MGB226 Innovation Case Study: Netflix Service and Business Analysis

This report provides a comprehensive analysis of Netflix, examining its service information, background history, and evolution within the streaming industry. It delves into an innovation evaluation, discussing sources of innovation, its impact, technological aspects, and the role of knowledge in Netflix's development. The report explores Netflix's approaches to innovation, including continuous improvement, the exploitation of new technologies, and product design. It also addresses disruptive innovation and new product development within the company. The report concludes with recommendations for enhancing user interaction, improving content offerings, and refining subscription plans to boost profits and customer satisfaction. The report is a case study for the MGB226 course, focusing on innovation, knowledge, and creativity.

NETFLIX

Table of Contents
Introduction...........................................................................................................................................2
Service information and Background history.....................................................................................2
Innovation evaluation............................................................................................................................4
Recommendations..................................................................................................................................7
Conclusion..............................................................................................................................................8
Reference................................................................................................................................................9

Introduction
Netflix is a streaming company that offers internet-streaming services to providers. This can be
done either through watching them through the internet or through sending hard copies of the
tTV series and movies on DVD. The reason for picking this is that over time the filming
industries has grown and been part of leisure activities. The production industries have had a
high demand for movie production thus the recent technological advancement and innovation of
new methods to meet its customer's demands (Gomez-Uribe and Hunt, 2016).
In addition to being leisure, it has also added social bonding since people can join or boost
interpersonal relationships by watching or discussing on these services. The industry acts as an
education channel since some of the TV series and movies streamed by Netflix offer valuable
information to the users.
Since the start of the filming industry, there have been several movies and TV series released
that have tried to depict a true story (Jones, & Alony, 2011). This may include the dreadful
activities that have happened during the past. Watching these prevents society from doing
activities that may lead to this. There has also been a product that has shared the cultural history
of different communities thus aiding in appreciation of certain cultures. It is also important to
note that this service has also created job opportunities for different professions thus boosting
economics.
Service information and Background history
The company's name in full is Netflix, Inc. The co-founders of this company were Red Hastings
who was a business entrepreneur and Marc Randolph; he was the marketing director. This dates
back to the year 1997 August 29 (Lusted, 2012). They started the company as a media streaming
and rental video company in Los, Gatos in California. The primary service that is offered by the
Netflix Company is to offer subscription service to viewers. The TV series and movies that are
contained in their library include both productions done by other film industries and in house
productions.
Based on the current statics, it is estimated that the company has over 149 million subscribers
over the world. The major chunk of the subscriber is from the United State with the number

reaching 60 million. Despite the global reach of this service, there are exception countries that do
not have this service. These countries include:
 Syria
 Iran
 North Korea
 Iran
 Crimea
This is due to the government rules and regulation that have banned these services. The company
has grown to have other branches across the world, with the key branch offices located in: Brazil,
Netherlands and at South Korea.
In the beginning, the business ventured in the DVD sales and renting, this was trough use of mail
service. In the year 1999, the company was able to offer these services through the internet. The
DVD sale was not promising and after a year since the founding of the company Hastings
decides to leave this service and focus only on the DVD rental services (Tidd and Bessant,
2018).
It was until 2010 that the internet venture leads to streaming of the service. Once could subscribe
and stream the films directly through the internet. The business retained its DVD rental service.
The streaming services were launched in the United State and its promising customer satisfaction
it spread internationally to other countries (Velásque, Ahmad, Bliemel, & Imam, 2010).
In the year 2012, the Netflix Company produce its first TV series by the name ‘lilyhammer’.
This marked entering the production business. The company's venture in the filming industries
made it top of the list in 2016, having produced many TV series than other services. In the year
2017, the company was caught up in debts of up to 21.9 billion. This was contributed by the
acquisition of streaming rights in over 190 countries and the resources put in producing new
content at a high rate.
Currently, Netflix offers streaming service in three categories, these include:
 Basic plan- this enables a user to stream TV series and movies in only one devise
 Standard plan- allows HD streaming on up to two devices concurrently.

 Premium plan- this plan allows you to stream TV shows and movies in high definition
(HD) concurrently in up to four devices.
Innovation evaluation
In this section, the innovations that have taken place in the Netflix Company will be discussed in
depth. This will be in regards to the innovation concepts discussed through the lectures
(McCulloch at al., 2009).
Sources of innovation
One of the major factors that bring about innovation is new technology or new knowledge and
the change in how things are perceived. Hastings was impressed by how Amazon had
revolutionized the trading industries through delivery and advertisement of the product on the
internet. This perception of selling products and service through the intent induced the idea of
renting films. Their idea has first of VHS tapes but this was too expensive and delicate to ship.
The introduction of the DVD made is cost-effective and safe to transport over a distance without
it being damaged. Netflix using the same platform, internet, as a channel to trade online is a
diffusion of innovation (Haefliger, Jäger, & Von Krogh, 2010).
Impact the importance of innovation
Before Netflix’s services were introduced to the industry, it was difficult to hire or get a copy of
a film. These services have also made it more convenient and cheaper to hire or stream TV
shows or movie over the internet. Hasting is quoted that he was once fined 40$ for failing to
return a copy from a Blockbuster store in due time. In the year 2000, Netflix invented a monthly
subscription fee that made it more convenient and fair for the consumer to stream through
Netflix.
Technology push vs Demand-pull
The technological push in the Netflix Company as a case study was the introduction of the DVD.
These disks were cheaper to store compared to the VHS tapes. It has also more convenient to
transport them safely. Hasting did a test my mailing a DVD to his home in Santa Cruz and
arrived while intact. This technological push brought by DVD made it simpler. Over the year,
new ways of storing this data made it easier to stream. The enhancement in internet service also

made it possible for streaming across the world. The network structure revolutionized the use of
DVD and tapes to having the data stored on servers that can be accessed by the authorized user
over the internet (Di Stefano, Gambardella & Verona,2012).
Role of knowledge
Hastings was a renowned developer who as well conversant with the internet and the network I
created. On the other hand, Marc Randolph was a marketing director who understood how the
business market work. The partnership made it easier for them to use their skill set to see the
niche in selling and renting of film, this made them start a company that would satisfy the
customer's needs (Yan and Dooley, 2014.).
Approaches to innovation
There are numerous approaches towards an innovation; they depend on the nature of business
and its capacity in the market. The approaches that were used in offering Netflix services
include:
Continues improvement-
Using new technology- Netflix used DVD that was a technological improvement in the latter part
of the year 1997. This technology made it easier and cheaper to transport DVDs from the store to
the customer's address. The enhancements in the internet service also made it possible for one to
stream the TV show and movies from the Netflix library (Mihm, 2010).
Exploiting new technologies- the internet was and fewer companies were using it as a resource.
Amazon had learned to maximize the internet to marketing, shipping and performing various
processes through the internet. Netflix also decides to exploit it a resource to rent and sell films
through DVD.
Upgrading the model or services- in the begging, the co-founder of Netflix developed it a film
renting or selling the company. Over the years, the company grew and was able to produce its
films. This expounded its territories to also producing its films.
Product design- The Netflix Company has also used improved design as an approach to
innovation. The company offers different plans that make it convenient for a customer through

specialization; the improvement in their design has been able to meet different customer's
demands.
Disruptive innovation
Despite the upside brought about by the technological advancements, there were downsides to it.
The internet services had broadened the demand market of the Netflix service (Christensen,
Raynor, & McDonald, 2015). Their demand and interest in producing and delivering titles to
worldwide customers led the company into debt. This makes the majority of the profit used up in
paying this debt rather than investing in other business processes within the company.
New product development
It is abbreviated as NPD and involves the introduction of a new product or service into a market.
The NDP of Netflix was to the introduction of a new service that was not in the market. This was
modified from the Amazon online trading principles. Numerous objectives spearhead new
product development. They include (Schemmann., Herrmann, Chappin and Heimeriks, 2016):
 Change in demand due to customer preference
 New competition from similar or alternative products
 Change in technology
 Change in raw material
The new product development happens in four phases, they include:
 Fuzzy front-end- this is a prior phase to the requirement phase that involves
brainstorming. This is to understand the niche in the market and the highlight possible
requirement.
 Product design: This phase converts the stated requirement to products, services or
functions that will meet the customer’s requirements. This phase involves engineering.
 Implementation of the product, this involves testing the product design in a case scenario
(i.e Hastings receiving a mail with the DVD)
 The last phase involves the launching of the product to the market. It is the final phase of
the NPD.

The Netflix product has now dominated the market in streaming TV shows and movies. This is
based on the current statistics on the number of users who have subscribed to this product.
Recommendations
The customer feedback is important in identifying the preferences and the development area that
need to be addressed. In cases where they are neglected, the customer may abandon the product
and seek similar services from competing companies. The following are some of the
recommendations to the Netflix services.
The company should focus on increasing user interaction by offering push up notification on
relevant information. The films contained in the library have an expiry date and a user may lack
a film they had desired to stream. The other way of increasing user interaction is to introduce
random selection option that will help the user to select what film to watch, this will also
increase the use of the product thus boosting profits.
Netflix services have also developed trailer and comments that give brief descriptions on a film.
These descriptions are sometimes too detailed thus giving the customer the scope of the film.
This should be limited and well-structured to urge viewers to see the films.
The plans that are currently being offered should increase, there should be an extra plan that
enables the user to pay or subscribe to extra libraries. This will increase the profits by offering a
new service to the customer.
The Netflix service should also introduce a rating service that will make user rate a film after
they view a film. This will help in selecting a film to watch based on another person's reviews on
it. The reviews can also be a source for new ideas, this can be archived if this data is collected
and analyzed to create new films that will meet the customer needs.
The Netflix service should also incorporate a suggestion function that will suggest films to
watch. This can be done by analyzing the customer's history and suggesting another film of the
same genre.

Lastly, the service should be divided or grouped based on the age of the customer, this will
increase the market since parents may subscribe their children to Netflix plans that are
convenient to their age bracket.
Conclusion
Based on the case study, it is evident that innovation is necessary to archive success in the
business community. If the co-founders to Netflix did not realize the current business niche in
the business industry, the customer would not have enjoyed this service.
It is also important to understand and have adequate information before innovating a new
product. If the NPD processes are not adhered to, the final product may fail to meet the customer
requirements.

Reference
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard
Business Review, 93(12), 44-53.
Di Stefano, G., Gambardella, A., & Verona, G. (2012). Technology push and demand pull
perspectives in innovation studies: Current findings and future research
directions. Research Policy, 41(8), 1283-1295.
Gomez-Uribe, C.A. and Hunt, N., 2016. The netflix recommender system: Algorithms,
business value, and innovation. ACM Transactions on Management Information
Systems (TMIS), 6(4), p.13.
Haefliger, S., Jäger, P., & Von Krogh, G. (2010). Under the radar: Industry entry by user
entrepreneurs. Research policy, 39(9), 1198-1213.
Jones, M., & Alony, I. (2011). Guiding the use of grounded theory in doctoral studies–An
example from the Australian film industry.
Lusted, M. A. (2012). Netflix: The Company and Its Founders: The Company and Its
Founders. ABDO.
McCulloch, P., Altman, D. G., Campbell, W. B., Flum, D. R., Glasziou, P., Marshall, J. C., ...
& Balliol Collaboration. (2009). No surgical innovation without evaluation: the
IDEAL recommendations. The Lancet, 374(9695), 1105-1112.
Mihm, J., 2010. Incentives in new product development projects and the role of target
costing. Management Science, 56(8), pp.1324-1344.
Schemmann, B., Herrmann, A.M., Chappin, M.M. and Heimeriks, G.J., 2016. Crowdsourcing
ideas: Involving ordinary users in the ideation phase of new product
development. Research Policy, 45(6), pp.1145-1154.
Tidd, J. and Bessant, J.R., 2018. Managing innovation: integrating technological, market and
organizational change. John Wiley & Sons.

Velásquez, M., Ahmad, A. R., Bliemel, M., & Imam, M. H. (2010). Online vs. Offline Movie
Rental: A Comparative Study of Carbon Footprints. Global Business & Management
Research, 2(1).
Yan, T. and Dooley, K., 2014. Buyer–supplier collaboration quality in new product
development projects. Journal of Supply Chain Management, 50(2), pp.59-83.