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The Netflix Company’s Cultural Change Management

The Change Event in Netflix

The advance of the Internet and allied technologies has allowed small startups to develop into large, multinational corporations quickly. Founded in 1997 in California as a small startup business, Netflix became a global organization in less than 20 years due to its Internet technology (Liang et al., 2016). Currently, Netflix is the leading provider of online streaming services, with a customer base of more than 167 million subscribers worldwide (Sim, 2016). Since its international expansion strategy began in 2010, the company has experienced significant growth in the global market and now has a presence in more than 190 countries across the globe. The company provides original movies, documentaries, and shows to customers who access them on any internet-based device, including smartphones, desktop computers, laptops, and television sets. Due to its online presence, original content, and technological innovation, the company has acquired higher customer loyalty in the industry, which has helped it achieve a fast-growth of customer base.

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However, it is worth noting that the company started by selling DVDs and rentals through the mail, where the product of trade was a rent-by-mail DVD, and the mode of payment was based on a pay-per-rental platform. This system allowed customers to enjoy unlimited rentals of DVDs with monthly payments (Lobato, 2019). The company started using streaming services in the mid-2000s and has since focused on online after abandoning the old model.

In 2010, Netflix embarked on a new model driven by a change in organizational culture. The company launched on a broad step that sought to change its structure and methods of operation. One of the primary focus areas in the culture change was human resource and organizational performance. Achieving this objective required the company to focus on employee motivation, a key ingredient of its culture change (Jang et al., 2021). The new model of corporate culture sought to encourage employees to develop resilience to support growth with an increasingly competitive demand for streaming services. The rationale was to ensure that the employees would help the company establish an online platform to fulfill its value position and achieve a competitive advantage. This culture change sought to provide a framework of core values, business philosophy, beliefs, and behaviors that would permeate its workforce and motivate the employees to support innovation. For instance, the new corporate culture allowed the company to facilitate communication to enhance sharing of ideas.

The Cause of the Change

Noteworthy, Netflix sought to position itself as the leading company in providing online streaming for original content in a market that was increasingly allowing the entry of multiple companies. With internet technology, any company with innovative ideas could join the race and utilize the growing customer base as streaming services became widespread. Achieving this objective required innovativeness, which could not be possible without focusing on organizational culture change to involve the workforce (Poletti, 2018). Consequently, the company’s new corporate culture consists of a core philosophy prioritizing the people. This corporate culture focuses on independent autonomy, communication, attitudes, effectiveness and productivity, and rule avoidance.

A significant reason for the culture change at Netflix was the need to respond to the dynamic nature of the modern business world. Noteworthy, business success is driven by employee performance and organizations in the contemporary world, and their leaders must focus on creating an organizational culture emphasizing performance. However, implementation requires both collaboration and creativity to achieve. Various studies have shown that culture is a central driver of business success in the modern world. According to Kobiruzzaman (2021), culture is one of the chief factors that drive employee performance. In addition, organizational culture is linked to the individual company’s reputation in the market. Organizations that have established an innovative culture based on an excellent focus on human resources will likely achieve a strong image and a higher rate of success in the market and industry.

In particular, organizations need to establish a culture that fosters productivity and collaboration in the technology sector. This factor is why Netflix realized that it was not going to achieve its objectives without changing its culture (Hickman & Silva, 2018). The company realized that changing its corporate culture would drive transparency and openness between the employees and allow independence in making decisions.

The Success of the Change

The culture change at Netflix has contributed immensely to the company’s rapid growth and expansion into the global market. Indeed, recent research on the company shows that the transformation of the corporate culture is the primary reason for the company’s success in the industry, where it leads the 50 best online providers of content ahead of Google’s YouTube, Facebook, Disney, Walmart, Apple, and HBO (Hickman & Silva, 2018). By 2010, the company was facing pressure in the US as leading competitors like Google and Disney took away the largest market share. It became evident that the company could not remain with the old culture and allow competitors to use innovative ideas in their expansion.

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In 2011, the company embarked on a corporate culture change, primarily focusing on the concept of innovativeness and independence of decision-making among its employees. Groups called ‘dream teams’ were established in the company, independent of making innovative ideas and testing them. As a result, the company had, by 2015, realized the benefits of the culture change (Hickman & Silva, 2018). Indeed, the company jumped from position 6 in the list of the most innovative online providers of original content to second position. This achievement was directly linked to the Change in corporate culture.

By 2015, companies providing online content to the mission of users worldwide were facing a battery of challenges. For instance, customers and other players placed a stiff demand for original content. In addition, there was an increase in the need for more engaging and innovative content and programming (Hickman & Silva, 2018). Customers were also demanding online services and platforms that were engaging and interesting. Furthermore, there was an increase in the need for platforms to directly address customer needs, including the ability to allow conversations and communication between them and the providers.

Netflix’s new corporate culture was set to address most of these challenges and issues. With a focus on innovativeness and the alignment between the entertainment service and target customer preferences, the company has addressed most difficulties (Hickman & Silva, 2018). Recent studies indicate that the new culture services as the strategic management approach for achieving a competitive advantage and business growth and expansion.

With the new corporate culture driving these new abilities, Netflix experienced rapid growth in customer base and sales. It attracted millions of subscribers, and by 2018, it surpassed the target 150 million mark (Xu, 2021). By 2020, the company enjoyed over 170 million subscribers, and subscriptions were still increasing (Xu, 2021). Moreover, with the 2020 restrictions on travel and the new focus on working from home due to the Covid-19 pandemic, many people turned to online content. The company enjoyed additional subscriptions during the period. These successes were mainly attributed to the new corporate culture that focused on innovation and the independence of decision-making for employees and their teams.

The Cause of the Success of the Change

The success of an organization’s culture primarily depends on how it has established it and how it is applied in the business process. In the case of Netflix, the success is mainly attributed to the design and execution of the culture change. As previously indicated, the new culture was characterized by autonomy, communication, attitude, rule avoidance, and focus on high effectiveness (McCord, 2016). Based on each of these characteristics, it is possible to identify the factors that made the culture change at Netflix a success.

The focus on autonomy meant allowing independence in decision-making. The new focus aligned with Netflix’s organizational culture’s “people over process” approach. Independent decision-making became a characteristic that motivated employees to develop personalized strategies for finding solutions to problems and challenges in the content streaming business (Hickman & Silva, 2018). Consequently, the corporate culture allows employee autonomy while also promoting initiative at the end, enhancing the company’s ability to develop and apply new capabilities. These new abilities have helped Netflix achieve a competitive advantage in the dynamic market and industry. In addition, the company has used this approach to optimize its employee turnover, which has reduced significantly since the Change. Indeed, the optimization of employee turnover has helped increase efficiencies in human resource development and related strategic management efforts (Hickman & Silva, 2018). Therefore, this aspect of the culture change explains why the company has been successful.

The focus on communication, which has allowed openness and broad and deliberate sharing of information, is one of the factors that has made the culture change successful at Netflix. The company is an online-based retailer that depends on innovative ideas and data on consumer and market trends. Therefore, Netflix uses its organizational culture to support the efficient and effective dissemination of data and information that guide strategic decisions (Fouladirad, Neal, Ituarte, et al., 2018). Given that the corporate culture the company adopted in 2011 is flat, it aligns with the open, broad, and deliberate sharing of information. The new culture supports effective and efficient communication throughout its organizational structure. The rationale is to reduce communication challenges that can bring online business growth and expansion barriers. In addition, openness in communication acts as a factor in motivating employees to communicate openly and freely about their problems and challenges at work. As a result, the model facilitates optimal solutions to these problems. In this way, the company has achieved innovativeness, which explains the success of the Change in corporate culture.

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Netflix’s new culture focuses on attitudes and is based on extraordinary candidness to encourage employees to maintain sincerity and objectiveness. It is worth noting that open, broad, and deliberate information sharing also relates directly to organizational culture’s candidness. However, it also relates to the employees’ perception of their job, organization, and industry. For instance, the new culture facilitates objectives in the behavior of the employees. Specifically, teamwork is encouraged to support multinational content-streaming operations (Spangler, 2018). The organizational culture now facilitates strategies and programs that motivate employees to adopt and apply this form of attitude in their interactions in the workplace.

The culture change at Netflix also focused on high effectiveness to emphasize high productivity and job effectiveness. The company adopted new programs to demonstrate that increased productivity and effectiveness are the basic features in the content-streaming workplace. Therefore, the company can motivate its employees to adopt techniques that facilitate high effectiveness (Putter, 2018). Moreover, this culture aligns with Netflix’s objective of encouraging the workforce to reach the high productivity levels necessary for long-term success in the online content-sharing industry.

Finally, the culture change at Netflix emphasized rule avoidance, which makes the new approach unique in some ways. The new cultural trait is based on the idea that strict rules can complete online business rigid. A rigid business is likely to reduce responsiveness in the market, especially where the process involves direct association with customers through online communication (Hallinan & Striphas, 2016). Moreover, the industry is dynamic as it experiences frequent technological changes and consumer needs and preferences. Rigidity means that customers will look for other avenues which are readily available due to the open and flexible nature of the online business. Therefore, the rule avoidance approach to corporate culture has helped the company maintain a flexible business and adjust to customer needs and demands, which has resulted in a high level of customer satisfaction.

Lesson Learned About Change Management

From this case study of organizational Change at Netflix, significant lessons are learned that ensure that the student acquires the knowledge and skills necessary for entrepreneurship and executive leadership. It is worth noting that organizational culture is the central aspect that drives employee performance and, thus, the overall performance of a company (Floegel, 2020). There is a need to focus on human resources when establishing an organizational culture because employees are the fundamental assets of a business.

Facilitating employee performance through an effective cultural change in an organization requires focusing on some things. As the case of Netflix indicates, influential organizational culture is one that allows freedom of communication and decision-making. Indeed, poor and ineffective communication and lack of independence are the barriers that hinder innovation. The inability of employees to express their problems or ideas hinders their innovativeness. Such employees have no room to test new ideas in solving their problems (Hickman & Silva, 2018).

Moreover, rigidity in an organization has no use in the modern business world that requires accessible communication. Indeed, the online business’ principal asset is information, which must be shared effectively between the different players (Hastings & Meyer, 2020). Lack of such denies a company the opportunity to thrive in the modern business models, which further implies that it cannot achieve growth and expansion.

References

Floegel, D. (2020). Labor, classification and productions of culture on Netflix. Journal of Documentation, 77(1), 209-228. Web.

Fouladirad, M., Neal, J., Ituarte, J. V., Alexander, J., & Ghareeb, A. (2018). Entertaining data: business analytics and Netflix. International Journal of Data Analysis and Information Systems, 10(1), 13-22. Web.

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Hallinan, B., & Striphas, T. (2016). Recommended for you: The Netflix Prize and the production of algorithmic culture. New Media & Society, 18(1), 117-137. Web.

Hastings, R., & Meyer, E. (2020). No rules rules: Netflix and the culture of reinvention. Penguin Publishing Group.

Hickman, C. R., & Silva, M. A. (2018). Creating excellence: Managing corporate culture, strategy, and change in the new age. Routledge

Jang, M., Kim, D., & Baek, H. (2021). How do global audiences of TV shows take shape? evidence from Netflix. Applied Economics Letters, 1-7. Web.

Kobiruzzaman, M. M. (2021). Netflix organizational change & structure case study 2021–2022. Newsmoor – Best Online Learning Platform. Web.

Liang, C., Chang, C. C., Rothwell, W., & Shu, K. M. (2016). Influences of organizational culture on knowledge sharing in an online virtual community: Interactive effects of trust, communication and leadership. Journal of Organizational and End User Computing (JOEUC), 28(4), 15-32.

Lobato, R. (2019). Netflix Nations. New York University Press.

McCord, P. (2016). How Netflix reinvented HR. Harvard Business Review, 92(1), 71-76. Web.

Poletti, T. (2018). Netflix is growing at a stunning rate – and so is its profit. The Market Watch. Web.

Putter, B. (2018). Netflix’s company culture is not for everybody and that’s exactly how it should be. Forbes. Web.

Sim, G. (2016). Individual disruptors and economic gamechangers: Netflix, new media, and neoliberalism. Bloomsbury Academic.

Spangler, T. (2018). Netflix spent $12 billion on content in 2018. Analysts expect that to grow to $15 billion this year. Variety. Web.

Xu, Y. (2021). Re-understanding personal and organizational mission with Netflix cultural Manual. Education Reform and Development, 3(1), 34-37. Web.

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