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>I found some applicable information for a variety of >businesses. In most mature business categories, >there's a “Blockbuster”. At least 1 big business >dominates a big, profitable business category. >Dominating businesses usually make their categories >less profitable for the rest. > >It's still very possible to knock out the dominator. >Netflix almost did it in video rental. >www.forbes.com/2008/05/03/blockbuster-netflix-walmart_l >eadership_clayton_in_sa_0503claytonchristensen_inl_prin >t.html >Depending on the web browser you use, you may be able >to highlight this link (above), then right click it & >choose to use a search engine to find it. In Firefox, >it's “Search Google for (the term)”. > >Here are some key excerpts- >------------------------------------------------ >Blockbuster had its hands full fighting against >Netflix, whose subscription-based online DVD rental >offering is highly disruptive to Blockbuster's core >offering of renting individual DVDs in physical >stores. One key difference: Blockbuster made the most >of its profits by charging late fees. Netflix has no >late fees. > >In 2004, Blockbuster began fighting back in earnest. >After a couple of turns, in 2006 it introduced what >appeared to be a compelling counter-attack--its "Total >Access" package, which let consumers get DVDs in >stores or via the mail. > >There's just 1 problem with Blockbuster's response: It >doesn't appear to have figured out how to make its >online offerings as compelling or profitable as >Netflix's online offering. Blockbuster's surging >profits came not from growth in its new business, but >from cutting costs (including advertising), raising >prices & generating more sales in Blockbuster's retail >locations. While it continues to play in the online >arena, its strategic focus seems to be to try to >squeeze as much life out of its core model as possible. > >While Netflix & Blockbuster still need to figure out >how to win as the battle shifts to video on demand, >Netflix appears to have decisively fended off >Blockbuster's advances. >The reason Netflix won this battle is its disruption >is rooted in a different business model than >Blockbuster's. > >Business models are powerful sources of competitive >advantage because they're very difficult to copy. You >can't simply mimic superficial features & >functionalities; you have to find ways to replicate >structures, operational processes & relationships. > >Netflix has optimized around its online model. It has >been experimenting & fine-tuning this model for more >than a decade. Blockbuster tries to stand astride 2 >distinct business models. It's hard to optimize what >appears financially to be secondary to the core. > >It always appears logical to leverage what you have. >But the quick path isn't always the best path. >Incumbents fighting back against attackers with >different business models have to be willing to >"forget" critical pieces of their core business. If >not, they'll end up with a quick but ultimately >unsatisfying response. >------------------------------------------------ >You need a competitively advantageous business model, >discovering it is easy enough, when you know how. > >Fine-tuning, maintaining & upgrading it requires more >time & skill; this is in addition to what's needed for >other business management & to work in your business. > >Use small tests to find methods & models a specific >niche of consumers responds positively to. You can use >temporary promotions to gage responses & potential >profit. When you find a short promotion people like & >is profitable, do it again for a long period. If it >still works well, do it again longer until you're sure >it's solid enough to fully implement. > >Why does Netflix emphasize “no late fees”. 1- People >dislike paying late fees. 2- The category >dominator—Blockbuster—charges late fees. 3- >Blockbuster's financial success depends on late fees. > >1- Eliminating what people dislike can be very >powerful attractions. > >2- Differentiation is critical in business success. >Give people reasons to choose you instead of >competitors. A flanking attack is competing, but it's >not head-to-head. You can safely bet every big >competitor has a bigger, harder head on you do. Don't >attack its head, attack from 1 side—its flank. >Competitors are ready & well-equipped for head-on >attacks. Flanking attacks are harder to prepare for & >defend against. > >Competing head-on/head-to-head is offering what >another business offers & in the same way. Netflix >avoided head-on competition by not opening stores & by >not inflicting late fees. (Late fees would be a >challenge anyway because movies were delivered & >returned in packages. Delays may not have been >customers' faults.) > >Flanking is offering what's essentially the same >product, but adding or eliminating something. Netflix >did both by doing the same thing. Not charging late >fees added the benefit of unlimited rental time. It's >definitely more efficient to differentiate in 2 ways >by doing 1 thing. >According to Jay Conrad Levinson, Guerrilla Marketing >“is a body of unconventional ways of pursuing >conventional goals. It is a proven method of achieving >profits with minimum money.” > >I advise you to use unconventional ways to attack big >competitors' flanks. > >3- Every dollar a competitor gets makes it stronger & >you weaker. Every dollar you don't get, makes you >weaker & makes a competitor stronger. When it's >practical & it fits your differentiation, attack how >big competitors get their money. By blocking their >incomes, you'll weaken them. They're threatening you, >so they deserve to lose some income—in ethical, >lawful, competitive ways. They're doing it to you! > >Successful flanking often depends on attacking the >weakness in a competitor's strength. It's hard for >firms to eliminate their strengths because if they do >they become weak, even if it's temporary. Big >businesses take longer to change because they have >more money & egos invested in everything they do. >Another example of attacking the weakness in a >competitor's strength is- Wal-Mart's Supercenters need >to sell huge volumes, which requires big stores & many >consumers. Even if it had more employees, it'd be too >expensive to personally attend to each customer, >especially when it has such low prices. To do this, it >needs to stock many products many people are familiar >with so they can buy without asking questions. > >You can attack this weaknesses by offering less >familiar, newly released products. Have highly >trained, friendly, patient employees who are >articulate & like to teach. Have a small store people >can walk through without being lost. > >We can debate Netflix's radio commercials, but since >Netflix is very successful, I won't get into that now. >Except for this short note-- I advise you to focus on >benefits you offer when you advertise. Using it's game >show motif, Netflix doesn't focus much on benefits, >But by offering movie rentals, its business is >providing entertainment & its commercials are mildly >amusing. Maybe this is why its commercials (seem to) >work. > >Dennis S. Vogel >A thriving business is only possible by offering what >competitors don't have & if enough people want it. >Give them compelling reasons to buy it from you. To >help you do it, I have free marketing advice & >information here - >http://www.thrivingbusiness.lakefield.net/ >http://www.voy.com/31049/

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