Back to the late 20th century, when Netflix was just a small start-up, Blockbuster dominated the video

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Back to the late 20th century, when Netflix was just a small start-up, Blockbuster dominated the video rental industry with over 9,000 stores around the globe. With the emergence of DVDs as the new video medium, Blockbuster managed to get exclusive deals with big Hollywood studios to rent new DVD releases after cinema showings ended. At that time, almost every household had a videocassette recorder (VCR) for the purpose of video watching, and Blockbuster rental stores were people’s frequent destination for movie selections.

Then, at one point, people realized they went to Blockbuster stores not because they enjoyed the experience but just because it was the only choice for them to watch new movie releases. With that being said, Blockbuster store visits were far from convenience. Imagine one Sunday afternoon, your kids were home and you wanted to watch a movie with them. Then you would probably spend the next few hours driving them to a nearby Blockbuster store, going through hundreds, if not thousands, of DVDs on the shelves without a catalog or any recommendations from store attendants, except for the new releases which were charged out at a premium, getting eyestrain from reading the titles, and arguing with your kids what to watch. By the time you got home, you realized you had not cleaned up the VCR machine’s video head after the last watch, so you do that first, before sitting down on the couch to play the DVD you brought home earlier. How much enjoyment was left then? But it was not the whole story. After some days of watching the movie, you were too caught up in your work and forgot to return the DVD on time, thus you had to pay the store an exceptionally high late fee. In fact, late fees comprised of a large pie of Blockbuster profits. It was an unpleasant experience that actually drove people away from the business.

Then Came Netflix – a Market Disruptor

As a former Blockbuster customer, Netflix CEO Reed Hastings thoroughly understood the issues with that customer journey, and he initially started Netflix as a mail-order DVD subscription service to eliminate the lengthy in-store visits and annoying late fees. To make up for the lack of physical customer interaction, Netflix offered lower prices (monthly subscription fees for unlimited rentals) and implemented efficient order-processing computer systems. After just a few years, from a small business, Netflix steadily grew its revenues and got Blockbuster on guard.

Nevertheless, it was when Netflix launched its video streaming service that saw the end of Blockbuster. Netflix, again, took a deep dive into the consumer journey and foresaw the future demands for instant-access entertainment at the convenience of Internet devices. With the new streaming service, Netflix customers could browse a detailed digital movie catalog and press play in a second with no need for a physical DVD. The streaming service of Netflix is so successful that it accounts for one-third of downstream Internet traffic during peak hours in the U.S.

In 2013, upon discovering the potential hype of binge-watching, Netflix started to produce in-house content, known at Netflix Originals, and released all the episodes at one time. Its first original series House of Cards still remains one of the best dramas on Netflix. Besides, Netflix took on customers’ desire for personalization and came up with the smart content recommendation system which was backed by machine learning. Each customer now has a customized experience on Netflix based on their personal habits and preferences. This is where Netflix built up its sticky service to get customers addicted and keep them coming back for more.

Netflix’s popularity can be exposed by impressive numbers: circa. 150M users, almost double the runner-up Amazon Prime; two-thirds of Netflix users share their accounts with others, increasing the actual viewers by 2.5 times; 10 hours spent on Netflix weekly by average U.S. users; 23 languages used and 57% of international users; etc… Considering the recent increase in the share of users outside the U.S., Netflix is drastically growing its international content in the library.

And it gets that the customer journey doesn’t stop changing either. Netflix has been extending the customer journey via cross-platform partnerships. It has teamed with telecommunications and media companies like Vodafone, BT, and Sky in the UK, who all offer Netflix as part of their mobile or cell phone packages, or TV packages, and you can now control your Netflix accounts with voice-activated home automation IoT apps like Amazon Alexa, and Google Home. All of these customer journey extensions are there to save customers time and to provide convenience, and continue to provide better customer experiences.

Hasting could not have applied all of these digital transformation changes to the Netflix business model so successfully without closely following and predicting the customer journey and even testing with customers via co-creation. For a service company like Netflix, customer experience is king, thus the importance of the customer journey mapping process when it comes to lifting a business or an organization to another level, and changing the ‘game’.

Task: In this case study, you are required to explains the ascendancy of Netflix and how it should maintain its dominance.

Discussion:
1. Conduct a historical analysis of Netflix and Blockbuster and identify and explain the path dependency of the organisations. (why historical analysis important base on two companies innovation and technology skills improvement in those two organisations history)
2. Conduct a cultural analysis of Netflix and Blockbuster and identify and explain the implications of the organisations’ culture on their respective strategic development.
3. Use the Strategic Position and strategic Choice analysis above to identify and explain strategic drift as it relates to the organisations and its relevance to the fall of Blockbuster and the ascendancy of Netflix. (Focus on strategic choice)