Devoted to Managers and those that seek to improve their management skills

In 2005, Movie Gallery (MOVI) got into a big battle with Blockbuster (BBI) over the acquisition of Hollywood video. Blockbuster must be secretly thanking their lucky stars on losing the bid. Since paying out $1 billion for the company, Movie Gallery has been going downhill.

Andy Grove one time said, "A corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change. Values have to change. The sum total of those changes is transformation."

The problem with living organisms?: if we make the wrong decisions in relationship to change, we can be destroying the organism. This is the place Movie Gallery and its management team are about at. Insiders say the company will be filing Chapter 11 very soon, to deal with its $1.2 billion debt load its revenue can't service.

Why this all came about was they did what traditional companies have always done when struggling to compete: they tried to get bigger, thinking scale would be a determining factor in success for them. They are paying for it now because it wasn't the thing that needed to be changed in the company. They were going backward, and not transforming forward.

What had happened was the industry had been disrupted, and the leadership used old methods that had nothing to do with what the disruption was. The disruption had to do with distribution, not bigger companies or pricing wars.

So they battled it out for Hollywood Video, for the privilege of taking on debt they aren't able to service. In other words they overpaid for a company in a declining market. The video-rental business in physical buildings was declining.

They should have used the $1 billion to built out better and different distribution systems to meet the changing consumer demands. Instead they paid a huge price for something that simply brought them more of the same problems. Now they were only bigger than before.

Change shouldn't happen for the sake of change, it should happen based on real market conditions. What Movie Gallery did was the equivalent of drowning and someone throwing you an anchor you catch which brings you down even quicker. Only in this case, Movie Gallery paid for the anchor bringing them to the bottom.