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Strategy - BLOG

Four Lessons for Turning Around a Declining Business

Amitava Chattopadhyay, The GlaxoSmithKline Chaired Professor in Corporate Innovation at INSEAD |

The movie theatre business offers insights as to how firms can find new opportunities for turning around dying businesses by understanding consumers and their needs better.

For movie theatres in the U.S. and West­ern Europe, view­er­ship peaked in the late 1940s and has since slid by 80 percent or more, depend­ing on the mar­ket. Tele­vi­sion made the ini­tial dent, fol­lowed by home videos, and most recently the likes of Net­flix and Ama­zon Prime. A com­mon thread that ties all the com­pe­ti­tion together is the tele­vi­sion set. Given this, movie theatres have recently built on their offer­ing to give movie view­ers an expe­ri­ence that can­not be repli­cated on TV at home.

First came the big screen theatres and sophis­ti­cated sound sys­tems, which cre­ate a more immer­sive expe­ri­ence. Tech­nol­ogy has pro­vided THX, IMAX, and 3D expe­ri­ences, expe­ri­ences that can­not yet be matched on home sys­tems. Some theatres today are offer­ing a 4D expe­ri­ence! At these movie theatres the seats respond to what one is watch­ing on the screen with piped in smells, smoke, and even water sprays!

Experiences matter

But, tech­nol­ogy is just the begin­ning. Movie theatres are doing much more to bring back the crowds, and they are suc­ceed­ing. Recently, my wife and I went to see a movie at a theatre that offered a dra­mat­i­cally dif­fer­ent expe­ri­ence. On arrival at the theatre, we were ush­ered to a table in a thought­fully lit space laid out with tables just like one might expect at a nice bistro. We were brought a menu that offered treats that were more bistro-like, going way beyond the basic fare of “Coca-Cola and pop­corn” that has been the main­stay of the snacks and theatre rev­enues. The menu offered the oppor­tu­nity to have our own bot­tle of chilled Moët & Chan­don cham­pagne, canapés, a cheese plat­ter, burg­ers, and much more.

We ordered cham­pagne and canapés and were served at our table with the cham­pagne chill­ing in a bucket of ice. When it was time for the movie we were escorted to our seats inside the theatre which was next door. And what a seat it was; they made busi­ness class seats on most air­lines seem basic and they offered an almost-private view­ing expe­ri­ence. Reclin­ing in our plush seats side by side, with our own blan­kets and pil­lows, we soon had some­one bring the cham­pagne and canapés from the table out­side to our theatre seat-side.

Sip­ping on cham­pagne and nib­bling canapés, ensconced in a super com­fort­able seat, and watch­ing a movie together was spe­cial. We enjoyed it thor­oughly and, impor­tantly, look for­ward to doing it again, per­haps not every time we watch a movie, but cer­tainly from time to time, as an evening out on the town!

Turnaround lessons

So, what are the lessons for businesses in declining industries? There are four. First, the movie the­atre indus­try appears to be seg­ment­ing the mar­ket and devel­op­ing tar­geted offer­ings. For cer­tain audi­ences and movie gen­res, the 4D expe­ri­ence makes a real dif­fer­ence, especially for teenagers and young adults at an action or hor­ror movie. For, other audi­ences, such as cou­ples, the oppor­tu­nity to enjoy a movie accom­pa­nied by one’s favourite bev­er­ages and fin­ger foods might be a real draw.

Sec­ond, in devel­op­ing the tar­geted offer­ings, the the­atre busi­ness is con­sid­er­ing the tar­get con­sumers’ con­sump­tion expe­ri­ence. It’s not just the movie and its abil­ity to draw, or the screen size, or the sound, which have been the con­sid­er­a­tions for decades, but the total in-theatre experience.

Third, the com­bi­na­tion of benefits is dis­tinct and, impor­tantly, coher­ent. The tech­nol­ogy (for example, IMAX and THX) and crea­ture com­forts (for example, seats) are sig­nif­i­cantly supe­rior. There are entirely new ben­e­fits, never pre­vi­ously offered in movie the­atres (for example, 3D, 4D, fine foods, wine and cham­pagne, blan­kets, pil­lows). And, ear­lier main­stay items like pop­corn have been elim­i­nated! To cre­ate an authen­tic expe­ri­ence one needs to keep in mind what goes together, offer­ing supe­rior and new ben­e­fits on the one hand and bal­anc­ing it with the reduc­tion or elim­i­na­tion of con­flict­ing ben­e­fits on the other. In this case, din­ing while watch­ing a movie doesn’t mix with pop­corn and the movie the­atre has wisely removed pop­corn from its menu!

Fourth, it’s not focused on tech­nol­ogy. It’s look­ing around and com­bin­ing expe­ri­en­tial aspects from dif­fer­ent indus­tries – restau­rants and air­lines, to name two, to offer a com­pletely new expe­ri­ence. If you haven’t been to a movie the­atre recently to take in a movie, go check it out. You might be in for a very pleas­ant surprise!

Amitava Chattopadhyay is The GlaxoSmithKline Chaired Professor in Corporate Innovation at INSEAD. He is also co-author of The New Emerging Market Multinationals: Four Strategies for Disrupting Markets and Building Brands. You can follow him on Twitter @AmitavaChats.

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Donald (Don) Jones,

This is an excellent example of taking a dying customer experience and converting it into a new upscale customer event. Innovation comes from manipulating our life experiences, in all their forms, and repackaging those experiences into a new experience. Hence, popcorn and candy and coke movies to fine dining, champagne and luxury seating movies. Market segmentation, pennies to dollars.

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