Blockbust & the Challenge Culture
- 5 days ago
- 5 min read
In 2004 Blockbuster was at its peak.
9,094 stores around the world (over 800 in the UK), 84,300 employees, 65 million customers and $5.9 billion revenues.
A decade later it was all gone.
Blockbuster was founded in 1985.
Their stores were spacious, clean and welcoming, with a wide range and availability of movies to rent.
They developed the best technology to optimise inventory and make the process pain free for customers.
With a great foundation they were able to aggressively expand and grab as much of the video rental market as possible.
Between 1988 and 1989 they were opening a new store every 17 hours.
They rapidly became a monopoly.
But things started to get shaky with the introduction of DVDs.
The smaller and more portable format opened the space to new disruptive challengers.
Netflix launched in 1997 offering DVD rentals by mail.
Redbox launched in 2002 offering DVD rental from kiosks.
And they started to cut away at Blockbuster’s dominance.
Blockbuster was slow to react, only starting to offer DVDs by mail in that peak year of 2004 and a kiosk service in 2009.
In 2007 both Netflix and Blockbuster launched streaming services.
But unlike Netflix who saw streaming as the future and were focused on switching fully away from DVD rentals, Blockbuster launched tentatively while trying to maintain their core revenue stream.
Blockbuster struggled to adapt and innovate and it was their downfall.
They filed for bankruptcy in 2010 and by 2014 the stores were all closed.
Challenge Culture
"You build on failure. You use it as a stepping stone." - Johnny Cash
In 1994 an Englishman with a background in Human Resources roles joined Blockbuster in Europe.
Over the following decade Nigel Travis worked his way up to become the COO, before leaving the business at its peak.
We often learn the most when things go wrong, and Nigel Travis had that opportunity.
For the next four years he was the CEO of Papa John’s, watching as Blockbuster’s fortunes faltered.
And in 2008 he joined Dunkin' as the CEO where he watched Blockbuster's final collapse.
It gave him the perspective to consider what had contributed to Blockbuster’s fall and how he could ensure that his new organisations didn't make the same mistakes.
He realised that at Blockbuster, “we did not challenge ourselves hard enough or listen attentively enough to questions about our strategy … In the end, Blockbuster completely collapsed and disappeared.”
Because there was no challenge Blockbuster regressed to the status quo, when innovation and decisive shifts were needed.
And the issues built up until they overwhelmed the business.
He realised that he needed to instil a challenge culture, “I strongly believed we had to respond differently by becoming more flexible, more egalitarian, and more able to adapt. The only way to do that was to embrace challenge and encourage pushback rather than reject them. How else will you hear new ideas and improve existing practices?”
An effective challenge culture involves, well those two things:
Challenge: Throughout the organisation everybody needs to challenge the status quo, challenge themselves, their colleagues, and their leaders.
Culture: Those challenges can only happen within a psychologically safe and positive culture.
And if you can create that mix then you’re much more likely to successfully assess the situation, make good decisions and drive through effective solutions.
It would have really helped Blockbuster when everything around it was shifting: “A challenge culture is particularly effective in times of change, and I think we’d all argue that we live in times of unending change. In a challenge culture, people are expected to question the status quo, push back on long-held assumptions, and examine and discuss new ideas and proposals, always looking for more and better information, refinements, and more exceptional initiatives.”
Challenge culture is not a new thing.
It’s been core to some of the most transformational efforts in our society.
Scientific thinking has revolutionised the world because it operates with an intentional challenge culture.
Any new piece of scientific study goes through a rigorous process of peer review by experts in the same field to ensure quality, validity, and originality before publication.
And the dramatic improvements in the safety of commercial aviation is the result of implementing an open challenge culture through the process of crash investigations.
Challenge culture is also something we can introduce at an individual level by creating what Adam Grant, the psychologist and author of Think Again, calls a challenger network:
“I think of a challenge network as the group of your most thoughtful critics who are able to hold up a mirror so that you can see your blind spots and then know what you need to rethink.”
“We learn more from people who challenge our thought process than those who affirm our conclusions. Strong leaders engage their critics and make themselves stronger. Weak leaders silence their critics and make themselves weaker.”
So many stories of great breakthroughs were the result of these networks, from Orville and Wilber Wright's task conflict resulting in invention of flight to Darwin’s extensive network of challengers that helped led him to the discovery of evolution.
Innovative Tension
It's essential to get the right balance of challenge and culture.
Not enough challenge and you lose the creativity and innovation needed to get an idea off the ground or push past the status quo.
The wrong sort of culture and the environment can be stifled by confrontation, or by submissive silence.
You can think of it as a matrix with the Innovation Zone being the place to be operating:
Innovation Zone (High Challenge / Positive Culture)
The ideal challenge culture.
Confrontation Zone (High Challenge / Negative Culture)
A top-down and toxic blame culture focused on relationship conflict rather than task conflict. It’s aggressive and exhausting, forcing people to defend rather than advance their organisation.
Submission Zone (Low Challenge / Negative Culture)
People stop trying because they have been beaten down by a directorial system that punishes initiative. There is no trust, safety, or drive to improve.
Bubble Zone (Low Challenge / Positive Culture)
This is a comfortable environment often mistaken for good culture, but it lacks the friction necessary for growth. People like each other, but consensus and comfort is more valued over truth.
In his book, The Hard Thing About Hard Things, Ben Horowitz describes this balance in startups, “Most business relationships either become too tense to tolerate or not tense enough to be productive after a while. Either people challenge each other to the point where they don't like each other or they become complacent about each other’s feedback and no longer benefit from their relationship.”
But by introducing a challenge culture and challenge networks you, and your organisation, can be the exception to this entropy.
As Nigel Travis learned, “The ability to create a culture of challenge in your organization is essential to survival and sustainability in today’s chaotic world.”
“Only through questioning, pushback, challenge, and debate will you be able to stay relevant to customers’ needs, and sustain yourself. Not only do I understand the truth of this as CEO of Dunkin' but I have also learned it the hard way, in my experience as protestant and chief operating officer of Blockbuster, the now defunct video retailer. As it did at Blockbuster, the lack of a challenge culture can contribute to a company’s demise. It’s an existential issue.”
Nigel Travis retired as the CEO of Dunkin’ in 2018.
And while Blockbuster collapsed, with a challenge culture in place Dunkin’ added 3,300 new stores over the next ten years.
Travis, N., “The Challenge Culture: Why the Most Successful Organizations Run on Pushback”, PublicAffairs (2018)
Grant, A., “Think Again: The Power of Knowing What You Don't Know”, Penguin (2021)
Horowitz, B., “The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers―Straight Talk on the Challenges of Entrepreneurship”, Harper Business (2014)
