Innovative and Competitive Advantage: Changing Environment
Innovation and Competitive Advantage: Changing Environments
Innovation, its the life blood of a companies existence. The only way to stay alive in an ever changing market is to constantly be evolving and seeking growth, but what is needed in order for any company to be successful in innovating a new product or strategy in todays market? In todays market competitive advantages can be here today and gone the next due to ever changing technology and marketing strategies that fall out of date in a matter of weeks based on social media. However mastering the advantages is how companies stay ahead of the curve and give the customer what they don’t know they want and stay at the fore front of innovation. Today we will be looking at a company that has master that, Netflix.
When Netflix was being created in the late 90’s, there was a market already in place for movie and game rentals. Companies like Blockbuster and Hollywood video had been in that space since the early 80’s and were in thousands of stores nationwide with over a billion dollars in sales each year throughout the 1990’s. So how could a company enter that space and be competitive with brands that already have a corner on the market and had been the originators in the home movie and game rental space. Well Netflix in 1997 started by doing just home DVD rentals and although they believed that would be a competitive advantage, by 2002 they had yet to make a profit and they were actually still losing money. They had failed to carve out the market of at home delivery that had surpassed blockbuster, mainly due to home delivery not being what it is today with amazon prime. What they needed to do was innovate something that could move them out of the DVD market.
The Competitive change
Netflix knew that they were an advantage over brick and mortar store, they also knew that while home delivery was easy and convenient to consumers; most consumers didn’t trust that method due to long mailing times(3-5 days). Netflix decided to make a change and in 2007 it fully committed to a digital streaming service and went away from mailing DVD’s to consumers as they viewed it as a dying technology. Most consumers did not know that they wanted a streaming service until it was presented to them, in a decades time Amazon went from 66 million in income to 1.8 billion in net income. All of this was due to the company understanding that the streaming service created little overhead and brought the product to the consumers fast and was much more direct. Netflix has also embarked on a series of changes that keep its diary fresh and ever changing, the media they offer is new movies and TV Shows that Netflix maintains the profit on and there is little in the way of competition as Hulu and others are present in the market, but they lack the library and innovation that Netflix has. Hulu doesn’t provide original content like Netflix, which is something that Netflix has exploited in partnerships with disney and marvel to make Netflix original TV shows that are only on Netflix. Shows like orange is the new black, Punisher, house of cards, narcos and Daredevil have won awards and beat out shows on syndicated TV station further cementing Netflix at the top of the stream websites.
In 1997 Reed Hastings and Marc Randolph had an idea to start a mail order DVD company by offering flat rate movie rentals combined with a website. These were two emerging technologies, combined by forward thinking individuals. That lead in less that 20 years to 1.8 billion dollars in net income and has revolutionized the way we consume media and forced TV stationed to battle a company that people pay for. Netflix hasn’t been without road bumps and layoffs like the one in 2011 have happened, but they have handled the business well and bounced back to recover from those tough spots. The unique Netflix shows have a list talent and producers making content we all watch and know about. This is what helped Netflix become the leader in an industry that upon Netflix’s conception was dominated by Blockbuster. Blockbuster failed to innovate and change its business model and it ultimately ceased operations in 2010. Netflix changed this industry by introducing disruptive innovation and beat blockbuster, I’m looking forward to what they show us next.
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