The Full Price Anyway Case studies

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Netflix on the other hand thought this market was fantastic. It didn t need to compare it to an existing and profitable business its baseline was no profit and no business at all. This niche market seemed just fine. So who was right By Netflix had almost million customers. And Blockbuster It declared bankruptcy the year before. Blockbuster s mistake To follow a principle that is taught in every fundamental course in finance and economics.

That is in evaluating alternative investments we should ignore sunk and fixed costs and instead base decisions on the marginal costs and revenues that each alternative entails. But it s a dangerous way of thinking. Almost always such analysis shows that the marginal costs are lower and marginal South Africa WhatsApp Number List profits are higher than the full cost. This doctrine biases companies to leverage what they have put in place to succeed in the past instead of guiding them to create the capabilities they ll need in the future. If we knew the future would be exactly the same as the past that approach would be fine. But if the future s different—and it almost always is—then it s the wrong thing to do.



As Blockbuster learned the hard way we end up paying for the full cost of our decisions not the marginal costs whether we like it or not. You End Up Paying  such as this one helped me resolve a paradox that has appeared repeatedly in my attempts to help established companies that are confronted by disruptive entrants—as was the case with Blockbuster. Once their executives understood the peril that the disruptive attackers posed I would say Okay. Now the problem is that your sales force is not going to be able to sell these disruptive products.