Two days ago, Blockbuster announced that it will close all of its remaining approximately 300 U.S.-based stores (news link). This has been a long time in the making, and there is a lot you can learn from this. Prior to Netflix, Blockbuster thrived due to its use of "bad profits" (a term from Fred Reichheld's book, The Ultimate Question, which introduced the concept of the Net Promoter Score, NPS). Bad profits are a highly disruptive source of negative word of mouth. Blockbuster's bad profits were, of course, late fees. Everyone I know that was a Blockbuster customer - including myself and my wife - hated late fees. You knew Blockbuster "got you" and you felt that you "only had yourself to blame" because you were the one that was late on returning it. Sometimes you would plead with the in-store associate to have mercy on you. It became the primary source of Blockbuster's profits. Anytime bad profits are your primary source of profits, you are due for a hard-knock. That hard-knock came from Netflix. Their original ad campaign, "The end of late fees", was pretty much all they needed to say. Their business model was designed very differently - leveraging the Internet and network economic effects (a nod to another favorite book: Net Gainby John Hagel III). When Netflix said, "The end of late fees", word of mouth took care of the rest. This is why NPS has become so important to companies as a form of measurement for their most important external stakeholders - their customers. It is used by thousands of companies, including many Fortune 500 companies. Brad Smith, the CEO of Intuit, said, “Thank goodness for Net Promoter. It provided a framework for thinking about—and managing in this social media world… our teams call it the love metric”. Tony Hsieh, the CEO of Zappos, said, "We use NPS every day to make sure we are wowing customers and employees."
It has been awhile since I've posted as I've had three conferences back to back, including the main TED conference in Long Beach, our own Bazaarvoice Summit in Austin, and then SXSWi. So it is perhaps ironic that I write this philosophical post about time.
Benjamin Franklin was famous for saying many things and one of them was "remember that time is money" (you can read his full quote here). In my new journey as an angel and VC investor and entrepreneurial coach, I've been having many conversations with those that have been in these fields for longer than I have. In the first half of my life, I've been singularly focused on changing the world through technology - as the entrepreneur myself versus through others. One of the more stirring conversations I had recently was with a successful investor that said, "what use is money with no time". He was frustrated in that he had a lot of money but that it had chained him to have little time and he was vigorously trying to change that.