Fast-Forwrding Blockbuster

What name comes to mind when you think of renting movies on the weekend? Maybe it's Blockbuster. If so, you're not alone. Although Blockbuster is still the world's largest video rental company, with more than 5000 stores in the United States, the past few years have not been good ones for this company. Blockbuster has posted losses in 9 of the past 11 years, closed hundreds of stores, and lost many customers to Netflix. The whole business of renting DVDs is changing, and Blockbuster is making changes in order to remain competitive.

One of the most important changes was hiring new CEO, James W. Keyes. As the former CEO of 7-Eleven Stores, Keyes faced a similar situation as the convenience store industry went through a difficulty transition in the 1980s and 1990s. By 1990, 7-Eleven was in bankruptcy. However, by 2004, his company had achieved 36 consecutive quarters of revenue growth and a profit of $106 million. How? What Keyes did t 7-Eleven was to rely on numbers. He implemented an approach in which quantitiative data collected by each store dictated the product mix carried in that store. For instance, a store in one neighborhood might carry more Corona compared to another store across town that stocked more Coors Lite An enthusiastic believer in the power of data, Keyes took into account all kinds of factors, calculating, for example, which doughnuts sold best in hot and cold weather.

Now Keyes is doing the same for Block. Among other things, he hopes to customize titles at each store based on rental patterns. Although selling video rentals may be different than selling Slurpees, Keyes is unfazed. He says, “I think an internet company, even if it is selling a service, is still another form of retail. It comes down to the ability to understand the needs of the customers and satisfy those needs in a way tht is better and different from the competitors.”

Discussion Questions

1. Mr. Keyes obviously is a big fan of the quantitative approach. How might principles of scientific management be useful to Blockbuster?

2. How might knowledge of organizational behavior help the company's frontline store supervisors manage their employees? Would Mr. Keyes and other top managers need to understand OB? Why or why not?

3. Describe blockbuster as a system.4. What do you think Mr. Keye's quote (last sentence in last paragraph) is saying? Do you agree or

disagree with his statement? Explain.