Opportunity Statement
Change and disruptive innovation make an organization effective in the long run. If an organization seeks to remain competitive in the dynamic market, change and innovation play a fundamental role in improving competitive advantage. Organizational change in this context refers to the alteration of technology, the organization structure, or people in an organization. Change is effective to increase sales and revenue, and how an organization handles this change will reflect the success or failure of the organization. Change can include making things better, cheaper, faster, or doing things differently from competitors. In this paper, we shall discuss managing change and disruptive innovation in a case study of Netflix Corporation.
Abstract
Change management and disruptive innovation is an essential subject of study as it helps organizations make smart choices towards attaining competitive advantage. Organizations can familiarize themselves with new technology and change how they operate toward obtaining long-term goals. Successful organizations make strategies to change the way of operations and work processes. This can take a range of processes and activities with failures and successes. What matters is how the change agents, especially managers handle the transition and resistance to change from employees (Robbins& Coulter, 2007).
On the other hand, disruptive change refers to the processes that an organization engages in that radically change its game in the industry. It involves creating rules and regulations that standardize operations and identifying areas that require improvement. Additionally, it helps organizations analyze their products and services, identify areas for improvement, and identify consumer needs that can be solved with an innovative solution (Robbins& Coulter, 2007). This research paper shall examine the change and disruptive innovation taken by Netflix and summarize findings that other corporations can use to attain competitive advantage.
Introduction
Change management encompasses the comprehensive process or approach of transitioning organizations, groups, or individuals from one state to another (Project Management Institute, 2013). The aim is to improve the current organizational state and move the business towards a future state with intended goals. Change management helps organizations integrate and align employees, processes, strategy, culture, and organizational structures. Change agents should ensure a strategic plan is followed towards attaining the organizational objectives (2013). Four main areas of change occur in organizations, which include people, structure, technology, and strategy. Changing the people in the organization refers to processes involved in changing the attitude, perceptions, expectations, and behavior of employees (Robbins& Coulter, 2007).
Moreover, changing the organizational structure involves altering how workflows in the organization. Through changing the workplace relations, job design, employee empowerment, and coordination mechanisms, among others. Changes in the external environment often impact the organizational structure of a company. Changing technology involves the change agents altering how work is done by enhancing modifications to the work process. Finally, changing the organization strategy comprises the change in methods of work performance or equipment used in attaining the final products. Failure to pay attention to these main areas when the change is due may negatively impact the organization (Robbins& Coulter, 2007).
In this research paper, we shall focus on change and disruptive innovation taken by the Netflix company to change operations and strategize on improving sales, meeting customer needs, and staying competitive in the industry. The research is intended to give the history of Netflix before and after a change and to evaluate the effectiveness of the change and innovation undertaken by the company. The findings will help to reveal the effectiveness of managing change and disruptive innovation in struggling companies.
Method
This research will use secondary data methodology in analyzing the process of organizational change and disruptive innovation of Netflix company. The research will use readily available data on the company website and scholarly articles such as google scholar that reveal information on the organizational change of Netflix. It shall involve the review of available literature on the company website, books, and articles from an existing database to narrate the company’s turnaround story. Additionally, we shall analyze case studies and other relevant literature that will contribute to narrating the change story, and we shall study the leadership and organizational changes, network changes, partnership changes, core competence and further contribute toward revealing the findings of the research that contribute to understanding the effectiveness of managing change and disruptive innovation.
Literature Review
Change Management involves the practice of continuously renewing the structure, capabilities, and direction of an organization to match the requirements of the ever-shifting external and internal customers. Change is essential for an organization, whether at the strategic or operational level (Wang & Sun 2012). To maintain core competence, stay ahead of technology, or survive in the market, change agents need to make strategic decisions for competitive advantage. Managing organizational change is very important, and it should be regarded as a high managerial skill required by every organization that seeks to survive. Many organizations use organizational change as a strategic tool to guide and lead employees toward attaining long-term goals. It is the role of strategic leaders to influence employees to make informed decisions that enhance the organization’s long-term success (Todnem, 2005) (Zainol et al., 2021). Netflix is an excellent example of an organization that used change as a strategic tool to manage organizational effectiveness. The CEO believed in the transformational leadership of its employees that changed the organization’s success story.
Netflix Inc. is an entertainment service provider with a huge mark in the media and entertainment industry. The company was established by Reed Hastings and Marc Randolph in 1997 (Netflix Inc, 2021). It has over 222 million paid memberships globally in over 190 countries. These subscribers enjoy unlimited Tv Series, mobile games, documentaries, feature films, and genres in a different language (Netflix, 2022). In 1999 the company had its first shift from selling DVDs and rentals by mail to introducing a subscription feature where customers could rent DVDs at a monthly rate compared to the initial pay-per-rental model. The change allowed customers to enjoy unlimited content. In 2007 the company went through another change. The company introduced a new video and streaming feature for television series and feature films. This change helped to boost success and achieve a competitive advantage. In 2011, the company went through a challenging period of turmoil that nearly led to its closure. Netflix lost more than 8 million customers in a single year, and stock prices fell by 80% from a peak of $304 per share down to $ 100 per share (Ryan, 2013).
The loss was caused by a management decision that split a $ 10 subscription into two costing $ 8 each. The rise in price by 60% was not received well by the existing customer base. The split between online subscribers and DVD watchers brought mistrust, and customers canceled their subscriptions. The change agents had a tough decision to make, either to continue with the strategy hoping customers would accept it in the long run, or to listen to customer demands (Modgil et al., 2020). The company also faced stiff competition from other online service providers such as YouTube. It gave the customers preference leading to a further loss in customer subscription (Meunic, n.d).
Netflix decided to listen to customer demands to have all-time access and better internet access. The company offered simplicity and content precisely based on the customer’s feedback on the social media platforms. It transformed the service it offered by changing the rental industry, how customers rented movies, and how people watched movies and delivered them to their homes (Ryan, 2013). The change in operations increased the subscription customer base from 12.3 million to 20 million (2013).
Additionally, the company turned to cloud computing to manage the explosive customer growth. It partnered with Amazon Web Services to run critical applications. Another remarkable growth in shares was experienced by Netflix, with a growth of more than 70% to reach $ 304 per share (Ryan, 2013). Netflix Inc is known as a remarkable business innovator today and a successful disruptor in the industry. It moved from supplying DVD mailouts to offering online streaming services, a sector that was previously overlooked. Netflix is an opportunist, and it took advantage of open space in the market using thoughtful leadership and a culture of innovation that has helped the company to survive in the market (2013).
Many players diminished in the space where Netflix took advantage by offering customers the ability to watch content directly on their personal computers and to forget checking the mailbox daily. The company started to pay attention to customers and offer exceptional value by offering a variety of content at a fair price. It also offered a wide selection of television shows and movies available through streaming video. The company is now rated as the best e-commerce site to offer the best service to customers and maintain customer satisfaction. It is currently rated above Amazon and Apple for offering the best customer service (Ryan, 2013).
Netflix has focused on listening to employees and customers, and it has changed how employees are expected to work in the company. The company has conducted various changes in the company on the core competence, networks, and partnerships. In order to successfully achieve these changes, the company has increased employee responsibility and freedom of work. The project teams are expected to work towards offering the best service for the company. The company also expects the managers or change agents to make better-informed decisions. Netflix expects its employees to work independently and only consult the managers when they are unsure of an action. Also, the company continuously helps in improving the employee culture with a significant focus on customer satisfaction (Modgil et al., 2020).
Findings
The Netflix case reveals that organizational change is effective for competitive advantage. The company focused on giving customers the best experience by changing its operation methods. Initially, the company offered DVDs, and customers could receive mailouts of content they could watch and pay per order. The company then moved to online streaming services due to changes in innovation and advancements in technology. The change aimed to satisfy the large customer base by offering unlimited content online that could be watched in the comfort of their home. Had Netflix been stagnant in its processes, the company could have lost a great deal. Stiff competition from other online service providers such as YouTube was a threat to the company’s survival.
Netflix gave the customers a smooth experience, meeting the customers’ needs and changing the whole experience by enhancing customer service. It continuously focused on innovation by introducing new products to the market and new workflow processes. The company shifted from DVDs to online streaming to improve the service and, in return, avoid late fees from customers. The change was effective since the company saw an increase in revenue during the period, and the stock prices increased. Subsequently, the number of subscribers increased as the customers enjoyed the personal experience offered, and they could select ad watch unlimited content compared to DVDs. Additionally, Netflix builds on its culture of listening to employees and giving them the freedom to make informed decisions to better the company. The change agents use strategic leadership to influence employees to make decisions and become part of the organizational change.
Conclusion
Change and disruptive innovation are effective in an organization that seeks to maintain competitive advantage and remain relevant in the industry. Change helps companies focus on innovation that leads to better performance and offers services that satisfy customer needs. Continuous improvement goes hand in hand with altering the company structure, processes, and the overall way things are done in an organization. The Netflix case is a good example of how organizational change can turn around the status of a struggling organization. Devising strategies that can work to yield high profits and maintain customer satisfaction involves continuous innovation and using new opportunities in the market for organizational well-being. Organizational change boosts competitiveness as a company keeps up with trends in the industry hence becoming more appealing to customers. On the other hand, disruptive innovation helps companies to analyze their processes and strategize on how to improve in the long run.
