Entrepreneurial Strategy

A Company's Resilience

Entrepreneurs can learn a great deal from the demise of some of the largest firms due in part to the emergence of new firms and new technologies. These disruptors have had a profound impact on some of the largest and most successful companies in the country.

Out with the old and in with the new. Companies come and go all the time, but what causes large, established firms to go under and what can entrepreneurs learn from them?

The following companies either filed for bankruptcy in 2009 or are near financial collapse. Some of the most well known businesses that have endured decades in business are now being terminated by emerging businesses and newer technologies.

1. Blockbuster
2. Circuit City
3. Ritz Camera Centers
4. Borders

While these firms have been the victim of financial collapse for several different reasons, one common underlying theme among them was their inability to successfully create a new value proposition for their customers in the face of emerging disruptive firms and technologies. Rather than create or reinforce their value proposition, they all countered the emergence of a new business model or a new technology, by trying to copy it.

When NetFlix emerged with its mail order movie rental, Blockbuster tried to copy NetFlix's mail distribution model. NetFlix invested mass amounts of time, strategy, and money into building an efficient movie rental distribution system. Blockbuster excelled at brick & mortar retailing, not mail order distribution systems. You cannot change your infrastructure overnight and compete with a firm that started with a much more advanced system than you are capable of building in time to compete.

The same is true for the all of the firms who have struggled recently. New companies emerge daily and with them bring new business strategies that offer greater value to your customer. It is difficult for established firms to be nimble and respond immediately to new business models and technology innovation, however trying to copy that innovation as your sole business strategy is a losing proposition.

As an entrepreneur, you can learn a great deal from the demise of these firms. Seeing how such disruptive business models and technologies can quickly bring a large competitor to its knees, you have the opportunity to study how you can do the same in your industry. Slight changes in distribution, as we saw with NetFlix, can alter the landscape of an industry.

Do not fret larger competitors when starting your business. Challenge yourself to be the next great disruptor by asking yourself what strategy you can implement that would drastically alter your larger competitor's ability to compete tomorrow? Digital film technology crumbled Ritz camera and with it, new companies built their strategy around online photo storage, custom digital photo books, and more.

The demise of established firms caused by trying to copy the value propositions of emerging firms serves as a reminder to entrepreneurs that your own value proposition should be different enough and strong enough that customers take notice and that competitors would be challenged to do as well as you. Find one element in a competitor's business model to focus on and do it better then them and you will give yourself a strong shot of competing successfully.

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