggest problem with these failed stories, however, is that they don't necessarily come true. Managing a mega organization well often requires enough intelligence, ambition, and enthusiasm. To summarize the failures of large corporations in simple and general terms for reasons that now seem too obvious is untrue, biased, and misleading to the uninformed.
Big companies fail not for a single reason or a trend. The root causes of collapse are often more complex than we think. Just because the CEO is too stupid to lead the business well, we can't recognize the real reasons behind the failure, and we can't learn its lessons.
In fact, every business model has its day of failure. We need to find the real reason for the failure in order to try to avoid making the same mistake in the future.
<h2>Bestsida: Behind the typical failures</h2>
Blockbuster ENTERTAINMENT INC (formerly Blockbuster Entertainment Inc.) is an American home entertainment provider that started out as a rental video and later expanded into streaming, video-on-demand and theater industries.
One of the most popular gas bags that bricklayers like to criticize is Baishida. In their eyes, the failure of Blockbuster is a typical case: in the process of the gradual rise of Netflix, it failed to perceive the threat it faced, and only made a profit by making users who did not pay high late fees on schedule, and in the Internet era, it failed to form an effective strategy. Ultimately leads to the failure of the business. Then, the industry giants inevitably fell into chaos and eventually went bankrupt.
But the reality is much more complicated, interesting and disturbing. The explanation given by Bestv's former CEO, John Antioco, in the Harvard Business Review, was that although at first, Best Western felt that the Netflix market was relatively niche and did not pay attention to them, his team soon began to develop a new strategy, stopped charging a large amount of late fees, and began to invest in online platforms.
The top management came up with a feasible strategy, but it could not control the resistance within the company, and finally the strategy could not be implemented smoothly.
Finally, the team developed a strategy to counter Netflix, launching the same service, Total Access, to grab market share: let consumers rent videos online and return them in physical stores. Subscribers quickly picked up, and it wasn't long before subscribers grew faster than Netflix.
And then what? The situation took a sharp turn for the worse: As investors saw the plan costly (about $400 million), the chain owners feared that their business would not work out and brick-and-mortar stores would be eliminated. As a result, there are more and more contradictions within the enterprise. Finally, in 2007, Antioch abdicated after a dispute with chairman Carl Icahn over salary, and his successor, Jim Keyes, reversed his strategy to focus on retail, and three years later, the company went bankrupt.
Notice that the reality is still very different from the brick case. In the failure cases in the mouth of the brick family, the top management seems to be foolishly only concerned about their existing interests and do nothing in the face of challenges. But the reality is far from being so simple, and the top level of Baishida has actually taken action, and has come up with an effective strategy and acted in time. However, due to contradictions within the company and poor coordination, the strategy was reversed, which led to the ultimate failure of the enterprise.
<h2>Does Kodak really dismiss digital photography? </h2>
In 1975, a young engineer in Kodak, Steve Sasson, invented the digital camera. In the beginning, digital cameras were nothing magical, weighing 8 pounds (3 to 4 kilograms) and an image quality of just 0.01 megapixels (today's iPhones can take 12 megapixel images). So his estimate at the time was that it would take 15 to 20 years for the technology to mature.
The bricklayers will appear at this time to say: of course, what happened next is easy to predict, because Kodak is a stupid big company, like an ostrich, burying its head in the sand, failing to realize that this was the point of technological transformation at that time, and did not invest in the research and development of digital photography. So the market rookies quickly occupied the market and blossomed everywhere, but Kodak declared bankruptcy in 2011 and could only withdraw from the stage of history.
However, the truth is not so simple. Kodak actually has a real investment in the development of digital photography. Kodak's EasyShare product line was the hottest product sold in its time. Kodak also invests heavily in the printing quality of digital photography. The problem was that Kodak focused on improving the quality of film, and the film market disappeared completely.
In fact, looking back at the past from the present point of view, it is not easy to say that kodak can use what measures and strategies to change history and change destiny at that time. The only business that has profited from the development of digital photography seems to be Facebook. And Kodak's development of a new competitive advantage from social networks does not seem to be feasible. The most likely thing is to start a completely new business that replaces the original source of cash flow. To make it, it is easier said than done.
Now Kodak is still here, the business is mainly to provide imaging services for enterprises, I heard that it has attracted more and more customers.
<h2>How Xerox lost its bright future</h2>
In the history of technological development, the most "legendary" is the story of Jobs and Xerox. Xerox was a major company in copy management and processing technology in the United States at the time, making a large investment in Apple, and Jobs also had the opportunity to contact Xerox's PARC Institute. After seeing Xerox's prototype Alto, he decided to develop a new computer with a graphical user interface and made a Macintosh, but what about Xerox? Got nothing.
However, the story of the giant and clumsy Xerox being taken advantage of by young people in the eyes of bricklayers is not so simple. In fact, in the late '60s, Xerox, like Kodak, found itself facing a new trend. Xerox's platform is based on highly profitable photocopiers, but they know that there is no future, so Xerox also wants to build a "future office".
Xerox products include printers, copiers, digital printing equipment, and related services and supplies. Rochester, New York, is the birthplace of Xerox and remains Xerox's primary office location.
Bricklayers like stories that are simple and clear, with thick lines of logic, because such stories are very direct in conclusion. If you believe what they say and think the leadership of Bestsea, Kodak, and Xerox are all stupid, then the answer to the challenge is simple, as long as you're not as stupid as they are.
Xerox's response is Xerox Star, a very advanced system. Unfortunately, if it is only used to automate the secretarial work, the cost of the system is too high, and it will take a decade for the cost of hardware to come down, the software application ecosystem to fully take shape, and Xerox's vision of the innovation office to be realized.
In 1981, Xerox released a workstation product: the Xerox Star. This is the world's first computer with a commercial GUI interface, it has a bit screen, a graphical interface, a mouse, and access to email.
In the Brick House version, the Xerox case does not mention an important point - the PRAC Institute has actually fulfilled its mission. Not only that, but it also saved Xerox from a Kodak-like bankruptcy. Although Xerox's market was seized by Japanese rivals, the smaller Canon and Ricoh, a component of the Star system, the laser printer, brought a lot of revenue to Xerox and became Xerox's cash cow, which is now constantly evolving. Moreover, Xerox has made tens of millions of dollars in costs by registering technology patents, and in addition, it has made a lot of money in its investment in Apple.
Bricklayers like simple, straightforward, logical, single-line stories because the conclusions of such stories are straightforward. If you believe what they say and think the leadership of Bestsea, Kodak, and Xerox are all stupid, then the answer to the challenge is simple, as long as you're not as stupid as they are. However, if you dig deep into the background of the story and find more clues, you will find that the reality is not so simple at all, and some of the lessons learned in the "case" are not true.
Every failure in history, we can learn from it. The story of Beststar shows that strategy alone is not enough, managers must also effectively manage internal relationships so that strategic plans are not disrupted; Kodak's story shows that it is not enough to respond, but also to be prepared. Digital photography may never be able to replace film, and Kodak had 20 years to open up new markets, but it didn't.
The case of Xerox is even more interesting, Xerox did create the future in the end, but it failed to realize the full potential of its technology because its target market was wrongly positioned. If you develop new, differentiated technology, you should perhaps target the market for a new group of people, rather than the original old customers. In this case, the initial new market is mainly made up of kids and enthusiasts, not businesses.
Most importantly, these stories give us a glimpse into how difficult and complex it is to manage a large enterprise. The answers to many questions are not simple. If someone says that it is easy to reverse the fate of a million-dollar large enterprises and bring large enterprises back to life in adversity, then you have better keep an eye on them.
Produced by the compilation group. Editor: Hao Pengcheng