Case Study: Best Buy’s Failure to See Napster
So on this attitude of wisdom, I think the very quotable Mark Twain. I love Twain. I don’t know if he said all that stuff but if he did, I just want to follow him around writing stuff down as he said it. He said at one point of his life, he said, "It's not what you don't know that gets you into trouble; it's what you know for sure that ain't so." And this "know for sure" stuff could be really a problem for lots of people. I was in Istanbul recently with a very charismatic Executive Vice President at Best Buy, big retailer. And he told a story from before he joined the organization. He told this story about one of these things that you know for sure that ain't so. Apparently, in 2001, Best Buy then, as now, the largest consumer electronics retailer in America. So they know a lot about consumer electronics. They know a lot about people buying media, things like that. They want to expand their influence. And so they're looking around with their mergers and acquisitions hat on and they found this company called Musicland. Musicland, really big deal. They own Sam Goody stores; they were a force to be reckoned with. At the time, they had 1,300 stores, biggest retailer of audio CD's and DVD's in America. And boy, the management team of Best Buy thought this was really strategic. They were willing to pay billions of dollars for Musicland because it expanded their empire it was so good, 2001 this is. Because they're confident that they know how people buy consumer electronics. They know about media purchase except for one thing. The management team, probably in their 40's and 50's at Best Buy in Minneapolis, Minnesota, they hadn't noticed that there was this little company called Napster, started in 1999, two years before their purchase and that there's this sea change had already started happening. In fact, it was well underway in 2001 when they made the purchase. That 18 to 30 year olds had basically stopped buying CD's completely and were downloading their ...
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