The popular tech term “disruptive innovation,” tends to signal the idea of a fundamental shift in an industry’s business model and consequently, consumer behavior. Classic examples may come to mind, none more prominent than Netflix’s dismantling of Blockbuster. Disruptive innovation, by definition, is defined as an innovation that creates a new market and value network, eventually disrupts an existing market and value network. In the case of Netflix vs. Blockbuster, this shift was centered around delivery method.
Often deemed the most influential business idea of the early 21st century, a disruptive innovation is far more extreme than incremental innovations. This idea evolves the very way that people behave by showing them a better solution to their needs. To highlight some common principles, we’ve focused in on Netflix’s entry into the entertainment industry.
In the present day, it is hard to believe that not long ago, we actually left our homes, drove to a store and waited in line to purchase a 6-12 month old movie. Now, that entire journey is summed up into three clicks of a button. Netflix did not seek to improve the in-store experience of movie-buyers. No, Netflix eliminated the in-store experience and provided movie-buyers with a better solution.
What Blockbuster Missed
Let’s explore a few critical pieces of Blockbuster’s Loss of Vision…
- What their customers were buying. Not in the sense that Blockbuster didn’t know what they were selling, but more so why their customers were spending money – there’s a big difference.
- Value chain is just as important as profit. Blockbuster focused too much on maintaining a high level of profits, and too little on inspiring innovation in the movie industry.
- Ignoring disruption doesn’t make it go away. In 2007, Blockbuster had the opportunity to acquire Netflix for a mere $50 million. They dismissed the opportunity, believing it would disrupt their “traditional” revenue.
- Disruption can be too fast to catch up to. For a period, Blockbuster tried imitating Netflix’s early-on strategy by introducing mail-order movie rentals. Even later, they introduced movie streaming. Because of Netflix’s innovation, the once-Blockbuster customers had disappeared before the company could react.
Why Netflix Worked
Netflix introduced a huge change in how content was distributed. In doing so, they shifted consumer expectation and interaction. As is the case with lots of modern day disruption, Netflix did not rely on physical storefronts to distribute their product or learn about their customers. They made it easy for themselves and their customers, creating an environment that could react to emerging customer preferences overnight.
Furthermore, and not uniquely, Netflix appealed to a wide audience because of the variety in their selection. Truly, they were a one-stop shop for people’s entertainment desires.
One In The Same, Netflix & Retrieve
At Retrieve, we see many similarities with Netflix in the way that our software is constructed. No similarity is more important than having one solution for a variety of customer needs. We pride ourselves as being an innovative, one-stop shop for those with wide-ranging needs for information and communication. When you want a single platform for your comedic, horror and action-oriented needs, choose Netflix. When you want a single tool for distributing your video, support, document and assessment content, try Retrieve -- for free!