Excerpted from Introduction...

Introduction

I witnessed rapid acquisition-based growth for the first time as a young management consultant back in the 1980s. My client was the Chairman of the Midwest Region of Blockbuster Video. His team was literally opening a new retail outlet every week in one of the five cities in his territory. As I recall those cities included Chicago, St. Louis, Minneapolis, Milwaukee, and Indianapolis. During that period they purchased other movie rental stores and converted them, built new stores, and bought the inventory of still other outlets. I was engaged to look into the management of inventory for this burgeoning organization, which was no small feat. Each new retail outlet contained used inventory from other existing outlets, used inventory from other stores that were being purchased, used inventory from non-blockbuster stores that were overstocked, and new inventory just coming onto the shelves from distributors. Rolling the inventory from these various sources as it aged, so that availability met demand in each location, was a challenging problem in supply chain management and distribution requirements planning.

Blockbuster had a number of things going for it in those days, a few of which I really only came to appreciate years later. They had a winning formula for the acquisition and delivery of their product. They had bright, energetic management with enormous foresight into customer demand. They had a growing market. They also had one other element that made what would have been a good business into a real powerhouse. That element was, in essence, what I am referring to in this book as Enterprise Optimization.

I remember working through a physical inventory at the local retail site closest to my home in Chicago one Sunday evening. Inventory began when the store closed to the public at 11 PM and ran through the night. By store opening the next day every single tape (there were no DVDs in those days) had been electronically scanned with bar code scanners (there were no wireless scanners in those days either, so there were a lot of very long cords), reconciled for reporting to the regional headquarters, and reported. There were about 10,000 tapes in each store then, so this was a fairly intense process. Every store did it every month, all on the same night. By mid-day on the following day there was a reconciled and current inventory covering every store in the region. The closing of accounting books after that was completed was a proverbial piece of cake. For its day this practice was state of the art. The high-tech approach was repeatable, measurable, and in control. As each new store was acquired or built, it was brought on line with all procedures (including physical inventory procedures) implemented immediately as a standard practice.

The secret ingredient for Blockbuster in those days was commonality in their business processes and systems, with performance at each of their hundreds of business units focused consistently on common corporate goals and objectives. They never allowed a store that they acquired to continue to manage operations the way it had before they bought it. They had clear written procedures covering every aspect of the business, and they went by the book. While they were bright, imaginative managers, they incorporated their flow of new ideas into the official protocol of operations rather than allowing individual outlets to depart from the defined path. They were constantly on the lookout for new ideas and improvements but were careful and deliberate about incorporating them. That approach made Blockbuster into a mammoth success.