Netflix's Innovation Strategy: Product & Service Development Analysis

This report assesses Netflix's innovation strategies using the Blue Ocean Strategy and Business Model Canvas. It explains the theoretical frameworks, applies them to Netflix's product and service development, particularly focusing on 'Netflix Originals,' and recommends future pathways for the company. The analysis covers Netflix's entry into uncontested market spaces with original content, reducing competition, and expanding globally. The report also discusses the sequence of developing a blue ocean strategy, emphasizing buyer utility, pricing, cost, and adoption. Ultimately, the report provides insights into how Netflix leverages innovation to maintain its competitive edge in the streaming industry. Desklib offers similar solved assignments and resources for students.

Managing Innovation
Assessment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Theory Explanation................................................................................................................3
Theory Application.................................................................................................................7
Recommendation for future possible pathways of product and services for chosen
organisation..........................................................................................................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
Books and Journals:..............................................................................................................14
Online:..................................................................................................................................14

INTRODUCTION
Innovation is a fundamental thing for any business organization in order to grow and
develop their business in the potential market. It is also essential to enhance the customer base of
a brand so that customer do not get bored with the regular products and services. Innovation
refers as a term that is utilised either the act of launching something new as in an organization
that rewards creativity, together with the innovation, or it also can be a completely new thing.
The company which is chosen to complete this assessment is Netflix. It is a subscription
streaming service, as well as production firm in American administration. The launch year of this
organization is 1997 (Asheim, Isaksen, and Trippl, 2019). It furnishes a film and television series
via distribution and own production system, which is called as Netflix Originals. As of 2022, the
compand had over 221.6 million subscribers across the borders. Also, it delivers its services
world-wide such as Europe, Canada, Africa and the Middle East. In the following report, several
models or theories of innovation have been explained in detail. Later, there will be an application
of innovation theory on the products and services. In the end, the recommendations will be based
upon the possible future development pathways of the goods and services.
TASK
Theory Explanation
Blue Ocean Strategy:
The blue ocean strategy is about assisting the organization increase uncontested market
space separate from other, akin businesses. Such new market spaces are known as “blue oceans”
which signifies to compare with the endeavour for survival “red oceans” driving with stiff
competition. The blue ocean strategy shows the synchronous move of high product
differentiation, along with low cost, making the competition not relevant. As per the viewpoint
of Professor W. Chan Kim, blue ocean strategy refers the strategy required when supply
increases demand in a market. Such kind of situation is apply to various industries and sectors
and will be even more prevalent in the future. This approach of innovation promotes the
company to innovate and evolve new, affordable commodities that make competition under
consideration. Hence, the main objective of blue ocean strategy is for companies to identify and
develop “blue oceans” and avoid “red oceans” so that the organization will have more success,
enhanced profitability and fewer risks in the blue ocean market. In case of Netflix, this approach

also demonstrate company to look for market areas where there is only few competition and
where there is no pricing pressure (Belso-Martínez, and et.al., 2019). It says that when the
organization faces less competition to grow, business try for avenues and verticals of recognizing
new business where they can enjoy less competition in markets.
Sequence of developing a blue ocean strategy:
There is a sequence to build the blue ocean strategy that are buyer utility, price, cost and
adoption. It enables business firms to develop their executable business model and make sure
that a business profits from the blue ocean it is evolving. The starting phase of buyer utility
defines that the organization should create a reason why their customer should buy the specific
product and service from them. Second phase is of price, which says that the company should
create a price for which customers are ready to pay. It is important that the product or service
should be reasonably attractive so that customer will ready to pay even higher prices. The third
sequence is cost, which signifies that it develops a jump in value for itself in the way of profit
which means the product or service cost minus the production cost. The final phase in the
sequence is to resolve the issues in adoption. Therefore, it is important for the Netflix
Organization to identify the key issues while applying the innovation idea and more importantly,
to resolve the issues so that the process of innovation goes smoothly.
Illustration 1: Blue Ocean Strategy: How to Make the Competition Irrelevant, 2020

Business Canvas Model:
A business model canvas is defined as business model which is being used for visual
presentation majorly focusing on various key strategic factors. It represents the entire overview
of a business organisation which include working of company, revenue streams, customers and
many others (Chen, and Lee, 2020). It permits the companies such as Netflix for visualizing and
analysing the strategies for the company. Below mentioned are the several elements of the
respective model: Customer Segments: It involve the people who buy the products and services offered by
a business organisation. There are various types of customers but it is crucial for the
business to majorly focus on the core customers on priority basis. Through canvas
model, the chosen organisation can also assess various others factors which include
present and future needs, general demographics, likes and dislikes, relations with other
segments and many others. Value Proposition: It is the sum of all the products and services which specially shows
the regards to how it uniquely stands in the competition market. It can become more
simple by becoming higher faster, cheaper along with adding the higher efficiency. There
are two broad categories which are designed for placing the values i.e. quantitative and
qualitative. Channels: It involve the techniques or methods which are being used by the management
of business organisation for the purpose of interacting with the customers. It is considered
as the most important area of canvas which require regular or constant update. Customer Relationship: This portion of canvas involve the relationship of business firm
with their customers. The procedure of attracting the customers along with developing
the feeling of loyalty among them is the major role of customer relationship (Erwin,
2021). In respect of Netflix, this portion of canvas involve several factors which include
personal assistance, automation and self service, communities and many others. Revenue Streams: A company always look for the higher profit. On the line of canvas, it
is being developed by the revenue streams. The revenue stream area of canvas include
several factors which include asset or goods sales, subscription, leasing or lending,
licensing, white labelling, advertising and many others. Through focusing on this area of
canvas, Netflix can reach to the higher number of people in the target market.

 Key Sources: It is essential for the business firm to have sufficient resources or essential
assets which help the management in running the business or providing value products or
services to the customers (Ganguly, Talukdar, and Chatterjee, 2019). Like the other areas
of canvas, it also include several factors which include human resources, financial,
physical, intellectual property and many others.
 Key Partnership: Most of companies involve the partnership with several companies or
parties as it help them in performing their business functions in an effective and efficient
manner. It involve several parties which include distributors, cooperation, suppliers,
existing customers and many others.
Illustration 1: Strategy, 2022
Theory Application
Netflix Inc, video-rental and media streaming organisation introduced in the year 1997.
The founders are American Entrepreneurs Reed Hashtings and Marc Randolph. Also, it has
enaged in the development of original programming (Kawabata, and Junior, 2020). In 1999, the
chosen company providing an online subscription services via internet, Subscribers select
television titles and movies from the the website of Netfluc, the shows were then sent to
customers in the way of DVDs, as well as prepaid return envelops, from one of more than
hundred distribution centres. Netflix Inc facilitates internet entertainment services for watching
television shows and movies. Apart from that, it also caters movies and TV shows such as
documentaries, original series, feature films with the help of its internet subscription on the TV,

mobile devices and even computers. Moreover to this, it also provides DVDs by mail service in
the United States. Millions of customers prefer Netflix as it includes movies and TV shows in all
varieties, it is new and even old, tons of high quality original content as well as easy to navigate
interface. Although, the company has no longer provided a free trial, but customers are ready to
give a worth for a month and enjoy something new to watch (Gasparin, and et.al., 2021). The
company operates through several business segments such as domestic streaming, domestic
DVD and international streaming. For the application of particular theory or model that is
“business canvas model”, the chosen product is “Netflix originals”. The chosen company is a
multi-million dollar streaming digital platform that has produced and distributed content that has
either been made in-house by Netflix by their own or that they have acquired the production and
dispersion rights to, which are called as Netflix Originals and are acquirable on the flowing
platform in several nations. It is also found that Netflix has created over 1500 originals titles,
since it began creating fresh and new content in the year 2013. Also, with the help of Blue Ocean
model, the company has reduced several key competitors and provide exclusive web series and
movies to its digital platform and those are combined from other studios after first being created
accessible elsewhere.
Netflix introduced its fits original series in the year 2013 with house of cards. This was
the beginning of the company offering its first originally produced streaming show for the
specific streaming service. It was not available on any other platform weather it is digital or
DVD format. This type of original series content became a huge attraction for Netflix users as
they would get high quality streaming content in the form of original series for various movie
and TV genres. This attracted large number of audience to Netflix. Previous to this the company
dealt with streaming content from major studios such as Warner Brothers which did not provide
a competitive edge to the company as the same content could be found on other platforms.
After this Netflix also introduced original series in Spanish in the year 2018 with Elite.
This type of original series production by Netflix in multiple languages helped the firm expand
outside English speaking regions and gain worldwide popularity as digital space for high quality
serialized content (Song, Fisher, and Kwoh, 2019). The historical development of Netflix
showcases the application of Blue Ocean theory as the company entered a new market with its
original series production and was able to capture the potential of original streaming sector firstly
among its competitor. Here the application of Blue ocean theory is apparent, because initially the
original series of Netflix was able to enter an uncontested market space and use innovation of

offering original content for entering to attract audience in domestic as well as foreign market
(Macnaghten, 2020).
Illustration 1: Chart of the Day: Netflix Competitors Could Present Better Plays for 2019

In case with Netflix Originals, the management of Netflix apply Blue Ocean Theory for
developing thrive in uncontested market space. The application of the innovation theory for the
Netflix Originals is mentioned below:
Selecting right scope for blue ocean initiative along with developing confidence of
people: In this, management of Netflix begins through working out on specific product that is
Netflix Originals by introducing pioneer-migrator-settler map. Wirth this, the company is able to
target area in which it has most to gain.
Get super clear related to current state of play: With clear together with shared picture
of existing strategic landscape, Netflix works on revealing similarity in strategies of company
and its competitors for looking towards purchaser’s addition to customers. With this, the
company gain reason for driving industry towards red ocean.
Identifying hidden constraints which turn into opportunities: Once management of
Netflix sees big picture, they are able to imagine where they need to be. For Netflix Originals,
the challenge is to establish equally clear addition to big picture view concerned with how
assumptions and boundaries of the sector limit organisational product appeal as well as size
through pain points (Kobarg, Stumpf-Wollersheim, and Welpe, 2019). The pain points are not
constraints, rather, brings understanding of company about non customers and reason to sustain
in the industry.
Go from big picture to establish practical options of blue ocean: The team of Netflix
is ready for generating options related to blue ocean which pursue differentiation addition to low
cost. In case with Netflix Originals, the management apply systematic process for reconstructing
boundaries of market together with create new market space. This helps the company to see
opportunities that other see red ocean on rivalry.
Launching blue ocean move: Herein, the company selects blue ocean move with rapid
test in market as well as refining it for maximisation of potentials. With Netflix Originals,
management of Netflix move to pursue through hosting blue ocean fair which is designed for
taking politics out from process of decision making, getting feedback as well as consolidating
commitment of people for selected move.
Recommendation for future possible pathways of product and services for chosen organisation.
As per the above discussion and developing competition in the market it has been
recommended to management of Netflix that they must give more focus to bring innovation in

market. Such as by applying blue ocean theory they can offer more innovative services and
offers to their customers which increase their experience (Marion, and Fixson, 2021). Blue
ocean innovative theory helps the company to make their product and services different as well
as lowering their cost in order to create new demand. It allow the company to expand their
business in new market which leads to increase in customer base and sales. It enable Netflix to
create their niche market in order to reduce the impact of current competition on their business
operations. By using Blue ocean strategy the company can enter in new market where has less
competition and more chances for future development. Management can focus to create new
market and develop more demand for their innovation rather than wasting their valuable
resources on current competitive market. By this they can target youth and teenagers in order to
retain them for long run.
It is recommended to management of Netflix that they can use blue ocean theory to make
their product and services different from other and expand their business in new market. Such as
they can expand their business in new line like music and cartoon. By lunching new app such as
Netflix Music, Netflix Cartoons and Netflix video games and many more. In Netflix Music they
can provide variety of music sections for youth and youngsters as well as launch new musics. In
order to expand their Netflix originals professionals can make their own cartoon series with new
animation to spread awareness about social issues to users and teenagers (Nguyen, Pham, and
Tram, 2020). Also they can Netflix News to provide fast and live news to students about each
sector of world which increase knowledge among youth. To develop their Netflix originals in
future they can use blue ocean strategy to make their product and services unique and beneficial
for the community as well as people. By using advance technology and software Netflix can
offer new offers related to subscription, provide flexible package, HD prints series, movies and
shows at reasonable price and many more in order to increase the experience of viewers. Further,
they can also add new comment section on their website and app which allow users to give
response and add their suggestion which increase their connection with company. In order to
bring new innovation the company can use artificial intelligence to provide fast downloading
services to people which save their time.
By expanding business in more market as well as expand their business portfolio they can
increase their customer base. The biggest weakness of Netflix is poor customer case services
which decline their customer base and sales (Ottosson, 2019). In order to overcome from these

weaknesses they have to increase their social media engagement, where professionals can easily
connect and interact with customers along with solve various issues related to speed,
subscription, package price and many more which increase sanctification among them. Engineers
needed to worked on means to make translated subtitles of their various shows or movies for
huge range of market. Such as they provide subtitles in various language in order to attract large
number of customers across the world and increase their experience (The Best Way for Netflix to
Keep Growing, 2018).
There are various other issues which Netflix has to deal for future development such as
mobile data deals, exclusive titles and international expansion and many more. They can reduce
all these issues by categorise all their content and shows into specific folder which helps users to
save their time or data which they invest in searching a particular show (Taylor, King, and
Smith, 2019) . Also they can increase their productivity by giving more focus on the quality of
their show and content which add value to customers and healthy for their eyes. By adding new
technology they can provide information about various series and shows first or early from
competitors to users which aids them to gain leading position in market for long run.
By meeting self esteem and self actualisation needs of employees they can motivate them
to increase their skills or knowledge to use advance technology in their product and services.
Such as by providing training to their marketing team about the content and digital marketing
they can improve the skills of employees which they can use to promote their services in
innovative manner across the world. Such as by using content marketing and animation in their
promotion they can provide information about their new features and services in most attractive
manner. By giving more freedom to employees and allow them to give their suggestion in
decision making in order to set new trends in market which increases the customer base and
brand value of company (How The Netflix Innovation Strategy Empowers Staff, 2022). Netflix
can increase their customer base by empowering their staff members as well as hire new talent
which have full knowledge about digital technology as well as bring new features in their
websites. Netflix earn huge success in very short period of time to maintain it they have to
introduce new innovation in dynamic market. In recent times, customers are more demanding
and new start-up bring new innovation which decreases the sales of company.

CONCLUSION
As per above presented information, it has been concluded that managing innovation is
most important aspect in an organisation which helps it to increase their productivity and
profitability. There are various model and theories which an organisation can use to manage
innovation in their organisation. These theories are business model canvas, blue ocean model,
disruptive innovation theory and many more. Business model canvas includes multiple steps like
key partners, value propositions, key activities, customer segments, customer relationships,
channels, key resources, revenue stream and cost structure which helps company to gain
competitive advantages over competitors. Blue ocean model helps the company to evolve their
product and services as per recent trends as well as reduce the cost of operations. It has been also
recommended to management of organisation that they can use disruptive innovation theory and
advance technology to develop their product, services and process which leads to increase in
their brand value and customer base. By using digital and advance technology they can develop
skills among their employees which leads to enhance in their quality or performance.

REFERENCES
Books and Journals:
Asheim, B.T., Isaksen, A. and Trippl, M., 2019. Advanced introduction to regional innovation
systems.
Belso-Martínez, and et.al., 2019. Delving into the technical textile phenomenon: networking
strategies and innovation in mature clusters. The Journal of The Textile Institute.
Chen, Y. and Lee, C.C., 2020. Does technological innovation reduce CO2 emissions? Cross-
country evidence. Journal of Cleaner Production, 263, p.121550.
Erwin, D.H., 2021. A conceptual framework of evolutionary novelty and innovation. Biological
Reviews, 96(1), pp.1-15.
Ganguly, A., Talukdar, A. and Chatterjee, D., 2019. Evaluating the role of social capital, tacit
knowledge sharing, knowledge quality and reciprocity in determining innovation
capability of an organization. Journal of knowledge management.
Gasparin, and et.al., 2021. Business as unusual: A business model for social innovation. Journal
of Business Research, 125, pp.698-709.
Kavadias, S. and Hutchison-Krupat, J., 2020. A framework for managing innovation. In Pushing
the Boundaries: Frontiers in Impactful OR/OM Research (pp. 202-228). INFORMS.
Kawabata, M.K. and Junior, A.S.C., 2020. Innovation and institutions’ quality: a comparative
study between countries. International Journal of Innovation Science, 12(2), pp.169-185.
Kobarg, S., Stumpf-Wollersheim, J. and Welpe, I.M., 2019. More is not always better: Effects of
collaboration breadth and depth on radical and incremental innovation performance at
the project level. Research Policy, 48(1), pp.1-10.
Macnaghten, P., 2020. The making of responsible innovation. Cambridge University Press.
Marion, T.J. and Fixson, S.K., 2021. The transformation of the innovation process: How digital
tools are changing work, collaboration, and organizations in new product
development. Journal of Product Innovation Management, 38(1), pp.192-215.
Nguyen, T.T., Pham, T.A.T. and Tram, H.T.X., 2020. Role of information and communication
technologies and innovation in driving carbon emissions and economic growth in
selected G-20 countries. Journal of environmental management, 261, p.110162.
Ottosson, S., 2019. Developing and managing innovation in a fast changing and complex
world. Springer Books.
Song, M., Fisher, R. and Kwoh, Y., 2019. Technological challenges of green innovation and
sustainable resource management with large scale data. Technological Forecasting and
Social Change, 144, pp.361-368.
Taylor, D., King, R. and Smith, D., 2019. Management controls, heterarchy and innovation: a
case study of a start-up company. Accounting, Auditing & Accountability Journal.
Online:
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<https://www.shortform.com/blog/netflix-innovation-strategy/>
The Best Way for Netflix to Keep Growing, 2018. [Online]. Available through:
<https://hbr.org/2018/08/the-best-way-for-netflix-to-keep-growing>

Blue Ocean Strategy: How to Make the Competition Irrelevant, 2020. [Online] Available
Through: <https://www.business-to-you.com/blue-ocean-strategy/>
STRATEGY CANVAS, 2022. [Online] Available Through:
<https://www.blueoceanstrategy.com/tools/strategy-canvas/>
Chart of the Day: Netflix Competitors Could Present Better Plays for 2019, [Online] Available
Through: <https://realmoney.thestreet.com/investing/stocks/chart-of-the-day-netflix-
competitors-could-present-better-plays-for-2019-14823074>