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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
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
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
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
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
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
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
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
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!
03.05.2023
IOT 5037 – Innovation adoption & diffusion in organisations: Diffusion of Netflix
Edward de Bono Institute | University of Malta
Disclaimer
10
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.