The transformation that was inculcated into the company happened in the year 2007. This change was the second transformation after the first in 1999, where selling DVDs through mails and rentals was shifted to the DVD subscription model. According to Snyman & Gilliard (2019), Netflix incorporated an online video streaming service in this transformational change. In essence, this was a new development for the company that had never been incorporated before. Notably, significant steps precluded the development of online video streaming. Therefore, understanding the history of the development is pertinent to appreciate the role of the change in itself.
Having been pioneered in 1997, within the boundaries of California USA, the initial set up for sales and distribution centered on the selling of DVDs through renting to users and sending some to the mails. By the time this was happening in 1998, just a year after it was brought into the market. By 1999, Netflix allowed for the subscription of the same services. The subscription feature allowed the customers to access monthly payments and unlimited rental services for DVDs. The transformation in this category highlighted pay for use kind of agreement. In the terms, the users had first to make payments through a subscription and then select all the movies they wished to watch (Kobiruzzaman, 2021). The company then sent it to them in the form of DVDs to watch and not necessarily from the official website.
The transformation is a good example of episodic change. Weick and Quinn (1999) describe an episodic change as infrequent, discontinuous, and intentional. Nadler and Tushman’s (1989) ‘Organisational Change’ model describe episodic change as anticipatory or reactive and whether the change needed a strategic shift in operations (Gibson, 2019). The change at Netflix is episodic because it was caused by external forces, especially from clients. There was a need for streaming television series and general films. Failure to accommodate the change would have sent the organization’s sales down the losses lane. The change was necessary to meet the demands of the rising technological invention and innovations and meet the public’s ever-growing demand. There was a transformation in the way clients wanted to watch the movies and the films that shifted the desire of the clients to have this need met.
Reason for the Happening of the Change Event
In 2007, Netflix began to face stiff competition from organizations such as Amazon, Apple, and Walmart. All of these companies had shown resilience in meeting their customers’ demand. In particular, long before Netflix had raised its antenna on the issue of meeting its customer’s demand, all of these companies had revolutionized how they did allow their customers to interact with their respective channels for online downloads (Walker et al., 2017). With the digitalization of the era, it was becoming outdated to deliver discs in wrappers and mail them to clients. This means that while other clients were accessing movies and films quickly at the tap of a button, Netflix clients suffered delivery delays.
External forces played a role in the change performed by Netflix. According to McGahan (2004), industries usually change due to threats to the industries’ core activities and assets. One of the driving forces for the change was the problems faced while using the system. The company delayed receiving the discs back after the clients had watched them already. The system was becoming strenuous and with lots of liabilities. It is essential to understand that the fragile disc wrappers could also get spoilt during the shipment, resulting in losses. A new invention would be essential to help Netflix regain its stand and guarantee business operations continuity with all these liabilities.
According to Kotter’s model of change, eight steps lead to the administration of change. The initial step of the model primarily intervenes in analyzing the reason for the need for change. In the first step of the model, urgency is needed (Kotter 1996; Galli, 2018). From the situation in which Netflix found itself in 2007, change was imminent and essential. Other rival companies gained dominance because of their accessibility to downloadable movies and films. There was a need to shift from more extended waiting periods of mailing and DVDs, according to Ruiz-Navas & Miyazaki (2017). The urgency of action at the time was in the offing. Additionally, there was a need to incorporate all the other steps of Kotter’s model to cement the required change. A team was to be built and have a vision sold to them before taking action. Short-term goals were created, and relentless work was done to realize a change. The change would then need to stick for the entire company’s future operations.
The transformation was pertinent to allow for faster streaming of videos, including Hollywood classics, mini-series, cult movies, and sometimes foreign films. The library at the Netflix collection amounted to over 70,000 videos that could then be accessed at $5.99 a month, which earned every subscriber six hours of unlimited streaming in a month (Boyd, 2017). With the new development, streaming was made easy as simply tuning in to a television network in the present day and having a watch. The limitations of the user interphases were marked with the archaic nature it held, but it was bliss for the time in which it was inculcated. It reduces the general time of accessing and watching the movies. An additional feature to counter the competition was introduced in the streaming and movie market. There was an introduction of queue and dock titles in which users could dock some of the movies to be able to watch them later. The developments were under the leadership of Reed Hastings, the then CEO of Netflix Inc.
With the introduction of the streaming system in 2007, Netflix has grown to a whelming 87 million subscribers instead of the initial 4.3 million clients that majorly used their DVDs on the worldwide scope. This increment is recorded by evidence of research conducted by Kobiruzzaman (2021). This is a clear sign that it was a calculated step to counter the competition emanating from the companies that operated similar activities, including Amazon, Walmart, and Apple. The evidence is the growth in the number of subscribers and clients that Netflix serves worldwide ever since they did cultivate the idea of streaming movies and films coupled with the intervention of monthly subscriptions.
The Success of the Change
The affirmative answer to whether the strategy of change and transformation deployed by Netflix succeeded. Netflix did succeed in its step to make a transformational change by incorporating the aspect of streaming movies instead of having to sell DVDs, rent them and send them to clients via the mail systems. Before 2007, Netflix had users and clients amounting to 4.3 million clients who mostly consumed rented DVDs and mails to demonstrate the level of success. In the present day, owing to the utility of the intervention of the streaming of videos since 2007, the company has a whooping subscription of over 87 million subscribers. An analysis of these numbers could function to explain the success level (Kobiruzzaman, 2021). Firstly, from the company’s inception in 1997 to 2007 is roughly a decade. The same is the timing from 2007 to the present day. Arguably, for the same period, Netflix has been able to rise over and above 20 times its subscribers through the utility of the streaming. There cannot be success greater than this where a company rises in its profitability by more than 200% within a single decade.
Reasons Why the Change Was a Success
The success of the change event was partly due to the leadership style demonstrated by the company CEO at the time. Being a transformative leader, Hastings deployed tactics of conveying his vision to all his employees such that they agreed to all they wanted to do. As a result, it was easy to realize the success goal, having shared the vision with all of his employees. In addition, research highlights that Reed Hastings is among the best transformative and innovative leaders (Tjemkes, 2021). These are qualities that cemented the success of the change plan.
To contribute to the success of the business model change, the leadership of Hastings allowed for consideration of the reviews of customers’ feedback, employees’ reviews, and opinions and discussions that are promotional of change. Whenever there is room for discussion of the possibility of failure and success in a business, highlighting mistakes that would pull the business to losses is easy. Moving forward as an organization is guaranteed to be synonymous with success and avoidance of costly business mistakes. Additionally, clients and employees feel appreciated, enhancing their trust in the company. Sales improve, and the employees feel respected, translating to an increment in the level of output (Barik and Kochar, 2017). With these arsenals, the success of Netflix Company was just but a matter of time.
The management vividly used Kotter’s eight-step model towards change to achieve the monumental change and shift in 2007. The model stipulates that there should be an increment in urgency (Kotter 1996; Yeng, 2017). First, there was a need for action in response to the competition emanating from Apple, Walmart, and Amazon. The next step needed to build a team; with the leadership of Hastings, this was also done. A vision is to be developed in the third step; Hastings envisioned transforming the company into a web-based service provider instead of the physical distribution of discs and mails. Communication for buying-in is the fourth step in which the CEO made deliberately with all employees, as has already been highlighted.
The action was then taken as required in the sixth step, in which an online library of videos and films was made available and subscription features as well. Ever since then, the organization has been recording small wins that have ultimately accumulated to the present voluminous company it is presently. Over time, they have shown resilience with no backing off the main goal required by Kotter’s model (Kotter 1996; Yeng, 2017). The last step of the model is to make the change stick. Today, the company provides online streaming of videos with more advanced features as opposed to what it did offer at the inception stages of the change. The usage of this model has guaranteed the success of the change. Additionally, using Kotter’s model as a yardstick to measure the progress of the conception of the change was elementary in the plan for success.
Lessons Learned and Recommendations for Future Use
Effective stakeholder engagement during change management is an important lesson to learn. Many changes fail to reach their full potential because stakeholder interaction was not an essential aspect of the process (Galli, 2018). Stakeholder involvement from the start fosters interest and a sense of continuity to a new future. Allow enough time and planning to include all important parties and give them time to debate, grasp, and internalize each project milestone or step in the process. Stakeholders who do not grasp the plan will struggle to stay involved and move in the desired direction afterward (Galli, 2018). For instance, the success of the change process at Netflix was due to effective stakeholder engagement. Netflix effectively involved its clients and employees in the process. As a result, they received feedback from clients during the change process. Therefore, stakeholder engagement cannot be overlooked during a change process.
The change plan depicted by Netflix as a company can be used to inform several other decisions in the future regarding the success and choices of different companies, particularly those concerned about continuity of operations. Firstly, businesses and companies need to understand their scope of operations and the scope of competition within the market base they share (Galli, 2018). For example, Netflix Inc. understood that they function to provide production and sales of films and movies in all available forms. This culmination allowed the management to understand the level of competition and to earmark the competitors who deal in the same line of products and services. It was a step that was essential in determining appropriate steps that the competitors take so that counteraction is implemented to water the impact of the rival firms. In the future, businesses and companies interested in the success of the operations and sustenance have to understand the dynamics of the markets in which they operate.
Needs assessment for any organization or company is of the essence. According to Kotter’s change model, the initial step is identifying urgency. However, the need for urgency cannot be determined unless there is an assessment of the organization’s needs. Netflix, on its account, did assess to determine that other companies were way ahead of them by allowing for services such as downloading movies while it was still distributing wrapped DVDs. As a result, there was a need to understand the clients’ demands and incorporate systematic technological advancement within the company to maintain relevance and operability. This is a lesson that can be implemented across all other organizations and companies to grow their market share and increase the scope of their operations to profitability.
Acute leadership is vital in spearheading the progress and administering the implementation of a change in a company. This lesson is one of the vitals deduced from the change plan incorporated by Netflix Inc. According to Kotter’s change model, the eight steps require strong leadership to implement (Galli, 2018). In other words, forming a team, selling a vision to the team, and organizing the team to spring into action requires the intervention of a visionary leader and one that possesses transformative leadership qualities. These were the same qualities that cemented the progress and success of the change plan of Netflix Inc. from the year 2007 under the leadership of the then CEO, Reed Hastings. He led the group of employees to acquire his vision for the organization and teamed them up to realize the goal. Today, the streaming of videos has never been phased out. On the contrary, it is only getting better with new features to fulfill the eighth step of Kotter’s model of change, making the change stick (Galli, 2018). These, among many others, are some of the lessons learned in the change plan demonstrated by Netflix Inc.
The Netflix Inc. organizational change and structure was achieved on streaming of videos and movies and to the present day is still being practiced since 2007 through the intervention of Reed Hastings (Kobiruzzaman, 2021). As much as the company was at a crossroads and on the verge of making losses due to the competition, it faced rival companies like Amazon, Walmart, and Apple. The intervention of a change concept salvaged its potential downfall. The change was beneficial to the company due to the fact that they were able to meet the needs of their clients in the market. The change was developed to solve the issues that Netflix was experiencing on their system and retain its clients. Therefore, an effective change structure is integral during a change process.
Using Kotter’s change model, the company’s CEO invented streaming of videos to replace the old usage of DVDs that were initially sent to clients through emails and hiring. This is because the latter was commonly marked with the problem of delays. This intervention saw the company grow from 4.3 million users to over 87 million users to mark and demonstrate the company’s level of success (Kobiruzzaman, 2021). Several lessons can be learned from the change model, including transformative leadership, needs assessment, and knowledge of market base and competitors. In addition, companies can use this analogy to maintain their operability and guarantee continuity in their businesses.
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