Prep
Distruptive Innovation
Netflix Inc.
Netflix story starts with
- DVD by mail
- Recommendation system to combat low diversity
- Streaming
- Content creation
- Global expansion
- Diversification
Questions
- What made Netflix a disruptor?
Pain points:
- Late fees
- Limited selection
- Having to go to the store
- Predictable subscription pricing
As well they saw up and coming:
- DVDs growing in popularity
- Broadband internet
- How did technological and market shifts later erode its advantages?
- The people who were licensing their content to Netflix started their own streaming services (Disney+, HBO Max, etc.)
- Netflix now had to enter the content creation space and compete there
- What strategic questions does Netflix face now?
- A transition from disruptor to disrupted. It is now being disrupted and being forced to change from a platform to a studio
- Instead of their low fixed cost model previously, they now have very high fixed costs.
- I think this might even be seen in Netflix’s infamous need to always end seasons in a cliffhanger to ensure subscribers stay on.
- Given these challenges, what should Netflix do next?
- Well we see now that they are introducing Ads to their subscription model to try and increase revenue
- I think selling consumer data is also very valuable, seeing watch times, when people drop out of watching, etc.
- Just like how Candy Crush makes a lot of money.
Archive
The Disruptor Faces Disruption
Netflix Inc. (Netflix) versus Blockbuster is a famous Classic Disruption story.
In this first section, we explore how Netflix emerged as one of the most iconic disruptors of the 2000s. By reinventing home entertainment—from mail-order DVDs with no late fees to personalized recommendations and a bold early bet on streaming—Netflix overturned Blockbuster’s dominance and reshaped consumer expectations. We will also touch on the vulnerabilities that surfaced for Netflix in the 2010s and discuss how the firm should position itself in the platform-versus-content-studio dilemma.
Case: Netflix Inc.: The Disruptor Faces Disruption (9B17E016)Download Netflix Inc.: The Disruptor Faces Disruption (9B17E016)
Now that you have read the case, consider the following case questions and bring your answers to class.
| Case Preparation Questions: 1. What made Netflix a dominant disruptor in the 2000s–2010s? 2. How did technological and market shifts later erode its advantages? 3. What strategic questions does Netflix face now? 4. Given these challenges, what should Netflix do next? |
Using Christensen’s theory of disruptive innovation, we will examine why Netflix’s rise exemplifies classic disruption. The video below offers a quick overview of the concept.