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Felix Zappe 13.06.202 2 Kurs: Thema | Fakultät | Institution Disclaimer IOT 5037 Innovation Adoption and Diffusion in Organisations 10th January 2017 The Diffusion of Netflix By: Felix Zappe and Merve Senay

The Diffusion of Netflix

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Page 1: The Diffusion of Netflix

Felix Zappe03.05.202

3Kurs: Thema | Fakultät | Institution

Disclaimer IOT 5037Innovation Adoption and Diffusion

in Organisations10th January 2017

The Diffusion of Netflix

By: Felix Zappe and Merve Senay

Page 2: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

DisclaimerAgenda

The Netflix Diffusion Timeline2

Characteristics of the Innovation “Netflix”1

2

Characteristics Influencing Diffusion of Netflix3

PESTEL Analysis - Factors Influencing the Adoption4

Recommendations for the Diffusion of Netflix5

Page 3: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

Disclaimer

3

1. Characteristics of the Innovation

Online subscription-based streaming service within high-tech sectorEvolution into leading online television networkTargets movie-lovers all over the world (40 million customers)

Netflix as Service Innovation:• Intangible• Heterogeneous • (Semi-)perishable • Simultaneous consumption (watching) and production (streaming)

Netflix as Disruptive Innovation (Christensen, 1995):• Create new market with new values• Disrupt existing market with existing values• Displace established market leaders

 

Page 4: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

Disclaimer

High Procurement

Costs

Independent MoviesRecommendation System

2. The Netflix Diffusion Timeline

• Evolution of online movie rental

• Fees in line with competitors & slow delivery time• Shift to a prepaid subscription model• Further adjustment of pricing system

• Unbalanced customer demand• Surveys & ratings to balance out demand for new & old movies

• Filter for hiding unavailable movies• Decreased customer dissatisfaction• Decreased need for more copies of new movies

• Hiring of Ted Sarandos• Negotiation of “revenue-sharing agreements” with major studios

• Overcoming barrier of slow delivery time• Offering overnight and same day delivery

• Acquisition of distribution rights to independent movies• Introducing them to market

• Online Streaming

1997

2000

2007

New Distribution Centres

Bypassing “Out-of-Stock” Issue

Feedback from Early Adopters

Video-On-Demand

40 $ late fee payment

UNLIMITED

2.01.0

4

Page 5: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

Disclaimer

2007

2013

2017

Rising Customer Base• Integration with platforms

such as XBox360, PS3, Nintendo Wii

Own Production

Internationalisation• Expansion outside the

US• Market entry into 60 different countries

New Consumer Behaviour

• Netflix Merchandise• Open Source Project• Netflix Hack Day

NETFLIX WORLDWIDEGoal: Becoming the only

“TV-Network” worldwide!

3.0

5

• Independence• Success: many Emmy-Nominations and Awards

2. The Netflix Diffusion Timeline

Page 6: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

Disclaimer

6

3. Characteristics Influencing Diffusion of Netflix

Online rental Online streaming Own series

Relative Advantage

No storesConvenience

No rentalHigher convenience

More controlHighest

convenience

Compatibility Relatively high (Relatively) high High

Complexity Medium Low Low

Observability High (but delayed) High High

TrialabilityImmediate trial

after deliveryOne month trial

Cancel at any timeOne month trial

Cancel at any time

1.0 2.0

(Rogers, 1995)

3.0

Page 7: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

Disclaimer

7

4. PESTEL Analysis Factors Influencing the Adoption

Legal & Political

• Copyright laws• Tax differentials

• National regulations• Net neutrality• Privacy laws

Economic

• Purchasing power of customers

• Foreign exchange volatility

Social

• Changing demography

• Changing customer behaviour

• Diverse consumer segments

• Online piracy

Technological

• Keep track of technological developments

• Developing respective apps

Environmental

• Online production and consumption

• Shift from real to virtual product

Legal & Political

• Copyright laws• Tax differentials

• National regulations• Net neutrality• Privacy laws

Social

• Changing demography

• Changing customer behaviour

• Diverse consumer segments

• Online piracy

Page 8: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

Disclaimer

8

5. Recommendations for Diffusion of Netflix

Expanded partnership network Lower entry barrier

Diversification of own produced content

Exploiting the whole range of TV spectrum

Creating incentives for increasing Netflix’s popularity

Organising Netflix parties (hype creation)

Being aware of political and legal issues in respective countries

Influencing legal regulations and laws in favour of own behalf

Examining the capabilities of becoming a network provider

E.g. focusing on rural areas, double or triple play offers

Collaboration with cable TV providers

Scheduled vs. flexible show times

Page 9: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

DisclaimerIt is not easy to combine student obligations with the Netflix obsession

Thank you for your attention!

Page 10: The Diffusion of Netflix

03.05.2023

IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix

Edward de Bono Institute | University of Malta

Disclaimer

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References

Tidd, J., Bessant, J. R., & Pavitt, K. (2005). Managing innovation: Integrating technological, market and organizational change (3rd ed.). Chichester, United Kingdom: Wiley, John & Sons.Shih, W., Kaufman, S. & Spinola, D. 2009. Netflix. Harvard Business School.Pereira, P. M., 2015. Netflix – the new face of the TV industry. Noren, E. (2013, January 21). Digital Business Models: Analysis of the Netflix Business Model. Retrieved December 26, 2016 from http://www.digitalbusinessmodelguru.com/2013/01/analysis-of-netflix-business-model.html.Sadq, Z. M., 2013. Analysising Netflix‘s Strategy. International Journal of Science and Research.4(3).

Christensen, C. (2012, July 10). Disruptive innovation. Retrieved January 2, 2017, from http://www.claytonchristensen.com/key-concepts/McAlone, N. (2015, November 18). The father of “disruption” theory explains why Netflix is the perfect example — and Uber isn’t. Retrieved January 2, 2017, from Business Insider, http://www.businessinsider.com/the-father-of-disruption-theory-explains-why-netflix-is-the-perfect-example-and-uber-isnt-2015-11Randhawa, K., & Scerri, M. (2015). Service innovation: A review of the literature. In The Handbook of Service Innovation (pp. 27-51). Springer London.Rogers, E. M. (1995). Diffusion of innovations (4th ed.). New York, NY: The Free Press.