"Blockbuster Video Stores is a good example of a company that could not engage in transformational change".

Question

Quizplus · Accepted Answer

The Answer is Blockbuster video faced a dramatic change in its external environment as people stop renting DVDs from stores in favour or online streaming (like Netflix, iTunes...) or mail-order DVD rental (e.g. Netflix in the US).
So the forces for change are mainly technological (online streaming, downloading) and competitive (mail-order DVD rental), though students can explore other forces (societal, global, economic?) as long as their arguments are sound.
When customers stop using your product/service because of new technology or competitive substitutes, the organization needs to re-invent itself completely in order to adapt. This is certainly a form of transformational change since it requires a significant change in the firm's strategy and structure (change from a brick-and-mortar business to online or mail-order) that entails changing the organizational culture, mindset... The other alternative for Blockbuster is to remain a brick-and-mortar organization but change their strategy from DVD rental to some other retail business (coffee shop?) - also a significant transformational change. Developmental changes are small incremental changes that simply require firms to the same thing better, more efficiently... while using the same organizational strategy and structure.
The key issue is why it's difficult to implement transformational change: The reasons why organizations resist change are discussed briefly on p.475-478 and include institutionalization, bureaucracies and roles, cognitive scripts. Eg. Can discuss how organizations develop routines and processes that make them reliable and accountable to external stakeholders but that these routines and processes become embedded in the organization's structure and make it more difficult to change and inert. Transformational changes are the most difficult ones since they require radical and significant changes to organizational structures, strategies, culture... Organizations have great difficulty changing because they are rewarded for delivering reliable and consistent results. In order to become reliable and accountable to their stakeholders, organizations develop these reproducible routines and bureaucratic procedures that allow them to deliver stable and consistent outcomes. Changing these routines and procedures is very disruptive to organizations since they lose the reliability and accountability that stakeholders require. If stakeholders withhold their support because of the uncertainty and instability surrounding the organization, it will likely fail. Transformational changes are therefore very disruptive, costly and rarely successful.
Students may also discuss bureaucracies, institutionalization, cognitive scripts as factors making organizations more resistant to change. Assess how well they explain the theories (or use an alternate but equally valid theory) and apply them to the Blockbuster case. The problem with institutionalization is that when organizational processes become 'taken-for-granted', it's much harder for organizations to experiment with new ideas and engage in double-loop learning.
Blockbuster likely had great difficulty implementing changes that addressed the underlying reason for their problems (fewer customers willing to go to a store to rent a DVD that they must return 1-2 days later or pay late fees...) because their way of doing things was so ingrained in their organizational structure and culture that they simply changed superficial things (i.e. reducing late fees) that did not address the root cause of competition from mail-order or online movies. This is single-loop learning.

"Blockbuster Video Stores Is a Good Example of a Company