Netflix (Management of Innovation Case)

Topics: Netflix, Renting, Rental shop Pages: 4 (1129 words) Published: August 25, 2013


Netflix has been in the forefront of innovation in the video rental industry despite the fact that it came about 20 years after the opening of the first brick and mortar video rental store (The Video Station) and 12 years after the opening of Blockbuster (its most prominent competitor). Netflix’ mail service came in at the right time when the DVD-format was still new making the company’s business model even more relevant. The change in format (VHS to DVD) was just the first of the many changes that happened in the industry but Netflix seemed to have the right formula to make its business relevant to the business landscape at for its strategies to work for their growth.


A. Reed Hastings was pathing the technology

Two years before the recognition of DVD as one of the most rapidly adopted consumer electronics products in history (2000), Netflix had already began offering DVD rentals requested over the Internet and delivered through the mail (1998). Within a year after movies started to be delivered directly through their cable television provider or over their computer (2006), Netlflix launched WatchNow (2007). In an environment defined by fast-paced technology, Netflix’s Reed Hastings seemed to have foreseen the forthcoming changes in the business landscape and innovated at the right time making the business benefit from these changes.

B. Heeding to the market needs

The same year when the “crowdsourcing” term was coined (2006), the company launched Netflix Prize giving away up to one million dollars to anyone who could substantially improve its existing recommendation algorithm (Cinematch). Netfix Prize is a testament that the organization recognizes the fact that its market is a potent source of innovation – they did not confine innovation in the four corners of their corporate office. Moreover, Netflix Friends was...
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