Analyzing the Key Factors Contributing to Netflix's Success

Netflix is one of the top American entertainment companies in the U. S. specializing in online on demand streaming video, as well as a DVD-by mail services. The company started its subscription model in 1999 and now has 117 million subscribers in 190 countries. Not only does Netflix feature TV shows, movies, performances and documentaries, but in 2011, Netflix began its own original series with shows such as Orange is the New Black, House of Cards and acquired rights to shows like Desperate Housewives and Lilyhammer. Netflix’s goal wasn’t to gain attention from a broad audience but they wanted to connect with every viewer by giving each population a show or movie that they can’t live without. They used this tactic in order to create a strong relationship between them and the subscribers.

In December 2016, Netflix redesigned their website by using creativity and data science insights to make it easier for users to browse the catalog by matching up their previous show and movie viewing and giving them similar options instead of having to search through the entire website. Also Netflix launched their Download and Go feature which allows users to watch shows/movies offline, causing the company to expand into 130 new countries. This helped the company improve the mobile experience by creating faster menu scrolling on mobile devices and changed the way content is encoded so that more static video scenes requires fewer bits. Netflix designed a principle that their CEO, Reed Hasting, implemented into the company in order to succeed at disruptive innovation which are: Think Big, Start Small, Fail Quickly and Scale Fast. Hastings always knew that Netflix would and can create more as a company if they were to continue advancing. Although they were able to win against Blockbuster, he new as technology would advance that Netflix would have to be proactive rather than reactive to the newest inventions.

The Think Big initiative came from Netflix’s ability to create the streaming video services to its consumers. Hastings argued that most companies think small because they are more concerned with protecting their existing business, not nearly thinking the possibility of that being a long term threat. Start Small was created because Hastings had a big idea but started with small projects. He believed companies that started with big ideas and executed them as such, biggest downfall was not having the proper planning for the project. An example would be when Starbucks attempted to launch a drink called Sorbetto which was supposed to be the next biggest Frappuccino. This drink cause Starbucks to take a huge loss, with one of the reports from the NY Times stating: “Customers didn’t like the sugary concoction. And neither did Starbucks baristas, who had to spend an hour and a half cleaning the Sorbetto machines at the end of their shifts. A few months later, Mr. Schultz abandoned Sorbetto. ”

Fail Quickly, in my opinion, is one of the most important inniatives when a company is being innovative. As a fast growing company, it is important that you create a plan B in order for your plan A to work. In the beginning stages of the streaming services, Hastings adopted a poker players mantra where most of his most could have been lost early hand. Instead Hastings folded his hands to save the money until he finally would get a good hand. This is an example of thinking big as well. Most companies lack the right knowledge in creating a plan to get to the next level. The term “Do not put all your eggs in one basket” has become essential when companies are planning on launching something big.

Lastly, Scale Fast means to always be ahead of your own company. Companies started to follow Netflix by providing streaming video but has failed to successfully develop because they aren’t willing to take the risk of attacking its own business. Netflix is planning on buying an entire television program, which can cause more competition because this can start the end to a monthly subscription to a cable-television or satellite television service. Netflix has continuously proven their creativity through taking risks and accepting the potential loss or gain to the company by having a big plan but starting with smaller projects all while having a plan B. In 2015 Netflix’s market tremendously increased from 3 billion to 50 billion in one summer. Netflix is still the most popular subscription video-on-demand service in the world, however the content to the website is second-run content. This means Netflix isn’t primary owner of more than half the shows and movies they offer. Although this is true, the original owners cannot charge Netflix enough to capture the bulk of the value from having it available for streaming. This is because Netflix’s biggest strength is their research through user data. Netflix is constantly paying attention to their millions of users and observing the popular shows and movies they like to watch. This is a competitive advantage because they have superior information, giving the company a good sense of what each movie and show is worth. Netflix’s second competitive advantage is their massive scale. Netflix’s growth spark has cause its content to spread to an larger audience, causing higher subscriber number and higher content spending. Its competitors like Hulu may feel threatened because with their lower revenue, they wouldn’t be able to provide as much content as Netflix. Netflix has created its company to be so diverse in their content giving the users options such as kid friendly, Spanish-language, british, LGBTQ etc. creating a more relatable stream service for its users.

Lastly Netflix’s third biggest advantage is its capability for niche content. Netflix can afford to buy content that doesn’t have broad popularity, meaning they can adjust their content to attract particular subscribers who may be interested in personalized recommendation. The competitors aren’t as global as Netflix, so they wouldn’t be able to fully accommodate their users as much as Netflix can. Netflix may take pride in their users but they also value their employees as well.