Major Changes at Netflix: A Success Story of Transformation on an International Level
Major Changes at Netflix: A Success Story of Transformation on an International Level
Change in an organization refers to business transformation in which a corporation modifies its business tools, including its business policies and strategies as well as its processes, structure, architecture, and culture (Sartori et al., 2018). The most common causes for change management are technological advancements, globalization, changes in market conditions, bad performance, and the demands of customers. The institutional adjustments make it possible for the corporation to adapt to the digital economy. As a result, several firms have implemented technology advancements in order to keep pace with the digital age. Organizational transformation supports a corporation in substituting outdated processes with more effective techniques in order to get a competitive advantage in a given market. Netflix is one of the most successful examples of corporate transformation as it embraces the modifications that are necessary to adapt to the new environment.
Organizational Change at Netflix: Major Changes that Redefined the Movie Industry
Technology has altered numerous aspects of the universe, encompassing schooling, commerce, sports, and entertainment, among others. As a result of modern technology like computers the internet, smartphones, and social media, several well-known enterprises have gone out of business (McCord, 2014). Some people have been able to adapt with the pressure of transition by using complex techniques and embracing organizational change, while others have struggled. Netflix is among the best illustration of an organization that has had to adapt its business model and strategic planning so as to stay in business. It has successfully dealt with the impacts of institutional change in to gain a competitive advantage.
Netflix was established in 1997 in the state of California, United States. Nevertheless, the organization began operations in 1998, when it began selling DVDs and renting out DVDs over the mail. The commodity was a DVD which was basically rented out through the mail, while the payment scheme was a pay-per-rental strategy (Hughes, 2015). Netflix debuted its new subscription service the next year, in 1999, allowing consumers to rent DVDs on a monthly basis. Subscribers were able to take advantage of unlimited DVD renting with monthly payments through this service. As a result, the pay-per-use approach has been replaced with a monthly subscription model. Netflix users select the movies and videos they want to watch from the company’s official website. Following that, the programmes are distributed to subscribers in the format of DVDs by the distributors (Bariso, 2015). Netflix launched a new video streaming service for movies and television programs in 2007, which has since become widely popular. The effective utilization of the change force has contributed significantly to the success of the movie streaming giant. Netflix, on the flip side, is widely considered to be among the major platforms for streaming latest movies, series, television shows, and other entertainment content.
Since its founding in 1997 as a DVD rental service, Netflix has grown into an international streaming organization with more than 75 million consumers in more than 190 nations (Netflix Inc, 2016). The firm’s award-winning original programming is available to clients now, and they may watch television shows, documentaries, and feature films, among other things. In accordance with the organizational profile of Netflix, one of the advantages of watching films in this format contrary to conventional, linear television programming is that consumers get the opportunity of playing, pausing, and resuming their favourite shows (Company Profile, n.d.). Netflix is committed to ensuring that its content can be accessed on as many Internet-connected displays as possible in order to maintain its position as a leader in the streaming programming market, according to the company.
As per the corporation’s 2018 Annual Report, Netflix has adopted a fundamental strategic plan that to grow the streaming membership business internationally, and they are persisting to enhance the services offered to their members by expanding the streaming content focusing on a variety of genres and meeting the needs of consumers. Netflix is also constantly improving its user interface and expanding the reach of its streaming services to include additional screens for increased viewership (Netflix Inc, 2016). Figure 1 below shows the average weekly consumption of Netflix per major regions in hours. It shows that with immediate satisfaction and hectic schedules as the norm in today’s society, Netflix adds value to its consumers’ lives by making content available at any given moment on various devices, and by allowing each consumer convenience to choose what to watch and for infinite number of times depending on choice.
Figure 1: Weekly Netflix video consumption in major regions in hours (source: businessmodelanalyst.com, 2018)
With relation to comprehensive e-engineering, quality management, innovation, and restructuring, Netflix has been the most actively involved in the transition process. The firm’s domination of the market necessitated the implementation of these reforms (Fairchild, 2016). The organization has had to change on a continuous basis as a result of the use of TQM to assess consumer trends. Licensing is expensive, and the company needs to keep corporate costs under control while making continuous attempts to enhance the variety of movies, television shows, and series offered. E-engineering has served a role in making sure that Netflix’s infrastructure has been enhanced in order to handle the large number of requests from members. Restructuring has proven to be critical in maintaining the talent required for e-engineering projects.
Innovation, Intrapreneurship, and Creativity
Innovation, intrapreneurship, and creativity has been the main competencies that keep Netflix afloat in the ever-changing business environment. Intrapreneurship has a vital role to play in the attainment of innovation and creativity. These elements are mentioned by Blanka (2019) to be key ingredients in enabling sustainable competitive advantage. Individuals with entrepreneurial skills create an innovative environment in existing business activities and attempt to achieve sustainable growth.
Netflix started out as a DVD rental service, and it was in this part of the entertainment business that the corporation first began to cause havoc with the status quo (Dawson, 2016). Netflix, which entered the market by offering DVD rentals through the mail, has since surpassed the dominance of video retail establishments such as Blockbuster. Consumers were able to rent films from the comfort of their own homes, thanks to this one-of-a-kind service (The Economist, 2016). The institutional shift at Netflix provides a real-life illustration of Lewin’s change management approach. Every organizational change has a number of steps that must be completed in order for the change to be successful. The most important variables that influence an organization’s willingness to accept change are technology, culture, and the environment in which it operates, which Netflix leverages through innovation, creativity, and intrapreneurship.
Nature of Changes at Netflix and its Success
Netflix managed to provide a new, differentiated service that consumers valued, forcing existing competitors to either evolve or go out of business as a result. Blockbuster, for instance, failed to respond to the changing business and went bankrupt as a result of their failure. Technological advancements, shifting consumer preferences, severe rivalry, and the emergence of a worldwide marketplace, as demonstrated by Netflix’s disruption of the DVD rental industry, are driving transformation in the entertaining video industry today. Figure 2 below shows its success following this strategy by 2018. Market players must be creative and responsive in order to remain relevant; otherwise, they risk becoming obsolete. “The entertainment video industry is fiercely competitive and vulnerable to quick change,” says the author (Netflix, Inc. 10-K, 2015). Netflix used the term quantum technological transition (Jones, 2013, p. 367) for the first time when they debuted their mail order DVD business. With the help of modern internet technologies, this service was able to develop a whole new service offering that people rapidly discovered they enjoyed. As a result of this significant innovation, there is more unpredictability in the marketplace, and the competitive environment has shifted. Netflix caused competitors to alter their business models as a result of the company’s success.
Figure 2: Netflix as the video consumption platform of choice in America (Source: Statista.com, 2018)
Reasons for Organizational Change at Netflix
With regards to Corfield (2017), the organization is growing more and more well-known with each passing day for its ease of use, high-quality content, and improved functionalities. After all, the incorporation and adaptation of technological advancements is an unavoidable part of meeting and exceeding client expectations. Consumers in the 21st century would never want to spend additional time traveling to and from the cinema. Consumers would go to the theatre to watch new releases before watching films at home on Netflix. This is no longer the case. People can easily be entertained by technological advances, such as a desktop, a laptop, and a smartphone, thanks to the availability of internet access.
Lessons Learnt from Netflix’s Successful Transformation
A major lesson is that one must continuously keep changing and evolving with regard to the global changes. Another observation is that one must tailor their organizational changes with the objectives and goals of the shareholders. The decision to change its business model made Netflix one of the most successful organizations of the 21st century. The company basically has a huge market share of the film industry. The majority of people throughout the world utilize social media in a variety of contexts, including education, entertainment, and marketing. Netflix’s decision-makers had anticipated an increase in market demand. Consequently, the firm has shifted its business strategy to enable individuals to view films as well as television shows on computers and handheld devices. Netflix’s executives discovered that customers did not want to store video, so they adjusted the company’s business model. Furthermore, Netflix is continuously on the lookout for new strategies from competitors, making it stand out in the US and globally as shown in figure 3 below.
Figure 3: Dominance of Netflix in the US compared to other subscription service providers (Statista.com, 2019)
Apart from the above, another major lesson gained from Netflix’s successful transformation is a critical response to the external environment that is always changing. From the external influencers that have shaped Netflix’s path, it is increasingly clear that political, economic, social, cultural, technological, and legal issues will always be changing (Tallman, Luo, & Buckley, 2018). These agents of the external environment are important for growth because they push an organization to remain adaptable and flexible to changes. According to Vladoc and Chatzinikolaou (2019), being aware of the external environment and making the required changes and transformations is a revelation of growth. Netflix’s transformation helps to create an understanding of what is expected of a successful firm in relation to the future.
Netflix has shown great innovation and creativity when it comes to strategy formulation. This is one of the greatest lessons that can be derived from the organization’s success in its environment and industry. Sartori et al. (2018) identify an innovation strategy to be a key way for an organization to clarify its objectives and priorities. Innovation and related strategies are an important element of the success of an organization, particularly in the current overly competitive business environment. Innovation allows an organization to outline its goals including all of the activities that will aid in focusing efforts on the attainment of said goals. For example, Netflix’s innovative strategy was pegged on improvements to the DVD rental service, attempting to give customers a more flawless experience. With this innovative strategy, the company was able to align its goals and priorities in a way that enables success in the long term.
How Netflix Deals with the Forces that come with Organizational Change
As stated earlier, organizational change relates to the procedure of adjusting and transforming the way a corporation conducts its business. The organization implements a little or large adjustment in order to increase productivity and adapt to the new circumstances. When it comes to change in a firm, there are two primary components to consider: external factors and internal factors. Technological advances, globalization, political and social transition, and the management of ethical behaviours are examples of external factors. Changing technology conditions and globalization, for instance, are the key external pressures that prompted Netflix to modify one of its features.
Similarly, internal changes within an organization are meant to expose the organization to the inner strengths and weaknesses, thus propelling an organization to progress. Combined, internal and external changes, from the case of Netflix, will provide the drive and experience to push beyond the constraints of an industry. Internal factors such as human resources, current technology, and financial power are all important for Netflix in its quest to succeed in its industry. Additionally, Netflix has to deal with a corporate culture of success, one that sets the bar on performance and expectations from all stakeholders.
Further Developments and Change at Netflix
Expectations and behaviours are altered as a result of new technology, which alters the characteristics, tools, and patterns of an organization’s product or service offered. Netflix was able to successfully navigate the forces of change in order to achieve success and wealth for the corporation, giving it an edge in the international market as shown in figure 4 below. Internal forces, such as changes in managerial people, work climate, efficiency, employee expectations, and crises, can also affect an organization’s decision to modify management practices. Netflix, for instance, recognized that viewing a movie at home would cut the entertainment expense and alleviate the transport problems in the area. As a result, Netflix agreed to the organizational restructuring.
Figure 4: Netflix United States versus international audience 2007-2016 (Source: statista.com, 2017)
Netflix took its first steps as a typical corporation; however, it has gained a competitive edge by adapting its business model to meet the needs of its customers. The firm’s top management modified its structure in order to keep up with emerging technology. It has had two revisions, in 1999 and 2007. Nevertheless, since its introduction in 2007, the video streaming service has gained enormous popularity and generated significant revenue for the corporation. The discussion identifies some essential insights that can be applied to every business. One major observation is that it is always necessary to alter the characteristics of an organization in order to meet client expectations. Furthermore, digital adaptation and acceptance must be welcomed in order to provide satisfaction to both employees and customers. For the organization to work optimally, advanced features as well as tools must be introduced. For example, Netflix began its online video streaming feature in 2007 and has since expanded its capabilities.
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