Disruptive Innovation: The Netflix Way

Harvard Business Review’s article, What is Disruptive Innovation?, includes a great, short video describing disruptive innovation.  Check it out here!

In short, a big, established company is de-throned by a smaller company with less resources due in large part to the bigger company’s focus on sustaining innovation and overlooking certain customer segments or innovations.  Meanwhile, the small company establishes a foothold by identifying those overlooked segments and innovations and re-imagining how business could be done, while ultimately unseating the big giant.

As I read more and more about disruptive innovation, the most prominent example that comes to my mind is Netflix.  Netflix has re-defined watching tv and movies.  Prior to Netflix, Blockbuster was the market leader for newly released movies and tv shows. But the “inconvenience” of visiting a brick and mortar store, plus the expense associated with watching the beloved flicks was pretty substantial.

Netflix offered a new way of viewing for a fraction of the cost.  Not only could you enjoy browsing tons of different movies and tv shows and receiving it at your home, but it was also unlimited and only $7.99 per month. Blockbuster used to charge $4.99 for a 3-day rental of one new release.  While Blockbuster was focused on their stores, Netflix identified that there were many customers who weren’t close to a Blockbuster store and would benefit from receiving a dvd straight to their home.  It was convenient, quick and market-changing or put another way – a disruptive innovation.

Since Netflix first came out things have changed;  Blockbuster has diminished considerably; and the amount of people giving up cable tv has declined as well.  Netflix now offers unlimited streaming of tv shows and movies, as well as some propriety-branded shows.  Netflix and its shows are often mentioned alongside some of television’s most successful channels, such as HBO and Showtime, and has challenged other businesses, such as Amazon Prime and Hulu, to mimic their offerings.  Netflix has continued to evolve and has set itself up for continued success.

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Another company who has set themselves up really well by questioning traditional buying patterns is none other than Amazon.  Aside from their success in the online shopping realm, they continue to question every area of the business in the name of innovation.  One area that I am particularly interested in seeing evolve is their new initiative for delivering via drones.  To learn more, check these videos out.

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Amazon relies a lot on human interaction for labor and delivery of the goods purchased – which is also a high expense, so developing a way to deliver goods to people using a drone would cut down on labor and delivery costs, time and increase customer’s satisfaction.  Of course there is a lot of research and development that needs to be done prior to a major launch, but I believe Amazon is onto the next major innovation that could alter the world of delivery in a very impactful way in the next 5-10 years.

So many services have evolved to become digitally accessible.  The companies who are taking notice of the digital trends and identifying new ways to expand and improve their offerings via digital technology, will more than likely be on a path to continued success for the next decade.  The future is digital.

 

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