Netflix didn’t kill Blockbuster. Blockbuster did.

Purpose beats profit. Especially with change on the horizon.

Everyone has an opinion about Blockbuster’s failure. Every consultant and analyst offers answers for their decline, decrying all the poor strategic decisions. “Blockbuster failed because they didn’t embrace new technology.” “Blockbuster didn’t accept streaming until it was too late.” “Blockbuster clung to old business models.” These sound like the right lessons to take away from the company’s crash. But they’re just the obvious problems. They’re the errors we can point to and think, We would never do that. We’re smarter than that. It makes us feel safe to point out what we perceive as ineptitude: If all Blockbuster did was make bad choices, we can just make different ones.

But the people at Blockbuster weren’t stupid. They knew the market was changing, that their model was outdated, and that they needed to pivot. They had a lot of smart, innovative people working to solve their problems. They had an almost limitless war chest to dip into and they even had all the right ideas for how to do it. So the question is … why couldn’t they execute the pivot? Why did they make the wrong choices when the moment came?

Put simply: Blockbuster’s staff didn’t have a meaningful shared purpose.

The Coming Storm

In 1996, Viacom had just purchased Blockbuster and they knew it needed to be reinvented to stay relevant in the ever-changing media world. How would Blockbuster keep up with the times? How would they respond to Hollywood’s lackluster box office sales and television’s increasing competition for their customers’ attention?

Like a typical corporate overlord, Viacom decided to gut it. Against the wishes of two-thirds of its employees, they moved Blockbuster’s headquarters from Florida to Garland, TX, and replaced over 500 positions with new staff members, including a new CEO. This might have made sense to anyone who thinks businesses are spreadsheets and employees are just entries that can be rearranged and deleted. (We are sure someone, somewhere, in some boardroom, said, “What we need is fresh blood.”)

But great leaders know that people are not numbers; people have complex desires. They want paychecks, certainly, but humans also naturally want a sense of purpose, a feeling of belonging within their group, and opportunities to put their skills to use for a greater cause — even risking their security to take a stand for their beliefs.

Blockbuster’s panicked response to the changing horizons of their industry offered their employees none of this. They may have needed new talent, but the only guiding purpose was profit and survival, which drove employees to fight each other for status rather than fight side-by-side for Blockbuster’s success. There was no shared identity or transcendent purpose to bring the old guard and the new together; the company set off into turbulent waters with hundreds of talented new leaders who had no reason to trust each other and no world-changing ideal to bring to fruition together.

Without a shared identity centered on a radical and meaningful purpose, a culture will default not to “best idea wins,” but “my idea or bust.” Employees fight for their personal interests and not for the shared beliefs on which the company operates. When the storm clouds brew on the horizon, individuals and teams will turn on each other, and everyone will fight for the helm of the endangered ship.

Without a shared identity centered on a radical and meaningful purpose, a culture will default not to “best idea wins,” but “my idea or bust.”

A classic example for how these internal politics blocked innovation was the boardroom battle that took place between Carl Ichan and John Antioco during Blockbuster’s most crucial moments.

John Antioco almost beat Netflix anyway.

John Antioco was a born leader. He was the sort of CEO who was revered in corporate culture for his ability to turn a company around. When he came to Blockbuster after the move to Dallas, he might have had a difficult job cut out for him, but he still had a lot of the right ideas. He invested $200 million on an initiative to remove late fees, and $200 million in a new online streaming initiative. Even Netflix was getting worried, and tried to engage Blockbuster in a peace treaty partnership.

Procedural efficiency trumped the pride people took in their jobs.

Unfortunately, like all the ideas that Blockbuster tried during its slow march to bankruptcy, neither the Netflix deal nor Blockbuster’s online business ever materialized because of the political fight that Antioco had to wage with hostile investor Carl Icahn. Antioco was successfully pushing the online model, but Carl Ichan, an activist shareholder, didn’t trust him. Instead, Ichan launched a smear campaign to convince the rest of the Blockbuster board that Antioco was overpaid and was taking Blockbuster down the tank. So instead of innovating together and taking the necessary risks to adapt to a new market, Carl Ichan hip-checked his own best player, and Antioco was tied up dealing with internal politics rather than leading the organization. They cancelled each other out, and eventually the board fired Antioco, blocked his initiatives, and hired a new CEO who leaned back into a heavily retail-focused strategy.

Humans want more than money. We want meaning.

The fight between the leaders replicated itself down the chain of command as intelligent and innovative individuals struggled against each other, never finding common ground. After its relocation to Texas, Blockbuster moved like molasses, with flailing attempts that always ended in directional changes. Every new project was stopped or neutered by internal disagreement; acquisitions were abandoned; only the slightest variations of their model ever came to fruition.

One former employee commented on this period on Indeed: “The culture was very different during that time as people were very reactionary and out for themselves. There was a lot of second guessing tried and true practices and therefore the stability was no longer there.”

Even in-store employees lost their sense of purpose. Many film buffs once took pride in building relationships with customers, offering personalized recommendations and making the in-store experience enjoyable. Former executive Jonathan Salem Baskin noted that, as company strategy shifted under conflicting leadership, the chain began “running its stores … and treating its employees … like a convenience chain.” Leadership told store employees to try to sell more candy and trinkets, and focus less on the movies. Procedural efficiency trumped the pride people took in their jobs.

This is what so many analyses miss when diagnosing Blockbuster’s downfall: Blockbuster’s own culture of survival and self-preservation destroyed their ability to survive — from the inside out. Everyone can see that they failed at a macrocosmic level, missing opportunities to expand into new markets and ride new technological waves.

But on a deeper, more fatal level, Blockbuster failed to give its employees what humans naturally desire: a core purpose that inspires people to risk their survival for the sake of a greater cause. The fundamental human drive isn’t profit; it’s meaning. By staking their culture on basic survival, Blockbuster gave no meaning to its employees — no rallying cry to make the world greater through entertainment, no opportunities to innovate around a shared love of stories. Without purpose-driven work, everyone from executives to store managers will abandon ship to save themselves when the going gets tough.

A culture based around meaningful, world-altering beliefs and ideals can bring diverse individuals together to create a wildly innovative, dynamic, risk-taking tribe.

Culture weathers storms.

The reality is that storms hit every company and every team. A new technology upends the market forever. A new set of regulations are put in place that completely reshape the game. A global pandemic breaks out and the entire world goes on lockdown. Whatever it is, operational reserves and tight procedures aren’t the only thing you need to weather the storm — you need a rock-solid culture that is built on more than virtue-signaling mission statements. Blockbuster leadership didn’t stand for anything bigger than profit, and it had no values that transcended different interests and experiences to bring the old guard and the new together.

The irony is that, when motivated by more than profit, companies usually stand to profit. A culture based around meaningful, world-altering beliefs and ideals can bring diverse individuals together to create a wildly innovative, dynamic, risk-taking tribe. It’s not surprising that the competitor to beat Blockbuster was Netflix, which is famous for founder Reed Hastings’ radical commitment to culture.

Blockbuster’s blind spot wasn’t their flawed business model; they didn’t fail simply because they didn’t adopt new technologies or “pivot fast enough” — it was their culture, or more specifically, the culture they failed to create, that held them back from adapting. Their tunnel vision for survival limited their employees’ motivation to innovate together.

If you are wondering whether or not your company or organization will stand the winds of change and the test of time, ask yourself, what is the shared mission, identity, or set of values holding your team together?

Are you offering your team a deeper purpose than mere profit?

The business landscape is changing by the day, and we at Sherwood Fellows believe you have what it takes to respond to this moment.

We’ve put together resources for people who want to lead families, businesses, communities, and themselves.

There’s the 7-day Tribal Transformation for leaders who want to change their culture from the inside out. Each day of the course will walk you through every step of tribe-building, with case studies that show you exactly how to go from personal belief to team transformation.

We have our proven Core Beliefs Session to help individuals or teams get in touch with the purpose that fuels them. In just 2 days you’ll emerge with a Manifesto of values that can guide a transition, establish a family culture, or define a brand.

You can also take our Leadership Archetype Assessment to find out where in the leader’s journey you are — and where you need to go next.

This and more is available at A Tribe of Me.

A creative agency building tribes and moving mountains for brands with a mission. Drop us a line at sherwoodfellows.co