![]() Unfortunately, there are no definitive answers. The structure of those unseen connections, their context and how they relate to our objectives increasingly makes the difference between success and failure. We need to stop acting as if there is a recipe for business-like a cake or a casserole-and start thinking in terms of how factors are connected. Second, he failed to construct a network that could carry his ideas of change throughout his own organization.įor all the excitement surrounding online social platforms such as Facebook and Twitter, we really haven’t scratched the surface on the networks we encounter in real life: The networks of consumers that make up our brands and industries as well as the organizational networks that determine how things get done-or don’t get done-in our enterprises.Īnd it’s imperative that we start thinking about them more seriously. First, he failed to realize how quickly a niche idea could snowball into a viral cascade. So the inability to understand the networks that would determine his fate struck John Antioco twice. Things might have turned out differently. To this day I don’t know what would have happened if we’d avoided the big blowup over Antioco’s bonus and he’d continued growing Total Access. Keyes felt the company couldn’t afford to keep losing so much money, so we pulled the plug. Blockbuster went bankrupt five years later. ![]() Keyes was named CEO and immediately reversed Antioco’s changes in order to increase profitability. Antioco lost the board’s confidence and was fired over a compensation dispute in 2005. He pointed out that the costs of Antioco’s changes - about $200 million to drop late fees and another $200 million to launch Blockbuster Online-were damaging profitability.Įventually, an activist investor, Carl Icahn, began to question Antioco’s leadership. While he convinced the board to back his plan, one of his lieutenants, Jim Keyes, led a rear guard action. Once John Antioco became convinced that Netflix, and to a lesser extent Redbox, was a threat, he used his authority as CEO-as well as the credibility he had earned by nearly doubling Blockbuster’s revenues during his tenure-to discontinue the late fees that annoyed customers and invest heavily into a digital platform to ensure the brand’s future.Īntioco’s article in Harvard Business Review describes what happened next. Yet how he went about doing that sealed his, and ultimately Blockbuster’s, fate. It is not clear whether Antioco’s team did such an analysis or not, but by 2004-six years before the company went bankrupt-he sensed that Netflix had become a significant threat and sought to change his firm’s policies. ![]() Still, you can use conventional marketing analysis to evaluate whether an idea is spreading to new groups or just growing within a niche. Duncan Watts, a pioneer in network theory, is quick to point out that social dynamics tend to be idiosyncratic and it’s not always clear exactly where thresholds exist. Unfortunately, this effect is devilishly hard to quantify. As each threshold is past, the next group becomes more likely to adopt the new idea. Once they’re on board, those in the early majority begin to feel comfortable giving it a try. While ideas usually take hold in small niches of innovators, they can often spread to early adopters, who are only slightly more resistant to join in. The best way to understand thresholds is to look at the diffusion of ideas model formulated by Everett Rogers in the 1960’s. Under the right conditions, a viral cascade can ensue. As those who are more willing begin to adopt the new concept, the more resistant ones become more likely to join in. For any given idea, there are going to be people with varying levels of resistance. Network scientists call this the threshold model of collective behavior. And as more of their friends raved about Netflix, the laggards tried it too, fell in love with it and convinced people they knew to give it a shot. Some were reluctant at first, they actually liked being able to browse movies at the store and pick one up at a moments notice, but others jumped right in. ![]() Still, customers loved the service and told their friends. People couldn’t just pick up a movie for the night on their way home. Moreover, because its customers received their videos by mail, the service was somewhat slow and cumbersome. Without retail locations, it was hard for people to find it. While Netflix’s model clearly had some compelling aspects, it also had some obvious disadvantages.
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