As a technology media company Netflix has to consistently evolve to remain competitive and relevant among a consumer base that is faced with multiple choices of platforms in an industry Netflix itself helped shape. Despite a perceptually simplistic business model of being a platform where people go to watch entertainment and film, Netflix utilizes a complex range of technologies and services to produce, host, and enhance the viewing experience of its original content as well as that created by others.
Now that Netflix has established the ‘streaming’ of media status quo, a revolutionary change to how entertainment is consumer, it now faces arguably a more difficult challenge of implementing change to an existing platform and experience and making it better. This paper will explore a hypothetical complex change process Netflix may undergo in the near future and the leadership and organizational change management aspects that are associated with the transition.
Despite entertainment media undergoing many shifts in form (ranging from blockbusters to miniseries to YouTube clips in their various iterations), the concept remains relatively similar. In the context of the streaming industry where Netflix operates, a consumer has presented a choice of what to watch, once selected they click the title, and it begins playing with the audience watching the content with the ability to only pause or navigate the timeline of the said film or episode. A proposed change, which Netflix has already begun experimenting with is to introduce interactable media. According to an article in Los Angeles Times, “Netflix’s expansion into interactive shows signifies a big effort by Silicon Valley to re-imagine what the next generation of Hollywood entertainment will look like” (Lee, 2018).
The premise of this implementation is for the audience to interact with the existing content in various ways, enhancing the viewing experience by providing more control over the plotline or character development and delving deeper into the lore and backstory of said media production/franchise. In consideration, there are multiple opportunities to use interactive media to benefit viewed content if the viewer desires to use it, and there is significant interest in interactive content. In the words of Reed Hastings, Netflix CEO, “Once you’ve got interactivity, you can try anything” (Marketing Insider Group, 2017).
Essentially the change envisions combining interactive elements such as in video games with full-fledged popular visual media like films and television shows. Currently, the concept and technology development as its earliest stages, with a couple of Netflix produced shows providing the viewer the ability to make certain plot or dialogue choices, which in turn trigger a different pre-recorded response and potentially plot ending. It is a simplistic interaction and algorithm, reminding of the ‘choose your own adventure’ style of books and games.
However, with rapid development of multiple technologies that can interact with one another such as spatial audio, virtual reality headsets, some sort of sensory tactile mechanisms, and others – the possibilities for interactive media are the future of media consumption. Netflix understands this and needs to implement multiple change processes as well as technology development to meet high standards and expectations of consumers.
In the proposed change, the hard problem that arises is how to use technology and capabilities of existing or near-future technology both in the Netflix platform and external hardware in a manner which can benefit implementation of interactive media. Notably, there are some elements of soft-problem in this issue, but the concept is relatively straightforward – which media produced by Netflix or others can use which type of readily available technologies (either Netflix software or outside hardware such as TVs, touchscreen devices, headphones, etc). Netflix has seen success with its simplistic interactivity features in popular TV series, likely due to novelty of the concept but also because it engages the viewer in making certain key plot decisions. There are other readily available technologies for interactivity such as touchscreens, 360-degree filming which would allow viewers to shift camera perspectives when watching, and spatial audio via certain headphones for significant immersion into the content. The hard problem is selecting which technologies merit implementation and can be technically achievable and available on a mass scale and which ones need further development.
Companies typically spend million on R&D but there is often a gap between the value of the developed technology and its ability to work effectively. Adoption of a marketing perspective can be beneficial by introducing user involvement in key areas:
- early identification and development of the product to fit user needs;
- preparation for the user base to receive the technology;
- shifting the ‘ownership’ of innovation to its users (Leonard-Barton & Kraus, 1985).
The most effective plan for Netflix to introduce new technologies to the market is to invest heavily in R&D, both via its software platform capabilities and through cooperation with hardware developers associated with its service (since Netflix is unlikely to release hardware products of its own, it is a software and entertainment company, not a manufacturer). For example, Netflix is currently in cooperation with Apple to add spatial audio support for its newest headphones. While that is no interactivity, it does add to the immersion of the viewer experience significantly (Nield, 2021). Similar steps can be taken with other available hardware ranging from televisions to more immersive virtual reality helmets which are gaining popularity in the video gaming community.
The technology should undergo rigorous internal testing before implementation on the market. Netflix must achieve success and a smooth experience for the user due to the novelty of the interactive viewing experience. If released to the market with significant deficits and bugs to the experience, it will result in poor reception of the technology making user engagement with the content down the road much more difficult.
The soft problem arises with taking the technological process described above and implementing it with media. Netflix is not just a media hosting problem but also a massive production company of its content, which will be the primary ‘receiver’ of said interactive features. The company has to balance multiple factors as to which types of media and which of its specific productions warrant implementing interactive technologies. There are also the issues of how much interactive should be inserted and at which points in the viewing experience/plot.
The media production team has to cooperate with the technological and software development side of Netflix to ensure compatibility and if interactive content is inserted, it has to also be somehow filmed or produced. There are also factors to consider on how various interactive content will be received or used by the consumers, based on the dynamics of the interactive media trend and the rating/popularity of the media itself. Furthermore, there are considerations on how to move forward with audiences who do not wish to engage with interactable content but prefer a passive experience, raising questions on whether in the future interactive content should remain optional and how it would impact a passive viewing experience without compromising it.
To formulate the soft problem in a simple sense, Netflix needs to recognize the needs and wants of its consumer base, which is tens of millions of monthly subscribers that enjoy both original content produced by Netflix and other entertainment it hosts, along with the use of the software to navigate and watch the said content. Understanding consumer needs is the objective but significant challenge for most businesses, since people rarely even know what they desire before they see or experience it, particularly in new sectors and technologies, such as the proposed change for the company.
Anning-Dorson (2017) suggests a three-model approach in which a firm uses basic competitive tools for service engagement, interaction with customers, and external capability activation to achieve innovation, needed also for hard problem-solving. The firm can create a customer-firm interface which enables co-creation and allows the company to capitalize on external capabilities (Anning-Dorson, 2017).
Customer interaction and potential co-creation stem from the general need to create value for the consumer with the business products. All of this fits under the general umbrella of market research. A successful organization lays out research objectives, and develops an appropriate methodology to gather exploratory and descriptive data. Once data is collected, it is analyzed and interpreted to determine whether the business should proceed with specific decisions, services, or products (Camilleri, 2017).
For Netflix to determine which type of content warrants integration with interactivity features as well as the extent of the consumer desire for it and response to various forms, it needs to conduct thorough methodological market research and sample group testing. This would be the most effective approach in solving the wide range but ultimately similar in that they are market-based ‘soft’ problems facing Netflix with this change.
It is evident that the proposed change is highly innovative and takes Netflix once again in an undeveloped sector of technology and entertainment. The combination of hard and soft problems, both being highly intertwined indicates that the company will require significant collaboration among departments, which oftentimes requires strong leadership and management. Meanwhile, due to the nature of the change being a broad and unexplored concept, with Netflix essentially laying the groundwork for the industry, it will require direction from leadership to guide the organization at a steady pace in introducing of the new media and technological aspects to the market, which is both a high-risk, high-reward endeavor.
As explored in the previous paper, Netflix organizational structure and management structure promotes creativity, openness, and transparency with virtually no rules around how employees work but also demand high expectations and results from them. The CEO, Reed Hastings practices a “laissez-faire” or ‘hands-off’ style of leadership where he makes very few decisions, and those decisions he signs off on, Hastings trusts his employees and encourages them to take ownership of creating new products and initiatives (Allyn, 2020).
Hastings also demonstrates elements of transformational leadership by showing innovative foresight and direction for the industry. With the ability to recognize a market need, design a way to address it, and implement in a creatively intelligent and transformative manner highlights his ability as transformational leader and pioneer. He has created a culture of freedom and empowerment which has been credited with making Netflix such an innovative and adaptable enterprise in a highly competitive entertainment and media consumption industry. It effectively creates a new category (streaming) which has ultimately become equally or more popular than well-established traditional television and video on-demand services (Goncalves, 2018).
Leadership is inherently a process of social influence, where an individual draws the support and aid to accomplish a common task. It is a process with which change is usually distributed, promoted, or expressed, collectively unifying, inspiring, or motivating through various means. Switching focus, businesses strive to be more innovative, being a priority for a large majority given the importance of innovation in the modern world. The proposed change is what is known as product innovation, which is introducing a new or significantly improved product or service to the market. Innovating and leadership are closely interacted because innovation is an aspect which seeks to improve and enhance, even from a business perspective, it leads to better customer experience. Meanwhile, leadership always intertwines a focus on bringing about betterment in whatever area they function, in some sense making leaders innovators as well (Slimane, 2015).
Leadership plays a key role in boosting innovating in organizations. The role of a leader is ultimate to stimulate innovative activity via creativity and encouragement of employees. Many internal and external factors may determine innovative processes in an organization, but competent leadership tends to boost innovation behavior. The primary leadership style which generally stimulates employees to generate innovation is transformational leadership, characterized by inspirational motivation and intellectual stimulation (Kozioł-Nadolna, 2020).
As discussed earlier, Netflix leadership with Reed Hastings at the helm already practices elements of transformational leadership. It is ultimately what has driven Netflix to grow, succeed and innovate at such scale as to become a leading streaming and entertainment company without the backing of existing entertainment studios as many of its streaming rivals. It can be argued that its current leadership style is also appropriate going forward into the proposed innovative changes, simply due to its uniqueness and effectiveness.
Although, the company would likely benefit from a slight hands on approach and transformational leadership from Hastings. While for its previous change Netflix was a small company exploring virtually a new sector in the industry, now it is an established player with many moving parts. This time the innovative nature of the change is less drastic than transitioning from DVDs to streaming, but rather an enhancement of an existing service on a new level of perception and technology. Netflix would benefit from the intellectual stimulation that Hastings is known to offer and a unifying direction that a transformational leader can offer.
Organizational Change Management
The Triple Bottom Line analysis is a primary system utilized by companies to assess profits through the lens of corporate sustainability solutions, focusing on economic, environmental and social markers. The proposed change initiative is most applicable to the economic and social aspects of the Triple Bottom Analysis. From a social sustainability perspective, the innovation and growth of production and development at Netflix have multiple benefits for society by being job growth driver in multiple cities (both where Netflix is headquartered in Los Gatos, CA, as well as multiple locations around the country where the company studio films content alongside with various outsourcing work that may be done).
Those hired by Netflix in any capacity typically receive above-average salaries positioning them well in communities. Netflix is also well-known for using more than fair hiring standards. Finally, Netflix continuously supports local initiatives and sustainability in communities in its activities either through monetary contributions or even filming of documentary content addressing relevant issues.
Then, there is the consideration of economic sustainability, with Netflix making a major mark on the local and national economy. The company growth helps local suppliers to remain profitable and innovate alongside Netflix. This is relevant in terms of the change initiative as well which will require partnerships with multiple hardware technology firms as discussed, that stimulates national economic growth. Overall, Netflix is also striving to innovate and create a new category of entertainment, creating a viable investment and development opportunity which stands at the cross-roads of multiple industries.
Organizational change management going forward will be heavily based on digitalization and artificial intelligence, an aspect that Netflix has successfully been integrating into its software and will require further in-depth presence in complex technologies of viewer interactivity with content. Another trend to consider for future organizational change management is the shift from change processes to continuous development. Netflix with change management in the past and now going forward with this change initiative have largely adopted this process of continuous innovation rather than small-scale change processes.
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