The Case for Reinvention

The following post was originally published in June 2011

What a month, May 2011.  In the past 30 days, Blockbuster Canada was forced into receivership, Canadian Tire announced an acquisition and the introduction of major appliances, and Cineplex reported a first quarter loss of $800,000.

What, if anything, do these three cases have in common?  Each reveals a story of reinvention (or lack thereof) with particular emphasis on the importance of strategic revenue diversification.  Let’s look at each in brief, starting with Blockbuster.

Back in mid-2007, we presented a Value Growth Agenda to Blockbuster at their head office in Dallas.  Our strategy recommended an aggressive push to monetize the 50+ million unique accounts in its membership file.  We saw an opportunity to promote a range of membership services at each of its 360 million annual transactions, using a proprietary ‘capture and conversion’ direct marketing method.  We proposed the launch of a credit card and an identity protection service.  We detailed a roadmap into Music Downloads, Mobility Services, and an innovative Blanket Warranty on all ‘entertainment and electronic’ devices.  Unfortunately, none of these initiatives were advanced, as the company fought to defend its core business against shifting purchase dynamics for movie rentals.  Now 4 years later, the company is struggling to stay alive.

[UPDATE February 2017 – while the Blockbuster story has now ended, there is no telling if revenue diversification may have helped the company survive. HMV Record Stores in Canada is a parallel study.]

Canadian Tire Corporation (CTC), having survived the entry of Walmart Canada more than a decade ago, is once again reinventing itself as more US retailers march north.  Its acquisition of Forzani Group fortifies CTC’s position as the leader in sporting goods and apparel, and provides a platform with which to extend its Canadian Tire Money loyalty program in the future.  Its launch of home appliances will fuel promotional financing activity on its credit card and will undoubtedly play host to an aggressive and profitable extended warranty offering.

Finally, in the Cineplex case study, despite its reported losses and first-quarter box office softness, “the company’s diversified business model and related revenue streams provided ‘significant other revenue growth over the prior year’.”  Cineplex has been a leader in revenue enhancement for years with on-screen advertising, promotional merchandising, arcades, and concessions all helping the theatre chain weather the lows better than its peer class.

The Bottom Line

Continuous reinvention and the relentless pursuit of new revenue sources is critical as market leaders defend their positions against category insurgents and seasonal fluctuations.  Blessed are those companies (and their shareholders) with a large customer base and/or a large footprint/traffic base and the will to leverage their brand into complementary profit zones.  For strategic revenue growth solutions uniquely engineered to your business, contact Stratum Five today.