Key Drivers of Change in Netflix
Change in any business organization is a key process, which is brought into an organization to bring the required elements that are required to grow and develop that organization. This not only helps the business to remain relevant and grow, but also helps the employees to develop their skills (Karani, 2016). It is a constant process to ensure that the business is able to thrive in the dynamic environment. This can also be observed in the case of Netflix, which is a video streaming giant that has presence in majority number of countries around the world (Forbes, 2022). The company did not originally provide video streaming services, instead, it was originally a DVD sales and rental business, which was transformed in the year 2007 (Ruiz-Navas and Miyazaki, 2017). These changes in Netflix can be evaluated with the help of PESTLE analysis and Porter’s Five forces. These models help in better understanding the external environment of the business and how it impacted or drove change in the business.
With the help of the PESTLE analysis, the factors including as political, technological, social, economic, environmental, and legal, it was found that the first driver of change was technology. Since the introduction of internet and world wide web, there has been a significant change in the way people experience different things, including watching videos, movies and shows. The company recognized this opportunity to increase its customer base with the help of the technological advancements being introduced, as the company created online platform which offered the people the streaming of media and video on demand (Balasopoulou, et al, 2016). Another factor that is considered to be instrumental in the change was the social factor, in which the people of the society created the need for such platform, as they needed a platform or services where they can easily watch movies, videos or shows without needing to rent or buy DVD in physical forms. This further strengthened the drive to bring change in the structure and nature of the business of Netflix. The economic factors for change that were presented to the company was the fact that the change in the structure and its products will help in gaining more customers, and hence, more revenue. The company recognized the economic opportunity that the change presented, and grabbed it to ensure they monetized this opportunity (Maddodi, 2019). The company earns subscription from its customers, which is considered to be economical for the large number of content that the company avails to its customers. This enables the company to earn a large amount of revenue. Where the company could only operate in certain areas due to restriction of physical DVD, they could not freely offer their services to other economies, too. But with this change, the chance to offer the services to other economies and people also increases, offering further economic incentive for the company to adopt this change. There are certain political and legal factors that may affect this change negative by deterring the expansion of the company to other countries (Karani, 2016).
PESTLE Analysis of the Change in Netflix
As per the evaluation of the key drivers of change using Porter’s Five forces, it was found that this industry does not have an easy entrance for the newcomers. This is due to the fact that various legal copyrights and permissions are required in order to establish such business. This ensures this remains a business which has less competition for the company. Further, the bargaining power of the customers remain considerably less. The bargaining power of the suppliers (movies and shows’ owners) have considerable power when it comes to the distribution rights for that content (Ruiz-Navas and Miyazaki, 2017). Further, the substitutes such as TV and cinemas are does not provide as much competition, since the company has its won niche and caters to people who want to watch the content of their own choice, at the time that they desire. Although the company has a large number of competitors, it still is amongst the platform which is used by the highest number of people. These forces of competition also contributed to the company and the change in its structure back at that time, as the lower level of competition in the industry enabled the company to reap the benefits, and establish itself as the leading company in the streaming platform industry. The company is still undergoing changes at present, where it is adopting various changes such as technological changes, pricing changes, restriction of password sharing and other changes, which will help the business in providing competitive services, while also ensuring that its profitability remains high (Forbes, 2022).
The key stakeholders of Netflix are its employees, subscribers, producers of the content, competitors, regulatory bodies of the countries or region, pressure groups, shareholders and investors (Strebel, Cossin and Khan, 2020). Each stakeholder of the company has a different level of interest and power within the company. This level of interest can be evaluated with the help of Mendelow’s stakeholder model, which shows the combination of interest and power a stakeholder has in the company, and how they can affect the change within the company (Thompson, 2012). The following is the matrix used in order to determine the influence of the stakeholders of Netflix.
These are the stakeholders above have been placed according the impact they will have on the change process within the company. These stakeholders are considered to be important in the process of change, as they will have a direct impact due to the change being introduced by Netflix (Davis and Zboralska, 2017). The stakeholders will assess the change being introduced by the company, and will have a reaction (support or resistance), accordingly. This reaction will be based on the fact whether they will gain something from the change or not. In case the any stakeholder feels that it will be beneficial to bring change, they would be supportive of the change process, while the people or stakeholders which consider the change process to have no benefit or negative impact due to the change, they would react in a resistant manner. The senior management can assess and identify the support and resistance of respective stakeholders based on the potential benefit or loss due to the change being introduced by the company (Qureshi, Malik and Qureshi, 2017). For example, the company recently is establishing a new rule of not sharing login credentials including email ID and passwords with other people. It would not allow people outside a family to have access to a single account. The senior management must have assessed the impact of this change beforehand, before they actually started this process in order to determine the support and resistance of the stakeholders (Qureshi, Malik and Qureshi, 2017). The customers will be the ones who are impacted the most, as they will be forced to buy subscriptions, which was available to them at no cost. The employees and the analysts of the company will be informed, but they will be supportive of the change, as it would increase the level of revenue of the company, and hence, indirectly increase their incomes (Mayfield, 2014). Investors will also be supportive, as it would lead to higher earning as a result of increase in the revenue of the company. The producers and the production houses will also be supportive, as this would open the source of higher income for them. Thus, the level of support and resistance could be evaluated with the help of potential impact of change process (Mayfield, 2014).
Impact of Stakeholders on the Change Process
Ideally, the process of change will be managed when resistance is faced by the business. Netflix will need to handle the change with their customers and communities of customers, which have a high level of power and influence in the company. Ensuring that they adapt to the change and the change management is conducted in a manner that the resistance is turned into support will be done with the help of change models (Chebbi, et al, 2020). These change models can be Lewis’s model of change management, Kotter’s 8-Step Change Model, McKinsey 7-S Model and others, which can help in transitioning the resistance into support from the stakeholders.
Steps in these models, such as in Lewis’s model of change management (unfreeze, change and refreeze) will help the senior management in managing the change with the stakeholders. By ensuring that the customers are not in comfort zone, and are realizing the impact of them sharing passwords on not only on the platform, but also the ethical implications of sharing passwords, will help them in adapting to the change (Cameron and Green, 2019). Further, making them realize about the benefits such as all-time access, AI catering to only the preferences of the customers will help them in acknowledging and supporting the changes in the company. Giving the customers the time to transition from resistance to support and acceptance is also another way. This is the way that Netflix is adopting, as it didn’t implement the change immediately, rather, they ensured that the employees have enough time to adapt the idea and understand the reasoning behind the change.
Change management is considered to be the shift or transitioning approach which is structured in order to help in transitioning of the teams, individual, or organizations to a future desired state (Stolzenberg and Heberle, 2013). This process of change can only be achieved with the help of knowledge management, where the knowledge is organized, used, shared, created within an organization in such a way that the people are able to adopt the change process, and the change being implemented is smoothly transitioned for the organization. The knowledge management is considered to be a key part of the change process, as a business cannot bring change without knowledge (Dalkir, 2013).
When the company was introducing its change back in 2007, Netflix ensured that the knowledge was the key in bringing in the change. They ensured that the knowledge was extensively used in order to bring in the change. The company was trying to bring change and enter a new market and industry, and the nature of the business was completely different from the usual industry (Maddodi, 2019). The way the platform will work, the need for analysts, employees who will be able to handle the work related to creation of the software and platform, managing these employees and other changes were some of the changes that was achieved with the help of knowledge management. There were some issues related to knowledge tracking as this was an industry and niche that wasn’t before explored. The employees were not much aware of the way they would function, or what direction they should take in order to provide the right content or to market the company (Maddodi, 2019). Further, problem of knowledge migration was present, as the employees, customers and other stakeholders were presented with the issue of turning to new and modern knowledge, instead of continuing with the usual DVD business (Maddodi, 2019). Such issues were presented to the company, and still, more issues arise for the company, as it is an industry which is still developing and evolving, and the company is constantly learning how to adapt to the changes that are required.
Change Management Models for Handling Resistance
One of the major issues when transitioning from a DVD business to a streaming platform was for the customers, as they were unaware about how they would use the services provided by the company. This was due to lack of knowledge and knowledge tracking, as such platform did not exist back in that time (Maddodi, 2019). Creating such platform not easy as search platform was not created before which led to issues for the employees and developers of the platform. Such issues were resolved with the help of knowledge management. Creativity of the developers, marketing experts, financial experts and other employees of the company were able to bring the idea into existence with the help of knowledge and creativity. Leading of knowledge management was required in order to achieve the goal of the business to change its nature and operations. The leaders at the company made way and ensured that they shared and managed the knowledge of other subordinate employees, so that they will be able to adapt to the transition (Dalkir, 2013). By being aware of what needed to be done, and what the company is doing or the services it is providing, employees were able to conduct functions such as marketing, financial analysis, risk assessment and others, related to the change in the operations (Dalkir, 2013).
The issues were not only with the employees, but also with the customers. They would be required to shift to a new mode of watching and streaming movies and other media. This also needed to ensure that the customers were able to find the platform easy to navigate and convenient, as compared to DVD rental or purchase. They ensured that following the instructions on the platform was easy, and the customers were able to navigate the platform on their own (Shannak, Ra’ed and Ali, 2012). This helped in popularity of the platform, as people can watch the videos and other media, sitting at home, while not needing to go out and get an actual DVD for watching the movie or videos. They could also watch media anytime, which further added to its appeal. Although it was not easy to establish the platform with limited knowledge, the organization was able to do it with the help of knowledge and creativity, which resulted in creation of one of the most popular streaming giants, which is used worldwide and by a large number of viewers around the world (Shannak, Ra’ed and Ali, 2012). Thus, this makes it apparent that change process requires management of knowledge, especially in order to facilitate the transition for the employees and customers, who are the ones who were the ones directly creating and using the platform respectively.
Examples of Change in Netflix
Diagnosis of change is considered to be a key part of the change process. This is a step which is considered to be the onset of the change within the company. Diagnosis of change is the step where the early research is conducted on the requirement of the change in the organisation (Angel-Sveda, 2012). It is not only enough to recognize the need of change; it will also be important to acquire the knowledge and ensure the change is beneficial for the business. It will also be beneficial to understand the pros and cons of the change, while also evaluating its impact on the stakeholders of the business (Govender and Parumasur, 2016). This is a step which is undertaken by the senior management of a business, as this will ensure that the change process of successfully applied in the business. After understanding the required change, its impact and other necessary information, the senior management will proceed to the process of planning, where the start to develop a plan for application or implementation of the change in the organization (Appelbaum, et al, 2012). These two steps can be applied with the help of models of change, which provide a structure for the senior management or managers of a business organization on how to implement the change within the organization. Two such models are Lewis’s model of change management and Kotter’s 8 Step model change model. These models each have their own instructions about how change can be diagnosed and implemented with the organization (Turáková, 2018).
In Lewis’s model, the first step is to Unfreeze, where the old ideas are unfrozen, and the people are made open to change. In this step, the senior management is made aware of the need for change. They realize that change is required within the organization, and it will be beneficial for the organization if this change is brought into the organization. When the senior management is made open or unfrozen, the process for diagnosis of change ensues (Turáková, 2018). They conduct research in the change that is required and also plan the change that will be required. This planning will be done in order to make other stakeholders adapt to the change easily and without any barriers.
A similar process for diagnosis and planning is followed within the Kotter’s model. But the steps are more elaborative and explained using more than one step, as compared to Lewis, who only used one step. Step 1 to 3 of the Kotter’s model help in diagnosis of the change and also in its planning (Small, et al, 2016). Step 1 of the model states that there should be an urgency of change or creation of urgency, which will lead to change. It should be needed by the whole organization. This was not included in the Lewis’s model, where it was simply stated that the organization should unfreeze in order to diagnose and plan (Turáková, 2018). Kotter emphasized the need for the change to be recognized by majority of the people, so that it can be considered for adoption. Another step which was not listed in the Lewis’s model was formation of powerful coalition, where the change will be led by the leaders. Although Lewis’s model may imply the introduction and leading of change by leaders, no particular step was stated for this function of leaders in change (Turáková, 2018). The leaders will be instrumental in diagnosis, as they would investigate the need for change by evaluating its pros and cause, along with its impact on stakeholders. The leaders would also be responsible for planning of the change for the organization. The next step of Kotter’s model is creation of a vision for change, which is done in order to clarify the reason behind diagnosis, planning and implementation of change within the business organization. When this vision is clear, people will be more likely to adopt and accept the changes (Small, et al, 2016).
Other steps of Kotter’s model, such as communicating vision, removing obstacles, are some of the steps which further play a role in diagnosis and planning of the change process in the organization. In Lewis’s model, the second step, which is transitioning, will also help in planning of change in the organization (Turáková, 2018).
Thus, the two models have different steps to achieve the change, but the ultimate objective of the two model is to ensure that the steps such as diagnosis, planning and implementation of change is followed properly while applying change management in the organization.
References
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