David vs Goliath in the Corporate World

In this book - David vs Goliath.. - best selling author Malcom Gladwell explains the story behind David's victory over Goliath very well. It's a fascinating tale about smartness, ego, arrogance, over-confidence and skill. In the famous biblical tale the author explains how a simple shepherd boy - David defeats the giant Goliath in one of the most epic one-on-one battles.

While Goliath is huge in size, is wearing heavy armor on his body and has great skills in heavy weaponry, David by comparison is a tiny boy and only knows how to sling a stone well.

That slinging ability is what David knows best and is what works for him best in the battle. He is nimble, can move fast and can aim the stones taking his time unlike in conventional battles. That becomes Goliath's weakness. Goliath is carrying a lot of baggage, is heavy and cannot move as quickly. And one accurate aim right on the temple of Goliath's forehead is enough for David to win this one-on-one combat. 

An underdog, no one expected to win, comes from nowhere and destroys a formidable opponent. I feel like we have seen this play out many times in real life too. Such a story was played out in America's corporate world a few years back. 

I am talking of Blockbuster vs Netflix.

By mid 1990s, Blockbuster was a huge corporation with around 2,800 brick and mortar stores spread across the globe. It was America's favorite weekend "go-to" for entertainment. People would spend hours finding that great DVD for viewing at home. And of course there was the dreaded "late fee"!

Blockbuster was launched in 1985. Netflix was launched in 1997.

Not many understood Netflix's business model. But it sustained. At first people started getting used to the idea of mail-in DVDs at home. And soon enough moved to on-line streaming as it became more popular around 2008 and super convenient with no question of "late-fees"..

In the meantime, Blockbuster - like the giant Goliath had too much baggage to carry and could not keep up with the nimble "shepherd" Netflix. 

While Netflix was still in early days of its popularity, a meeting was organized between the CEOs of Blockbuster and Netflix. The Netflix guy proposed to Blockbuster CEO that if Blockbuster buys them out for 50 million dollars Netflix in exchange will run Blockbuster's digital service.

Blockbuster people smirked and gave them a cold shoulder in that meeting. They not only rejected the offer but they made amply sure to convey it to them on their face, that Netflix was just a small fish and a flash in the pan and they are lucky they are even sitting in the same room as Blockbuster folks. 

Netflix people including the founder felt humiliated and went back home. But soon enough they focussed on what they knew best. They started "sharpening their slinging abilities"..and put all their horse power behind making Netflix the best online stream service. In other words instead of fighting the giant on his turf, they harnessed their "Sling skills" and waited for an opportunity to beat the Giant.

Cut back to current day. Today Netflix is a 208 billion dollar behemoth (50 million eh!) and Blockbuster has collapsed after filing for a bankruptcy in 2011. There's one last remaining Blockbuster store still in Bend, OR.

If there ever was a David vs Goliath story in the Corporate world, the Blockbuster vs Netflix story would in my opinion check all the boxes. 

In most David vs Goliath stories one common factor is hubris. The giant invariably becomes arrogant and has excessive pride in his own self and falls prey to his own hubris. Goliath assumed David was weak little boy who could be easily muscled out in a battle. All David knew was slinging a tone accurately. He was light weight, nimble and fast. Goliath was slow, big and arrogant.... Rest is history.



Comments

  1. Sometimes this story plays out even if the "Goliath" is not arrogant - they are just unable to change quickly enough to the new paradigm because the business model does not permit it. In this example even if Blockbuster had bought out Netflix, they would have probably stifled out the innovation on the digital side through slow decision making and bureacracy.. These large companies sometimes are immobilized due to their cost structures and business models that are suited for the brick & mortar world.

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