The reason why your customers walk away? Just like these firms, you don’t understand them

(3) Blockbuster

Ask anyone you know why the Blockbuster collapsed and they’ll tell you in one word: Netflix. Blockbuster’s demise, many claimed, was due to online video streaming technology rendering the company’s business model obsolete.

But the truth may be very different. In 2006, Netflix’s Hastings asked Blockbuster to acquire Netflix – and Blockbuster turned him down. By 2007, still unable to compete against Blockbuster, Hastings received permission from his board to begin merger talks.

However, a sudden boardroom dispute resulted in a change of CEO for Blockbuster. Newly instated Jim Keyes didn’t seem to understand what business Blockbuster was in and started changing strategies. Within 18 months he had lost 85 per cent of the capital value of the company. Within two years, he lost it all.

It became the sort of company that charged outrageous sums for late fees and cared little for what its customers wanted the most. And after Blockbuster attempted to compete directly with competitors like Netflix, consumers had decided they didn’t want to give Blockbuster their business – this was especially so in a time where few people had the many to pay such fees.

Undoubtedly, when a once successful company loses touch with the purpose that made it great and doesn’t put adequate time aside to see whether people would be able to pay for the product in the first place, disaster follows. 

Eight of the most expensive mistakes in business history

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(4) Borders

Family duo Louis and Tom Borders built a bookselling empire that used technology to track inventory and provide insight into sales trends. But it wasn’t long before consumers started altering the way they shopped for, and enjoyed, books. To put it simply, Borders wasn’t interested in modifying its business model to accommodate them.

While it echoes the same mistake made by Blockbuster, what sets the tales apart is that the team decided to ignore the rising trends around it. It stuck to its roots and while consumers were increasingly headed to the Internet to shop for books and to readers such as Kindle, Borders placed much stock on its brick and mortar stores. Worse yet, it continued to build more stores.

Here’s the clincher. When it finally got onto the Internet, instead of opening its own online store though it let Amazon sell its products – with Borders’ technology only serving to further boost Amazon’s success. Borders’ slow response to the digital age sealed had sealed its fate. 

Essentially, if you intend to keep your customers and earn new ones you must constantly evaluate your core competencies to ensure they’re relevant.

It takes a worker in Britain five days to complete a task that an employee in France would complete in four. Andrew Yates argues that deeper customer interaction will replace productivity to drive growth, so more companies need to get on board with systems of engagement.

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