Innovation and New Product Development Case Study

A Challenge to Innovation: Can Netflix sustain growth?

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Abstract:
Netflix, the world’s largest online movie, television and other filmed entertainment rental subscription service (as of 2006), was an example of ‘innovation at work’. Operating almost like a mail-order business, the company had evolved a successful and proven marketing strategy, which helped it to grow into a highly profitable and established company. The success was attributed to the high levels of customer satisfaction and value added services the company offered since inception. With deals from all movie companies, and protected by a patent for its business model, the future of Netflix seemed to be certain.

However, the scene was set to change with the advent of movie downloads and analysts were skeptical about the continued success of Netflix. Although Netflix itself was to announce its own download venture in early 2007, it was to be seen how the company would remain competitive. The case tries to bring out the highly successful model that Netflix had adopted and if the success of this innovation could be sustained while facing newer challenges. The main issues that the case tries to highlight are: 1) Should Netflix alter its business model? 2) Can Netflix defend its business model and maintain its market leadership position? If so, what should its strategies be?

Pedagogical Objectives:

• To discuss how ‘disruptive innovation’ strategies impact companies
• To discuss how a successful business model can be sustained.

Keywords : Netflix; Innovation; Movie rentals; Innovation; disruptive innovation; Reed Hastings; Innovation Management Case Study; movie downloads; Apple; Amazon; Patent; DVD market; Value added services; recommendation system; allocation system; customer satisfaction

Contents:

• About Netflix
• Value Added Services
• The DVD Market
• The Movie Downloads Market
• Road Ahead