Simon Sinek corrects himself on existential flex, the massive strategic shifts leaders must sometimes make. Apple pivoted to graphical interfaces after visiting Xerox PARC, creating the Macintosh. Blockbuster refused streaming because late fees made up 12% of revenue, and Netflix took over instead.
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This is one thing I got wrong in my book, which is I said that most leaders will either experience an existential flex once, maybe twice, sometimes never in a career. I never expected that every leader would be facing it simultaneously. But the principles are still the same, whether we're all going through it together or not. Which is it's not about the daily flexibility of business. This is profound 180 degree strategic shift.
I'll give you my favorite example. In the late 1970s, Apple's already a successful company. They've already come up with the success of the Apple one, the Apple ii. Steve Jobs is already a famous CEO. And understand Apple had a just cause. They had a vision, a very clear vision, which is they wanted to empower individuals to stand up to incumbent power. They wanted to empower individuals to stand up to Big Brother, this revolutionary spirit. And if you remember.
That'S what they stood for, right? The computer revolution. They were one of the leaders of the computer revolution.
And Jobs and a few of his senior executives, as executives do, went and visited another company and they got a tour of Xerox Xerox parc, which is Xerox's R and D division. And Xerox showed them something they invented called the graphic user interface, which allowed a computer user to click a mouse.
And move a cursor across a desktop to use icons to work the computer. Now, this is a profound technology because prior to that you had to learn a computer language. So driven by the idea that one day an individual will be able to compete against a corporation, Jobs sees this new technology and goes back to his team and says, we have to invest in this graphic user interface thing. He sees it as a leapfrog technology to advance their vision. And one of the leaders who was there that day said, we can't. We've already invested millions of dollars and countless man hours in a completely different strategic direction. If we go down that path, we will blow up our own company. To which Jobs actually said, better we should blow it up than someone else. Well, that decision led to the Macintosh, a computer user operating system so profound that the entire software of Windows is designed to act like a Macintosh. And the reason a computer is now a household appliance was because of their willingness to make that profound strategic shift. And so the reason leaders usually don't make an existential flex is because they're too afraid of the short term losses. They're too afraid of the disruption, even if they sometimes see it as necessary. One of my favorite examples of a failure was Blockbuster. Blockbuster was the only significant national video rental chain. They were the 800 pound gorilla. And this little company called Netflix showed up and saw the rise of the Internet and the potential for streaming in the future. The technology wasn't quite there yet, but everybody knew it was coming. But they started experimenting with an entirely new business model called subscription. And if you remember, you could get the DVDs and keep them for as long as you wanted and then send them back. And the CEO of Blockbuster at the time went to the board and said, I think we really need to experiment with subscription. And the board would not allow him because the company made 12% of their revenues from late fees. They were so afraid to give up 12% of revenues that they literally committed an act of suicide. Blockbuster doesn't exist, and Netflix is determining the future of television and movies. Now. They will say the Internet put them out of business. Nonsense. They put themselves out of business. And so we're seeing that right now in Covid as well. There are companies that are desperately clinging to their old business models, but this marketplace, if you're not willing to pivot, the marketplace will put you out of business. And so we're seeing wonderful disruption happening, positive disruption, taking advantage of COVID to make changes they see highly necessary, where they may not have made these changes prior because they were just too afraid. SA.
