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Case Discussion 3 Question: Case Study: Netflix and Disruptive Innovation

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Netflix was able to gain a competitive advantage over its chief rival Blockbuster. Discuss the Netflix value proposition and how it successfully gained and advantage over Blockbuster.

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Identify and describe some of the technology innovations that Netflix was able to exploit and how these innovations contributed to competitive advantage.

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Netflix is often used as an example of disruptive innovation. Using the LIRC and the internet, research the concept of “disruptive innovation” and then discuss how Netflix fits the model of disruptive innovation. Consider what role technology played in achieving the disruptive innovation that provided Netflix with a competitive advantage.

Response Founded in 1997 by software executives Reed Hastings and Marc Randolph, Netflix has come a long way with a huge customer brand loyalty (Gallaugher, 2015). Netflix's value proposition statement is, "we promise our customers stellar service, our suppliers a valuable partner, our investors the prospects of sustained profitable growth, and our employees the allure of huge impact" (Kumar et al., 2015). With growing time, the world is getting more digitalized, and so is Netflix. Earlier, Netflix gained its customers' trust by selling DVDs door to door, but now Netflix offers a huge variety of movies and TV shows, all on a TV screen. By promising customers stellar service, they mean that shows and movies would be in high definition without any advertisements. Netflix is a digital platform that currently operates in more than 190 countries (Rosenberg, 2021), which means almost everywhere in the world. Suppliers from all these countries can upload their content on Netflix. As a consumer residing in the United States, I have plenty of options to see a Korean drama or a Bollywood movie, all on one platform. Day by day, the number of users is increasing, generating profit for the company as well as for the investors. The young generation is generally more tech-savvy, and Netflix knew how to mold this into their competitive advantages, something Blockbuster failed to take into their account. Blockbuster is a brick-and-mortar space where a consumer would have to physically go and search for a DVD. Netflix, on the other hand, collects the consumer's preference of shows, and then recommends shows based on their interests (Kumar et al., 2015). Netflix streams high-definition (HD) quality videos on a large scale for its consumers, and that is challenging. In terms of technology, Netflix uses cloud computing, content distribution networks (CDNs), and other public computing services to gain an advantage over its competitors (Adhikari et al., 2012). Netflix outsources the majority of the technologies due to

which they have a little infrastructure of their own. Netflix uses Amazon's cloud services to record and analyze customer's details (Adhikari et al., 2012). Netflix also uses collaborative filtering. It's a classification of software Cinematic that analyzes and monitors a consumer's preference of shows and then creates a welcome page based on what a consumer would be most likely interested in watching (Gallaugher, 2015). With so many options, this feature helps consumers save the hassle of finding what to watch. It was not something Netflix's competitors were able to match when the company was emerging. Disruptive innovation is a process by which a company's product or service starts acquiring its customer base from the bottom of the market and then moves upwards, creating its brand and leaving its competitors behind ("Disruptive Innovation," 2012). Netflix's quitting its DVD mailing service was merely an experiment. Netflix decided to do the DVD business by the name Qwikster and the digital streaming by Netflix (Richardson, 2011). It was a bold move, and Netflix predicted the future of the next ten years instead of focusing on ten months. Netflix also started producing its original content that is accoladed well by its consumers and critiques. With the change in time and technologies, people don't prefer old-style TVs anymore. They prefer internet TV so that they can enjoy their videos on demand. Netflix offers a lower subscription fee than its competitors (Hansen, 2017). Consumers can watch videos without the interruption of advertisements. Also, consumers started getting comfortable with the idea to not plan ahead of time of what they want to watch.

References Adhikari, V. K., Guo, Y., Hao, F., Varvello, M., Hilt, V., Steiner, M., & Zhang, Z. L. (2012). Unreeling netflix: Understanding and improving multi-cdn movie delivery. In INFOCOM, 2012 Proceedings IEEE (pp. 1620-1628). IEEE. Retrieved May 10, 2016, from http://www.hit.bme.hu/~jakab/edu/litr/CDN/NetFlix12.pdf Disruptive Innovation. (2012). Retrieved May 22, 2016, from http://www.claytonchristensen.com/key-concepts/ Gallaugher, J. (2015). Information Systems: A Manager's Guide to Harnessing Technology. Licensed under a Creative Commons Attribution-NonCommercial-Share Alike 4.0 International License. Hansen, B. (2017, January 23). Disruptive Innovation: A Case study on how Netflix is transforming the living room. Copenhagen Business School. https://researchapi.cbs.dk/ws/portalfiles/portal/60751689/248533_Bianca_Hansen_Masters_Thesis_CBP _2017_Case_Study_on_Netflix.pdf Kumar, N., Sharma, E., Matthews,B., & Baskov, V. (2015). Report prepared for: Netflix business model analysis. Richardson, A. (2011, September 20). Netflix’s bold disruptive innovation. Harvard Business Review. https://hbr.org/2011/09/netflix-bold-disruptive-innovation Rosenberg, E. (2021, March 9). Why Netflix content is different abroad. Investopedia. https://www.investopedia.com/articles/investing/050515/why-netflix-content-differentother-countries.asp...