Introduction
Multiple aspects of consumption were permanently affected by technological advancement, particularly within the entertainment industry. Modern gadgets and digital tools, such as computers, smartphones, and social media, indirectly contributed to the bankruptcy of many firms that have failed to adapt to the progress. By employing complex tactics and accepting the necessity for internal and external change in operations, some firms overcame the obstacles and managed to position themselves ahead of them. Netflix, a world-famous streaming service, can definitely be used as a case study of the latter. In 1998 the video rental company Netflix began to lend and sell its CDs by mail, using a pay-by-rental approach to collect revenue from its customers.
By the next year, in 1999, Netflix had introduced a new subscription service that allowed users to rent DVDs on a monthly basis. Subscribers to this service were able to rent unlimited DVDs for a monthly fee. As a result, the pay-per-use approach was replaced with a monthly membership plan. Netflix users would select their preferred movie and video titles from the official Netflix website, which were later delivered to their homes by company distributors. With the shift towards online media consumption, however, DVDs began to rapidly lose their relevancy. In response, Netflix launched a new video streaming option for movies and television shows in 2007. The willingness to embrace the changes in the home entertainment industry was crucial for the firm’s ongoing success. Currently, Netflix is thought to be one of the most popular platforms for watching new movies, drama series, TV shows, and other content. They’ve gained a competitive advantage by incorporating new features in response to public demand (Kobiruzzaman, 2021). Despite multiple advantages, said changes within the brand’s operations would have inevitably caused internal resistance, requiring Netflix officials to engage in management change.
Need for Change
To evaluate the need for change within Netflix, the Six-Box model might be utilized, with its respective focus on the six variables of the organizational state. The factors in question include purpose, structure, relationships, rewards, leadership and helpful mechanisms (Ihsani, 2020). The purpose box is the first step in this analysis tool, both logically and chronologically. A good starting step is to acknowledge the organization’s core mission and vision and to ask oneself how effectively the goals it sets for itself and its workers are understood. Then, determining how well these objectives align with a company’s capabilities may show why it isn’t functioning at peak efficiency. Setting these objectives is also critical; each employee should not only be aware of them but actively participate in their creation.
The structure is likely to follow directly after the purpose, which in Netflix’s case involved the need for drastic evolution due to the DVD rental services becoming obsolete. To begin, the managers identified the nature of the organizational structure, including the chain of command. This was then compared to the organization’s procedures to see how well the practices satisfied the established needs. The efficiency of these processes may then be determined by asking more detailed inquiries, such as regarding communication routes (Fouladirad et al., 2018). Thirdly, the relationships were analyzed to profile the existing dynamics and networks, both formal and informal, to see whether there might be a potential for improvement in the area.
Furthermore, the managers analyzed the firm’s existing reward mechanisms before the change. At the time, they were unlikely to be considered satisfactory by modern standards since the understanding of employee motivation has drastically improved in recent years. Yet the managers always knew how critical an effective incentive mechanism is for determining employee performance and is frequently a contributing factor in organizational problems (Lozic, 2020). It is critical to evaluate not just how employees are compensated but also what job they are compensated for. Although there may be generous incentive mechanisms in place, certain employees’ accomplishments may be routinely overlooked. The lack of acknowledgment has caused many Netflix employees feelings of anger, resentment, and demotivation, ultimately causing job withdrawal.
The organization’s leadership was addressed and evaluated as well, since this element is expected to hold the other parts together, working cohesively towards the common goal. Prior to the change implementation, the decisions made by leaders of the firm failed to increase its revenue or customer base. As the market itself was slowly disintegrating, the leaders were naturally ineffective in attempting to lead the firm to prosperity within a dying industry of DVD rentals. Finally, the support systems available to employees and managers alike required renovations, too, with better communication, budgeting and data processing policies required to maximize operational efficiency (Rahe et al., 2021). With all of these indicators in mind, Netflix executives recognized the need for drastic measures that included new market penetration and change in the value proposition delivery. The company continued to operate under a subscription model, but the variety of titles it involved increased massively, which was fitting for the new era of online entertainment.
Organizational Change Analysis
Regardless of the drivers that contribute to an organization’s adaptation and evolution, resistance to change within the staff is to be expected. Business scholars have designed a variety of frameworks and tools to examine and discuss change management within an organization. In order to evaluate such management in relation to Netflix, Lewin’s three-step model was selected. The steps in question are referred to as unfreezing, changing, and refreezing.
During the unfreezing stage, employees mentally prepare for the expected transformation. They are introduced to the idea by their superiors, breaking down the current state of affairs and pointing out the necessary areas for improvement, often covered by low KPI indicators. Employees are usually content with the organization’s existing state; as a result, some are hesitant to accept a rapid change of management due to inevitable uncertainty (Rataul et al., 2018). The process of teaching individuals about opportunities for organizational transformation is the unfreezing step (Jaworski, 2021). This stage’s main goal is to persuade employees to accept management change by using effective change communication. To encourage workers to accept change, it is critical to retain good managerial contact (Fernandes et al., 2019). Employees will accept change if they grasp the new concepts, but this will not ensure the company’s or organization’s survival (Jaworski, 2021; Roth et al., 2018). They must also recognize that change is required to keep the business afloat and create competitive advantages. When at this stage, Netflix ensured its employees were positively motivated and adequately evaluated the importance of suggested innovations for overall success.
Change is the second stage of Lewin’s framework, focused directly on the transformations being implemented to the company’s operations, strategies, and internal structure. Employees are adjusting to their new working environment, which in Netflix’s case involved drastic evolution in the market inhibited by the firm. Depending on the demands of the business, changes might be significant or modest. For employees to accept the changes, the business must give adequate training and support. It is the stage of putting the complete transformation process into action; as a result, numerous concerns must be addressed carefully (Burnes & Bargal, 2017; Galli, 2018). Due to a lack of understanding regarding organizational transformation, some employees may propagate false information. To avoid undesirable difficulties, the organization must adopt an effective communication strategy inside the organization (Ruiz-Navas & Miyazaki, 2017). Netflix successfully managed this stage by combating misinformation through careful regulation of communication channels and maintaining high levels of positive motivation for its employees.
Finally, refreezing focuses on a day-by-day practice of changes and new approaches established throughout the previous two stages. For Netflix, this stage involved the daily operations related to the digitalization of their business model. Among the new tasks were the personal data processing and storage for the subscription users, the management of the license agreements for the streaming titles and the original content development. As with the previous two stages, Lewin prioritizes effective communication as the main tool of successful management change. While the firm undergoes the adjustment from uncertainty to a new certainty, it is the responsibility of management to keep track of potential misunderstandings. Netflix has evidently successfully completed its change management cycle judging by the company’s position as the leader of the streaming industry.
Evaluation and Conclusion
To this day, publications on organizational change and internal change management refer to Netflix’ brand transformation as the turnaround story. Its executives managed to successfully recognize the shift experienced by the media consumption and entertainment industry as a whole. After implementing the largest change in relation to the delivery process of its video subscription value proposition, the company continued to evolve. Netflix began to invest heavily in its original content, understanding the need for diversification as rival streaming services continued to emerge (Martínez-Sánchez, 2021). Many of their own-brand shows ended up attracting a large and devoted fan base, as well as earning relevant and well-known awards. As its profits grew, Netflix continued to increase the budget allocated to the original content production, thus ensuring the consistent output of high-quality exclusive films and series. The internal organizational changes related to these new spheres of operations were also successfully handled in accordance with Lewin’s framework, which covered a wide range of innovations.
Furthermore, Netflix continues to adapt its interface and other software features, making the platform as user-friendly as possible. The principles of flexibility and excellence are further reflected within the human resources department of the brand. Netflix has been successful in enacting a number of adjustments to its philosophy of being open and radically honest with its staff. This has aided in the development of trust between them and the management. They’ve been able to foster ownership via flexibility by employing individuals who appreciate and don’t misuse the benefits they’ve been granted. Independent decision-making fuelled by open data sharing has been credited with success. Netflix is always working to enhance company culture, and each new employee contributes to the shaping and evolution of the culture. All of these innovations and principles were made possible by the firm’s focused and effective change management.
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