Case Study: Netflix
Case Study: Netflix
Drawing from the Oaks Reading on Innovation and Competitiveness, what strategy did Netflix use initially in competing with Blockbuster? How did it evolved over time? In hindsight, what could Blockbuster have done to defend itself against Netflix?
Netflix’s initial strategy revolved around the use of the internet and the United States Postal Service to deliver DVD’s to subscribers and could be described as disruptive innovation. Reed Hastings used the internet and postal service to cut the costs involved in operating a storefront and was able to provide people with a simpler, easier-to-use system. By allowing subscribers to rent however many movies they wanted a month and not charging late fees, Netflix offered the same service as competitors but with a simpler approach from the customers’ viewpoint; in addition, the lack of a physical store meant the customers’ options weren’t as limited. As well as their pricing plan, they offered a review system that customers’ recognized as making it more likely that their preferences would be reflected in recommendations from Netflix. Netflix eventually adopted a survey system to market movies directly to customers that increased customer awareness of lesser-known films. That simpler, more direct service allowed Netflix to grow until it was a direct competitor to larger firms like Blockbuster.
In order to continue being competitive, however, Netflix had to continue innovating and this is where their strategy became more transformational in its innovation. As long as people had to wait for their DVD’s to be delivered, there would always be a market segment that was more likely to use Blockbuster for more immediate rentals. Netflix’s innovation in this regard was the Video on Demand service (VOD). With this service, any subscriber could watch any available film/television show instantly from the comfort of their home without even having to drive to a Blockbuster.
In hindsight, Blockbuster could have
Drawing from the Oaks Reading on Innovation and Competitiveness, what strategy did Netflix use initially in competing with Blockbuster? How did it evolved over time? In hindsight, what could Blockbuster have done to defend itself against Netflix?
Netflix’s initial strategy revolved around the use of the internet and the United States Postal Service to deliver DVD’s to subscribers and could be described as disruptive innovation. Reed Hastings used the internet and postal service to cut the costs involved in operating a storefront and was able to provide people with a simpler, easier-to-use system. By allowing subscribers to rent however many movies they wanted a month and not charging late fees, Netflix offered the same service as competitors but with a simpler approach from the customers’ viewpoint; in addition, the lack of a physical store meant the customers’ options weren’t as limited. As well as their pricing plan, they offered a review system that customers’ recognized as making it more likely that their preferences would be reflected in recommendations from Netflix. Netflix eventually adopted a survey system to market movies directly to customers that increased customer awareness of lesser-known films. That simpler, more direct service allowed Netflix to grow until it was a direct competitor to larger firms like Blockbuster.
In order to continue being competitive, however, Netflix had to continue innovating and this is where their strategy became more transformational in its innovation. As long as people had to wait for their DVD’s to be delivered, there would always be a market segment that was more likely to use Blockbuster for more immediate rentals. Netflix’s innovation in this regard was the Video on Demand service (VOD). With this service, any subscriber could watch any available film/television show instantly from the comfort of their home without even having to drive to a Blockbuster.
In hindsight, Blockbuster could have