1. Introduction
Technological advancement of the 21st
century has opened many opportunities and poses multiple challenges for every
business and industry. Digital technology is continuously changing customers'
culture, behavior, and expectations.
Digital disruption is defined as
an effect that changes the industry and its operation through innovation or new
technology (Brooks, 2022). Understanding disruption allows companies to make
existing customers happy and retain them while attracting new customers.
The entertainment industry has
also gone through major changes in the past few years due to innovation. Streaming,
online subscriptions, and digital content have shifted the entertainment
industry from DVDs and CDs to digital content (Granados, 2022). Netflix is a
classic example of digital disruption in the entertainment industry.
This report analyzes the changes in the entertainment
industry and advises the Chief Digital Officers (CDO) of Netflix on understanding
change and acquiring and engaging talent for digital disruption. The report
also recommends Netflix on collaboration and creating a digitally ready
culture. The key leadership traits that are required for digital disruption are
also discussed.
2. The
case of change
Netflix is a classic example of
digital disruption in the entertainment industry. Netflix is a
subscription-based online streaming service. Unlike DVDs or CDs, it allows
subscribers to watch online shows, movies, and videos and play games on an
internet-connected device.
Netflix was founded in 1997 as a media streaming and video-rental service. Initially, as a distributor, Netflix started its digital service in 1997 (Zaman, 2022). This digital transformation allows the members to watch whatever they want, as per their customized taste on their own devices. The platform offers online services with a monthly payment of minimal fees. It allowed members to watch while sitting at home and without going to any physical place. The customization options allow the users to watch the shows according to their taste.
Figure 1 Netflix innovation journey (Sources: Zaman, 2022)
Netflix streams online content by purchasing an IP license to stream initially. After 2013 the company started the production and creation of its content. Now the platform is more focused on creating original content in diverse fields to attract more customers. To survive and thrive profit, any organization needs to meet the demand of customers (Grover, 2021). The changing behavior of customers due to digital disruption and tough competition has pushed Netflix to keep innovating and adopting changes.
Netflix is operating in a highly
competitive industry as the streaming television space is the fastest-growing
sector. Companies like Amazon Prime, Hulu, CBS, and Time Warner are also
developing their content and offering online streaming. This increasing
competition in the streaming sector poses threats to the growth of Netflix.
To meet the challenges posed by
digital disruption and competitors, Netflix is using AI, Machine learning, and
big data to stay ahead of its competitors by providing personalized content.
These technologies analyze the interests and viewing habits of customers and
offer them similar shows. Netflix also lost 200,000 customers in the first
quarter of 2022 (Mullin, 2022). The company is using different methods like;
shifting from binge to weekly streaming and online gaming to maintain its
customers’ rate and attract more customers. The objective of these disruptive
innovations is to re-accelerate growth.
1. Capture
insight
Netflix is a global leader when it
comes to online entertainment and streaming services. However, the company is
operating in a competitive market and it needs to understand its competitors
and macroeconomic trends like consumer preferences and behaviors. To understand
the need for change and adapt to the trends, companies need agility. This can
be developed through understanding the external and internal environment of
business.
Hyperawareness:
Netflix can use hyperawareness
techniques to capture insight into its company and industry. Hyperawareness is
defined as sensing digital trends and changing in a competitive environment (Neubauer, Tarling, and Wade, 2017). It also
allows the company to understand the customer’s behavior and employees’ data
and insight into the physical assets of the company.
Netflix needs to develop Hyperawareness of two types; behavioral and situational awareness. Behavioral hyperawareness is the ability to understand the needs and behavior of customers or employees. Whereas, situational awareness refers to an understanding of the external macro-environment i.e. business environment and operating environment.
(Donald,
2018).
Table 1 Types of Hyperawareness
Netflix can collect data about its
internal and external factors including, customer behavior, industry trends,
new technology, etc, and get insight into trends in the industry. The company
can use AI, big data, and Machine learning to be hyperaware.
Demographic, interest-based, and
search-based big data can be used to capture the behavior of subscribers about
the need for content and type of entertainment. Furthermore, the company can
use AI and ML to detect the visuals that are the most attractive to the viewers
(Goel, 2020). Furthermore, the company
can use SWOT (Strengths, weaknesses, opportunities, and threats) analysis to
get insights about its competitors. Netflix can also use online software like;
BuzzSumo and Epicbeat etc to understand current trends (Engenius, 2021). By
using these technologies Netflix can be hyperaware.
1. Make
fast decisions
Informed decisions are important for any
business as they ensure a better understanding of risks and make decisions
based on available information. Research
has indicated that data-driven informed decisions enable companies to work more
efficiently and make informed decisions (Fumagalli,
2019). Technology has sped up the process of data collection and
companies are making informed decisions faster.
Netflix is operating in extremely competitive
markets and evolving behavior of consumers required informed decisions. There
are many examples of big giants who were industry leaders but failed to make
informed decisions causing their downfall i.e. Nokia (Laamanen et al, 2016).
Data-driven and inclusive decision-making:
Netflix can adopt data-driven and inclusive
decision-making. This technique helps in making strategic, regular, and
customer-oriented decisions while considering the market standing of its
competitors. The company can also use predictive analytics by using past events
and data and predicting what the future holds.
Data visualization:
Another technique that Netflix can use is data visualization. This is a graphical representation of data based on available facts and numbers. It helps in giving quick insight into trends (Sing et al, 2022). Furthermore, the company can also use augmented reality (AR) and AI to ensure decisions are informed and inclusive as they involve internal and external experts.
Table 2 Making informed decisions for Netflix
For data-driven decision-making, Netflix can
use data analytical tools like to get real-time information and make decisions.
The company can also use cloud-based software to capture insight into customers’
behavior. According to Salesforce, companies that are using the software have
seen an increase in their revenue and customer satisfaction (Salesforce, 2022). Netflix can also use AI-based analytical
tools to grow its subscription.
1. Acquire
and engage talent
Human capital is a key pillar for any
organization. Talent engagement focused on building meaningful engagement.
Research has indicated that most of the policies failed at the execution stage.
For the successful implementation of strategies Netflix also needs to engage
the right talent.
Netflix can engage the right talent by using
dynamic resources and dynamic processes. Dynamic resources include; human
talent and technology. Whereas, dynamic processes include; introducing new
products and adapting existing technology. Netflix can also adopt the ADKAR
model to achieve changes successfully.
ADKAR model:
ADKAR models include; awareness, desire,
knowledge, ability, and reinforcement. It helps in better analysis and
understanding of change (Karambelkar and
Bhattacharya, 2017).
Table 3 ADKAR
Model for Netflix
|
Awareness |
Desire |
Knowledge |
Ability |
Reinforcement |
|
Netflix should create awareness
about the need for change. For instance, the company has started a gaming
segment and they should advertise it on different platforms beforehand. |
Create desire among employees as
well as customers about the change. This can be done through regular
communication and involvement. |
Inform stakeholders about key
changes that are required, their procedures, and their impact. Engage their internal as well as
external stakeholders. |
Test changes before full
implementation. Take feedback and identify loopholes. As Netflix can shift from binge and
test trial weekly episodes. |
Monitor the changes and
engagement of talent. Techniques like rewards, recognition, and, feedback should be used to encourage human capital. |
Netflix can start the process of human
engagement with awareness and desire to change. Clear communication will engage
more talented people. The company can also collaborate with teams and adopt big
data, AI, and software development. Companies like DHL, and Google are using AI
and big data to adopt changes and acquire talent (DHL, 2022).
Netflix also needs agile technology to
acquire talent. Agile technology refers to advanced automated processes, data
visualization, and analytical tools. Netflix also needs competitive human
capital and they can hire talent by using AI and online tests.
Acquiring talent is the start of the process
and the real issue is the retention of employees. The cost of retaining
employees is low whereas, losing these talents costs the company high prices (Frank et al, 2004). Therefore, Netflix should
offer clear communication, rewards, and a safe working environment to increase
job satisfaction.
1. Create
a digital-ready culture
Organizational cultures are the sum of shared
values, behaviors, and unwritten rules. These factors influence the
organizational culture. Becoming a digital organization not only required
products, services, and interaction with technology but also required a digitally
ready culture (Kohnke, 2017). Most of the
companies failed because of cultural clashes. Hence, it is important to create
digital-ready culture.
Hofstede cultural dimensions:
Hofstede has mentioned six dimensions of
digital culture. These are; power distance, individualism vs. collectivism,
masculinity vs feminism, uncertainty, long vs short-term orientation, and
indulgence vs restraint (Hofstede, 2011).
Figure 2 Hofstede
Cultural dimensions
Hofstede focuses on the understanding of key
differences between two cultures. Netflix also needs to consider these six
dimensions while operating in diverse markets.
Role of CIO:
The role of formal leadership is essential in
creating a digital-ready culture (Westerman,
Soule, and Easwaran, 2019). For Netflix, the role of the Chief
Information Officer (CIO) is crucial for the success of the new and existing
programs. This role is vital in companies that are focusing on digital channels
and making efforts to increase customer experience. According to Anatoly,
customer experience is the heart of digital transformation. The CIO should
inspire and drive the vision of the company (Apogaeis,
2022). He also interacts and acquires
talent. Furthermore, he should be a risk taker and collaborate to grow. He
should also create awareness among internal and external stakeholders and
convey the purpose, need, and procedure of change.
Netflix should look for Agile CIO. The Agile CIO will maximize organizational
value while minimizing waste. He will also encourage a “customer first”
approach. CIO should also encourage continuous improvement of the system and
process by supporting employees. Another important behavior that an Agile leader
will hold is to support their teams and strive for objectives. Amazon is a
globally successful chain and it uses an Agile strategy and focuses on
customers first (Denning, 2019).
Netflix should focus on creating
customer-centric digital culture because they are key stakeholders. The growth
and revenue of the company highly depend upon customer satisfaction.
1. Steer
collaboration
Digital transformation is not a one-day
process, but it is a continuous process that needs collaborative teams. Netflix believes in collaboration. According
to Netflix, the biggest lesson they have learned is the power of collaboration
(Bell and Koren, 2007). For instance, the
company gets information and data about customers’ choices through the algorithm,
however, the collaboration between different teams inclusively helps the
data-driven decisions. They also bring together people of different talents, and
skills and combine their recommendations to solve problems. Research has also
indicated that collaboration among team members and between team brings
innovation and improve problem-solving skills.
Creating an effective collaboration:
For collaboration, the role of leaders is
critical. Emotionally intelligent leaders create high-performing teams. Netflix
can also create effective collaboration by creating high-performing through
clear identification of goals, and resources and then making a team (Wolff, 1993). These teams should have
distributed work and they should be motivated by the leaders. This team will
support the vision of the company.
Table 4 Creating
high-performance Teams for Netflix
High-performance teams or effective teams can
lead the digital journey of Netflix. The vision of the company is to retain its
customers by offering stellar services and staying ahead of its competitors.
The company can initiate new programs like games, online streaming of original
content, and weekly streaming. For this, the high-performance teams can support
the process and ensure the successful implementation of the plan.
Collaborative tools for Netflix:
The role of Chief Collaborative Officer (CCO)
is important as he works long with teams and departments while ensuring collaboration.
The CCO of Netflix can use the following collaborative tools to support its
initiative:
·
Trello
·
Slack
Trello is a visual tool that is used for the
management of the project. The project is organized on a board and progress is
gauged. Netflix can add files, checklists, and customized boards for teams. By
doing this the teams can collaborate and efficiently share information. Trello
is used by Google, Spotify, PayPal, etc (Infoclutch,
2022).
Teams also need direct communication and
quick information sharing. For this, Netflix can use Slack. It allows the team
members to connect and share information, data, files, etc for communication (Slack, 2022). Companies like Airbnb, Shopify, Pinterest,
Udemy, etc are using Slack.
1. Select
your leaders:
According
to the Harvard Business Review, companies are facing four major leadership
challenges due to increasing levels of ambiguity. These four categories are
known as VUCA, Volatility, Complexity, Ambiguity, and uncertainty (Moldoveanu
and Narayandas, 2021). The leadership needs to respond to these four
challenges.
Leadership attributes for digital transformation:
Netflix
is also facing these four challenges. To help the business adapt to the VUCA
challenges, the following attributes are necessary for the leadership of
Netflix.
i.
Customers
First
ii.
Collaborative
iii.
Innovative
iv.
Digital
Champion.
Table 5 Attributes of leadership for the digital
transformation of Netflix
Sources:
(Juo, 2021)
The first attribute of a leader who can promote digital
transformation is prioritizing customers (Juo, 2021). For Netflix, the
customers are the most important and key stakeholders. Thus, leaders should
prioritize their needs, choices, and behaviors.
The second attribute is collaborative habits. The successful
implementation the of project needs the collaboration of all team members and
engaging all others. Collaboration is essential for maintaining highly
effective teams.
The third attribute is innovation. He should encourage change and
apply fresh ideas in the organization. For instance, the CEO of Tesla started
EVs and it was an innovative idea.
The last attribute is that he should be a digital champion. This
means he should not only be aware of digital technologies but also understand the
complexities and challenges. For instance, at Netflix, he should understand the
complexities of live gaming and the challenges of streaming.
Critical
behavior for leaders of Netflix:
The leaders of Netflix need to adopt a few changes to become agile
and innovative leaders. Here are a few of the recommendations:
i.
Leaders
should understand their leadership style. It can be commanding, visionary,
affiliate, democratic, and coaching. For the leadership of Netflix, the recommended
style is; visionary. As it brings a new vision whenever changes are required.
ii.
Leaders
should assess the strengths and weaknesses of their leadership style. This will
help in improving attributes.
iii.
They
should develop new leadership skills, styles, and attributes by using GROW
model (Grant, 2022).
Table
6 GROW model for Leadership of Netflix
i.
Remove
communication barriers and create an Omni channel for access to information.
ii.
Ensure
collaboration with team members.
Netflix
is an example of a successful digital transformation. The company is operating
in a highly competitive industry where change is necessary. The role of
leadership is critical in the successful implementation of digital
transformation. Netflix should collaborate and build efficient teams to manage
internal and external challenges and retain its position in the industry.
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