Managing Innovation in Business: Netflix

This report discusses Netflix's innovation management process, disruptive technology, radical innovation, and business model. It also explains how pioneers of radical innovations may lose the spoils of their innovations to the late entrants that disrupt the market.

Managing Innovation in
Business Netflix
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INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
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INTRODUCTION
Innovation management is defined as a process in which organisation undertake use of
combination of management of innovation processes as well as change management. Main aim
behind this is to introduce new things and develop business in an effective manner. This system
helps organisation to nurture the creative capabilities and create a workplace environment which
encourages new ideas of workflows products and services and methodology (Anindita, 2021). It
is essential for an organisation to implement innovative practices in order to continuously thrive
in an industry. Present report has been conducted on Netflix which is an American online
entertainment provider established in the year 1997 by Reed Hastings and Marc Randolph. This
organisation engaged in the operations of providing subscription-based streaming services to
consumers in which they offer wide range of television series and films.
Present report discusses disruptive technology radical innovation and business model of
innovation of Netflix. Along with this report discusses the manner in which pioneers of radical
innovation may lose the spoil of innovation to the late entrance. Along with this, report discusses
three key factors which determine its organisation success in movie enter industry in next 3 to 5
years.
MAIN BODY
In the Netflix case, please identify one example of a disruptive technology, one example of
radical innovation and one example of business model of innovation
Netflix is operating its business function as an American entertainment organisation
founded by Reed Hastings and Marc Randolph on August 29 1997 in Scotts Valley, California.
This platform is having specialisation in providing streaming media and video-on-demand online
as well as DVD by mail. It has been identified from the case study analysis of Netflix that in the
year 2013 Netflix expanded into television and film production and online distribution. By 2017
this organisation established it headquarter in Los Gatos California (Csalló, 2021). This has been
evaluated that Netflix initial business model mainly included DVD sales as well as rental.
Furthermore, it has been underlined that Netflix is an epitope of what it means to be innovative.
Renting of DVD is relatively a new technology that was introduced by this organisation. With
low monthly fees and unlimited rental allotment this organisation grabs attention of consumers
on a wider scale.
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Disruptive innovation is mainly defined as a concept product or a service which either
disrupts an existing market or develop a completely new market segment. It has been evaluated
that disruption mainly happens when traditional value drivers in an existing market are changed
in a significant manner (Das, 2021). In this new player enter in existing market segment with
new business model or new technology or this can be a combination of these tools, with an aim
to provide new form of products and services to consumers. In addition to this it has been
underlined that, disruptive innovation was mainly defined by Harvard business School Clayton
Christensen in a HBR article With the help of characteristics of disruptive innovation such as
higher risk, lower margin at least in the beginning, sales argument, involvement of new
technology or new business model Netflix create disruptive innovation which a future ready
platform for consumers.
Netflix is one of the most classic example of disruption innovation in which company
utilised new technology and a business model to make description in existing market. This
organisation started off as a video on demand and DVD by mail and further expanded in online
video streaming, which is one of its major developments. This organisation is innovation due to
its revolutionising the manner in which consumers get their daily dose of entertainment. In terms
with Netflix for example by creating compelling original platform, evaluating user data to server
subscribers better and letting people consume content in a better way, Netflix significantly
disrupted the television industry and duly force cable company to make changes in the business.
Furthermore, it has been evaluated that in the case of Netflix the major shift came with the
significant rise of streaming video (Das, 2021). This organisation significantly appeals to
blockbuster or audience by providing them wider selection of content with high quality, low
price and highly convenient approach. Thus, from the above analysis it has been identified that
the willingness to become leader Netflix become the digital disrupter in which Netflix jumped on
board and was effectively impacted traditional movie shops by providing consumers a platform
of streaming with low-cost approach, convenient, wide selection and all-you-can watch aspect.
With the help of emphasising upon these selling points Netflix continuously attract more and
more subscribers which becomes a digital disruption in industry.
Radical innovation is mainly termed as an invention which destroy or replaces an existing
business model. In simple terms this form of innovation close up existing process or system and
make replacement of it with something new entirely. It has been evaluated that radical
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innovation makes significant impact upon economic activity and on market of firms in respective
industrial segment. It has been evaluated that radical innovation mainly happens when a new
entry in a market segment completely destroy industry or a business. In terms with Netflix, it has
been identified that it is an existing example in the definition of radical innovation as when this
organisation entered in home entertainment industry with DVD rental service this business
completely replaces other business organisation and industry of cable operators. Radical
innovation is basically a transformative business model which completely replace or demolish
existing industry by creating a whole new system. It basically undertakes use of existing design,
system or invention and duly turn it into a brand-new product or service. With the help of radical
innovation organisation can create new services and products with the help of existing
infrastructure, core competencies and assets and can make changes in industry for better. In
terms with Netflix, with the help of creativity and collaboration of staff and willingness to
effectively work towards organisation shared goals, one example of radical innovation according
to the case study analysis is that (Dawson and Andriopoulos, 2021). This organisation firstly
introduced as a mail order movie service and then after that it offers services as a provider of
streaming videos. In this as a radical innovation Netflix put the retail-based movie rental model
and its other competitors out of business. With the help of this innovation Netflix measured
greater impact upon organisation economic activities. With the help of offering and
entertainment platform with HD quality, various forms of subscription plan and a wider
platform, Netflix created a new market segment and offer new products and services with higher
consumer benefit. Thus, from the analysis of case study of Netflix it has been identified that
Netflix significantly disrupted the industry by claiming loyalty and smaller market and become a
household name.
Business model of innovation
Business model innovation is mainly defined as an art of enhancing value creation and
advantages while making simulations. This model is important for an organisation in terms of
transformation. Business model innovation is being implemented by an organisation in order to
drive growth. In simple terms business model innovation is defined as a strategy or document
which duly outlines the manner in which business offer value to consumers in a market segment.
It offers information about the organisation target market and the role of business services and
products in meeting consumer needs. Furthermore, it has been underlined that business model
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innovation facilitate organisation to undertake advantage of changing expectations and demands
of consumers. In terms with Netflix, it has been identified that it is an inspirational example, as
this company duly shifted their business model multiple times and successfully grow in market
segment. At initial stage Netflix started with renting box products via mail service and then
shifted to delivering on demand entertainment services to consumers on global platform (Frey,
2021). In addition to this it has been evaluated that from renting DVDs to a subscription model
Netflix goes with the trend while exploring growth opportunities that significant allowed
organisation to assure growth and success in in market segment. The current business model of
Netflix is, technology, comfort, on demand subscription and data driven. Business model of
innovation of Netflix is being defined with the help of, The Business Model Canvas:
Customer Segments:
Netflix target consumer segment in psychographic segmentations with characteristics
personality of the end-users and lifestyle. Along with this, this organisation focuses on the
groups those who are relaxation seekers.
Value propositions:
It has been evaluated that Netflix’s entire value proposition is mainly linked to the fact
that it offers quality entertainment 24/7 to its users. Along with this, it involves access to a huge
catalogue of products, 27/access and on-demand streaming.
Channels:
By digitally and radically disrupting industry Netflix have its availability on among every
digital device. Along with this, Netflix duly becomes one of the largest distribution channel in
the world.
Customer relations:
In order to introduce new customers towards streaming platform Netflix have marketing
strategy which mainly include email. In this Netflix offer personalized product recommendations
as well as relevant updates to consumers as per their preferences (Jaworski, 2021). Along with
this Netflix also strengthen consumer relationships with the help of online live chat services,
Netflix gift cards, exceptional consumer experience and social media.
Key resources:
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Key resources that Netflix undertake include, content library, software developers,
filmmakers and producers, the recommendation algorithm, employees and the band. With the
help of all these resources Netflix offer high quality services to consumers in industry.
Key activities:
As per the analysis it has been evaluated that Netflix key activities is related to providing
best streaming content experiences to customers. In addition to this, Netflix key activities also
include hiring and retaining, developing its pricing strategy, producing, acquiring and licensing,
maintaining and expanding and retaining consumer’s base.
Key partnerships:
It has been evaluated that key partner of Netflix are internet service providers,
influencers, cinemas and theatres, film makers guides and individuals, content owners, IP
holders, investors etc. Along with this, Google and Amazon, TV network companies, alliance
with gaming industry and with smart TV companies are key partners of Netflix.
Cost structure:
Netflix cost structure mainly include DVDs and mail-related shipping costs, cost for
recommendations, artificial intelligence and R&D, cost of producing movies and major
purchasing rights establishment which include movies and TV shows.
Revenue Streams: Monthly subscription plan, basic, standard and premium are revenue streams
of Netflix.
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https://bstrategyhub.com/netflix-business-model-how-does-netflix-make-money/
Using article by Markides, (2006) please explain how pioneers of radical innovations that create
new-to-the-world markets may lose the spoils of their innovations to the late entrants that disrupt
the market.
Pioneers of radical innovation or first mover is a product or service which gains highly
competitive advantages by being the first one in a market segment with a particular service or
product. It has been evaluated that being first organisation to develop strong brand recognition as
well as consumer loyalty before competitors enter the arena, first-mover have advantages in
terms of high scale of cost, efficiency of delivering products and more market share. The main
advantages that pioneer of radical invasion create new-to-the-world market is brand name,
recognition economy of scale and low level of switching cost. However, as per the analysis of
article by Markides, it has been identified that irrespective of being pioneers of radical
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innovation in industry these pioneers may lose the spoil of their innovation to the late entrance
that district the market (Massa and Tucci, 2021). Furthermore, it has been analysed from this
article that irrespective of enormous product and technological upgradation pioneers of
innovation such as Netflix can be affected due to certain factors like, newly created market that
can be invaded by new entrants. Furthermore, it has been identified that early pioneers who
create new to the world markets are mainly very rarely the ones that scale them up from little
needs to big masses markets. In addition to this it has been identified that these organisations
eventually scale up in a new market jump into the market right before the dominant design. From
the analysis of this article, it has been underlined that, pioneers of radical innovation not only
time their entry into the market to perfection but they also take number of actions which grows
the market from niche into a mass market. These strategies can be lately used by late commerce
in order to upset established competitors. Furthermore, it has been identified that latecomers
mainly take competition away from technical performance to other product attributes which
include price and quality by lowering down the price of product to mass market level. Article of
Markides states that late entrant captures the market even when the product is not as good as
product of early pioneers. This can mainly happen due to two reasons in which first states that
because of the endeavors of the early pioneers, the new item improves in execution to levels that
either are sufficient or on the other hand even outperform client needs. At that stage, any extra
ventures to work on the presentation of the item further are not actually vital. In any case the
early pioneers could not help themselves: Their designing societies go to work, and adequately
sure, increasingly more cash goes into research and advancement (R&D) to further develop the
item further also, to add to its usefulness. All of this happens indeed, even with the full
acknowledgment that their clients do not need nor will they at any point use the additional
usefulness. It has been evaluated that product overengineering is connected to a second change
occurring, the additional investments and gradual options to the item's exhibition do not come for
nothing. The increasing costs lead to rising costs (McAndrew, 2021). The excessive cost, thus,
restricts the fascination of the item to a little section comprised of innovation fans and early
adopters.
The mix of these two elements allows late commers their opportunity to move in and take
the market away. They realize that they should simply to deliver an item adequate in presentation
yet less expensive than what is available at this point. Their item may not be comparable to the
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result of the pioneers, in any case, this doesn't actually make any difference. The early adopters
are not drawn to these sub-par items, yet the normal customer is. To them, this item is acceptable
enough and modest (Mier and Kohli, 2021). Over the long haul, the consolidators may work on
the exhibition of their item to such an degree that even the actually adroit clients start to think
that they are appealing—thus switch. In any case, this isn't totally essential. However long they
control the mass market, the consolidators are glad to leave a barely any little specialties for
different contenders to benefit from. Their superseding objective is to make an item that is not
really the good one sufficient in execution and prevalent in cost. In this it is essential for pioneer
radical innovator for example Netflix to undertake use of different ways to achieve technological
innovation and business model innovation. In this pioneer radical innovator is required to
influence upon certain aspects in order to continuously spend on valuable resources as well as
managerial talent in order to grow new radical business.
What key factors will determine a company’s success in the movie rental industry in the next 3-5
years? You are required to follow the process and generate at least two innovative ideas for
Netflix.
It is essential for an organisation to continuously keep on investing in different strategies
and practices in order to ensure long-term sustainability in industry. In context with movie rental
industry, it has been identified that there are some key factors which determine Netflix success in
movie rental industry in upcoming 3 to 5 years. In this is the first factor is giving renters or
consumers choices about the manner in which they would like to watch the movies. This can be
from streaming the movie from the internet or delivery from the mail. Along with this, the other
factor which will determine organisation success in movie rental industry in next three to five
years is ability to spend money on marketers as to attract renters (Pajkovic, 2021). It is it is
essential for Netflix to make sure that there is a wide variety of titles for renters to pick from.
Netflix offer convenient and easy access to consumers and have more geographic market
coverage comparatively to other competitors in industry such as Amazon and block buster. In
this it is essential for Netflix to strengthen their bargaining position in new content acquisition
and make continuation of their expansion into Ireland and United Kingdom. Netflix currently is
operating its services in the sector of buying and making content in which they sell content at a
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price on terms up to the date. Netflix model is undeniably successful however, there is stiff
competition in this industry between blockbuster, Amazon Google and Disney. All these
organisations have digital download and streaming services which is increasing competition for
Netflix in market. In this it is essential for Netflix to aware of this competitive force and attract
consumers with the help of various strategies (Wayne, 2021). They are also required to offer
content which is more valuable, scalable and sensible than being just a reseller and content
creator. Furthermore, it has been underlined in order to become multi-sided platform it is
essential to Netflix to emphasize upon different dimensions of growth such as selling more stuff
to the same subscriber. It is essential for company to overcome increasing competition in this
industry and assure continuous leading positioning in next 3 to 5 years. Furthermore, more
Netflix is also recommended to gain bargaining power and keep changing titles and get new
season of collection of movies and TV shows, by adding these titles in the library Netflix can
provide more options to subscriber comparatively to other competitors. This will allow them to
have a better bargaining power (Snihur, Zott and Amit, 2021). Netflix is also required to
continuously check up on their competitors’ different regions in order to make sure that they did
not suffer any loss in revenue. It is also essential for company to offer different promotion which
will benefit subscriber in a financial term.
Two innovative ideas
Gain bargaining power: This will help Netflix to continue to make changes in titles as well as
getting new season to the collection of TV shows and movies.
Deal with human preferences and human taste: In this Netflix can bring innovativeness in their
algorithmic approaches with the help of insight they gain from customers research in order to
have more human element in their systems.
In addition to this has been underlined that Netflix is the largest streaming services around
the globe and take use of effective strategies. This platform of a combination of invention and
innovation to consumers. Along with this, this platform offers consumers a convenient service
along with a wider range of selection of TV shows and movies in which consumers can stream
instantly anywhere at any time (van den Ende, 2021). In this with emphasize certain
recommended practices Netflix can assure success in industry in next 3 to 5 years. This will
significantly help Netflix to enhance their competitiveness in industry. Thus, from the above
analysis it is essential for Netflix to focus upon given recommended practices or innovative ideas
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in order to ensure success in rental industry in the next 3 to 5 years. This will duly benefit them
to become more powerful in industry while overcoming increase in competition (Via, 2021).
With the help of emphasising upon factors like valuable and scalable Netflix can enhance their
revenue generation capability.
CONCLUSION
From the above-mentioned report, it has been concluded that managing innovation in
business is a process of coming up with an introducing new thing in order to lead organisation
towards continuous growth and development. It is essential for any organisation in industry to
emphasize upon innovative practices in order to ensure profitability. From the case study
analysis of Netflix it has been identified that irrespective of inspirational example of innovation
it is essential for Netflix to emphasize upon certain aspects in order to stay competitive in
industry, such as Netflix along with making investment in technology, retaining and hiring talent
it is also essential for them to emphasise upon its content offering. Furthermore, it essential for
Netflix to continuously emphasise upon technological innovation and business model innovation
in order to overcome the risk of late entrants.
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REFERENCES
Books and Journals
Anindita, V., 2021. Disruptive Strategy in Disruption Era: Does Netflix Disrupt the Existing
Market?. International Journal of Business and Technology Management, 3(1), pp.30-
39.
Csalló, R., 2021. Value Proposition at NETFLIX.
Das, S., 2021. Magazine publishing innovation: The ‘drivers’ and implications of technology.
In Innovations in Magazine Publishing (pp. 7-28). Routledge.
Das, S., 2021. Managing innovation: The three ‘Ps’ of creativity and commercialisation.
In Innovations in Magazine Publishing (pp. 80-102). Routledge.
Dawson, P. and Andriopoulos, C., 2021. Managing change, creativity and innovation. Sage.
Feix, T., 2021. Digital Business Designs and Platforms. In Valuing Digital Business Designs and
Platforms (pp. 1-73). Springer, Cham.
Frey, M., 2021. Netflix Recommends: Algorithms, Film Choice, and the History of Taste. Univ of
California Press.
Jaworski, B.J., 2021. Netflix: Reinvention across multiple time periods. AMS Review, pp.1-14.
Massa, L. and Tucci, C.L., 2021. Innovation and Business Models. In Oxford Research
Encyclopedia of Business and Management.
McAndrew, N., 2021. Assessing Leadership in Business–Marketing: A Critical Investigation of
Reed Hastings.
Mier, J. and Kohli, A.K., 2021. Netflix: reinvention across multiple time periods, reflections and
directions for future research. AMS Review, pp.1-12.
Pajkovic, N., 2021. Algorithms and taste-making: Exposing the Netflix Recommender System's
operational logics. Convergence, p.13548565211014464.
Snihur, Y., Zott, C. and Amit, R., 2021. Managing the value appropriation dilemma in business
model innovation. Strategy Science, 6(1), pp.22-38.
van den Ende, J., 2021. Innovation Management. Bloomsbury Publishing.
Via, P., 2021. Netflix: see what´ s next-buy debtflix and chill (Doctoral dissertation).
Wayne, M.L., 2021. Netflix audience data, streaming industry discourse, and the emerging
realities of ‘popular’television. Media, Culture & Society, p.01634437211022723.
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