It looks like the end is near for Blockbuster. Time for some business coach training on the subject…
On Friday, Blockbuster announced that its revenue dropped to just $788 million versus $982 million a year ago and second quarter losses were a massive $69 million –32 cents per share –as compared to 2Q 09s’ $37 million, or 21 cents per share. There was more bad news for investors. The company announced that it will soon liquidate its assets. Not surprisingly, Blockbuster shares tumbled almost instantly by 20 percent.
This story holds two critical lessons for business coaches.
Over the past few years Blockbuster has scrambled desperately to stay afloat in the midst of overwhelming pressure from competitors such as Netflix and Redbox. Blockbuster is now staggering under a debt load of more than $1 billion.
So how did this U.S.-based entertainment industry titan get into such a mess? The answer is simple enough. The company didn’t have a wide enough “moat.”
Warren Buffett has taught investors over the years to look for economic castles protected by unbreachable “moats.” That’s because, in centuries past, kings protected their castles with moats. When raiders attempted to take the castle, they had to cross the moat under the withering fire of archers and catapults. The wider the moat, the tougher the task. Buffet likes a business with a sustainable competitive advantage that competitors have a tough time crossing. He likes managers with a commitment to ever increasing market share.
Blockbuster used to have this but lost it because they failed to see the sand shifting under their feet from the technological advances that made their business model fundamentally obsolete.
As a result, Blockbuster has followed the classic pattern of companies under siege by disruptive players with better ideas and better technology. Google the phrase “Blockbuster sues” and you’ll see the public record of the following process unfolding:
(1) the incumbent battles its competitors in court in an effort to marginalize them (2) as it continues to lose market share it tries to merge, or be acquired by its competitors (3) at last, the incumbent succumbs to inevitable market forces and gives up the ghost
What ultimately makes a company great is width of its moat: the depth, breadth, and sustainability of its position in the marketplace. Companies with wide moats can weather deep recessions and depressions, wars, and radical governmental policy changes. They thrive and continue to grow more formidable over time.
As a business coach, your #1 task it to help your clients understand how their industry is shifting like the sand beneath their feet, thinking soberly about the durability of their competitive advantage and identifying any emerging threats so they can quickly adapt.
As we can now see, Blockbuster was NOT that kind of company. Is yours? Are your clients? That’s the first lesson for business coaches from the Blockbuster debacle. In my next blog post, I’ll explain the second.
But for now, make sure you take this opportunity to teach your clients to avoid Blockbuster’s fate. To accomplish this, you must help your clients develop their “Unique Selling Proposition.” What unique innovation will you and your clients use to set yourselves apart from the competition?
To see how the “Unique Selling Proposition” fits into a comprehensive coaching process, check out my business coaching system — the world’s first complete system for building a 6-figure business coaching practice by helping business owners grow their businesses from start-up, through market domination, business systematization, succession planning, and re-sale.
Hi Eric, I wanted to take a moment to express my gratitude for being a part of Coaches Coach. It's...