Netflix is an online streaming company that operates on its vision to be the best entertainment distribution service network globally. To attain this vision, Netflix has undergone several strategic changes in form of product, digitization, marketing, and sales. Running under its generic strategy of cost leadership, the company gets a competitive advantage which keeps it at the top of the entertainment industry. Netflix shifted from a DVD service providing platform to online streaming to implement one of its main organizational changes. Although Netflix does not mainly focus on employee motivation through rewards, it gives the top talent chances to self-motivate by the provision of freedom and responsibility. The firm also offers sufficient benefit packages to employees and counts it as a way of applauding their good work. Therefore, Netflix has undergone digital transformation, product, and marketing strategic changes and operates under expectancy theory culture to motivate its employees.
Effective Change Strategies
Digital transformation was the biggest change Netflix ever experienced in its history. Netflix was founded in 1997 as a movie rental company whereby in 1999, customers would access the company’s website and order DVD movies to be delivered through mails (Xu, 2021). The historical transformation occurred in 2007 when Netflix introduced the streaming service to their subscribers. The subscribers would watch movies and television shows from their homes using the internet. Most of the subscribers’ plans had unlimited access to streaming services. This was not just a digital transformation for Netflix but also a whole transformation for the business.
Netflix partnered with producers of various electronic products including Blu-ray Disc players and video game consoles to enable the subscribers to stream videos on the internet. Subsequently, Netflix decided to undergo another related change that would grow the brand worldwide. The firm introduced a streaming-only plan in 2010 which included no DVDs. It also expanded its streaming coverage to reach Canada, Latin America, the Caribbean, Kingdom, Ireland, and Scandinavia (Xu, 2021). Netflix implemented this strategic change by leaning into its leading change vision. It incorporated its generic strategy, cost leadership in accomplishing the major firm change. Netflix charges minimal prices for its streaming services hence attaining a competitive advantage over other companies in the industry. This primary transformative change led to the next product change earning Netflix major growth in terms of revenue.
Original Content Strategy
Netflix implemented yet another huge change for the business by producing original content. In 2013, Netflix Originals production began where the company started to produce TV shows and movies (Xu, 2021). Since its foundation, Netflix was selling other producers’ content but also applied artificial intelligence which helped the company to know the customers’ needs. Using the data collected by the AI, the company knew what to produce to attract and retain customers. By producing hit shows like House of Cards, the company proved to know customers’ needs. This strategic change moved Netflix to a new level in terms of earnings.
Netflix Originals increased the earning margins of the company towards achieving its vision. Organizational changes never work well unless they are guided by visions of those that the firm appeals to (Kotter, 2012). Through the production of original content, Netflix creates customers’ engagement platform where they can watch most movies and shows produced by the company. In this case, Netflix was driven by customer data to create original content based on what the customers streamed or searched. The company also retains customers by giving incentives for long-term subscribers. For example, Netflix cancels 2% of monthly subscriptions for highly engaging customers to ensure their retention (Fouladirad et al., 2018). Netflix’s original content also involves producing content for specific regions based on customers’ needs. It produces movies and shows using different languages based on different regions of the world targeting its subscribers in the area. For example, the 2021 hit TV show Hit and Run is Netflix’s original production based on an Israelite story and by targeting the Israel audience, the original production language is Hebrew (Xu, 2021). This is among many other movies and shows that target a specific audience.
Netflix changed from a website streaming service to multi-platform streaming. The company made this change to comply with market changes where there developed several streaming platforms. Netflix no longer streams only on its website but also on YouTube and Instagram. The firm allows people to stream some of their shows without signing for the website. For example, Patriot Act is available on YouTube in full length for free (Fouladirad et al., 2018). This is a clever way to attract customers to sign up for more content by allowing them to have samples of what to expect when subscribed. Netflix has over 2 million YouTube subscribers who are connected to IGTV (Xu, 2021). The company provides free streaming services on IGTV and garners at least 100, 000 views for the stream. Although this seems like not a way of generating revenues, such streams only create business awareness without causing harm to the overall sales operations.
Netflix conducts digital marketing on various social media platforms. As another way of digital diversification, the firm markets its content on various social media platforms. Through short ads for various Netflix trailers and content, the company uses social media to reach a huge audience (Fouladirad et al., 2018). The business markets its new and least streamed content to gain more audience. That way, the business increases its earning margin. Netflix uses data-driven marketing to increase its total revenues.
The firm uses the data from customers to predict the number of people likely to watch its original content. For example, Netflix predicted that 100 million subscribers would watch “Stranger Things” so it invested $500 million in the series (Fouladirad et al., 2018). The production team also predicted that “Bojack Horseman” would gain 20 million views so they invested $100 million on the same (Fouladirad et al., 2018). These predictions help the company to produce profitable content which in return earns them more than expected. Using the customers’ data, the firm also knows how to produce interesting content for the viewers based on their preferences.
Netflix offered region-generated subscription plans in 2020 and 2021 for specific countries. The leading company in entertainment has over 200 million subscribers from all over the world. As of 2020, 4.6 million of the subscribers were from India, an apparent indication of brand growth in the region (Ruiz-Navas, & Miyazaki, 2017). Netflix encouraged the regional audience by launching a mobile plan which was 60% cheaper in India. Basing its decision on the large-scale use of the content on mobile phones, the plan costs were $2.72 or 199 INR per month (Ruiz-Navas, & Miyazaki, 2017). As shown by data, 76% of the Indian content consumers use mobile phones, and only 22% use desktops. Therefore, the Netflix subscription plan targeted mobile users (Ruiz-Navas, & Miyazaki, 2017). A similar plan is currently running in Kenya, except it is free this time. In October 2021, Netflix launched a free subscription plan for mobile users in Kenya which also targets a high audience.
Netflix uses various motivational tactics to reward its employees for small wins. Effective change strategy involves recognizing employees as the core actors in implementing change (Wong, 2021). Netflix understands that and involves its employees in attaining its vision by rewarding their excellent performances. Netflix does not reward employees after achieving small wins but appreciates their general performance. Netflix CEO, Reed Hastings mentioned that employee motivation is all about challenging employees to do better. Netflix encourages top talents to maximize their skills by taking appealing challenges. To reward their efforts, however, Netflix offers its employees several benefit packages.
Netflix benefit programs aim at creating flexibility for the employees by supporting them in and out of the work. The company’s health care options fit in their free and flexible setting. The options are meant to cover employees and their families’ lifestyles. One medical plan is offered through Kaiser while the other three plans (dental, vision, and health savings accounts) are covered by collective health providers (Wong, 2021). The plans cover varied types of care, in and out of the network while the firm offers 100% coverage of preventive care within the network providence.
The company also offers yearly health allowances which can be cashed in not deployed or care. The general health medical coverage allowance per year is $15, 000 and if the employees do not use it in the hospital can get $5, 000 cash (Wong, 2021). The company provides a fixed amount of $15 000 to all employees because the allowance covers other family members hence is depleted faster for large families. Netflix also offers great retirement plans and generous stock options for employees.
The company benefit programs cover the future of its employees. Netflix rewards employees with a 401k plan which is standard and is delivered through fidelity investment (Wong, 2021). Using fidelity investment retirement savings plan, the firm adds employees’ contributions with 4% of the total savings. Hence, employees with higher savings reap the increased benefits in their retirement savings plan. The organization also has a generous employee stock purchase plan. There are two different types of plans, free options, and supplemental allocation programs. In free options, employees get an amount equal to 5% of their salaries allocated to their stock option program (Wong, 2021). In supplemental allocation, full-time or hourly employees’ direct portions to the supplemental allocation to get the stock rewards. These plans are critical because they give employees stock on top of their salaries and give them a chance to determine how to allocate their paycheck.
Netflix offers unlimited paid time off to its employees as a way of practicing their culture of freedom. The organization believes that employees thrive by being trusted and by so doing, having the freedom to make a difference. The Paid Time Off (PTO) policy of the institution is to allow employees to take vacations on any day necessary (Wong, 2021). PTOs are not recorded and are only discussed between employees and managers. The culture of the firm demands employees to take time off to relax minds and keep their mental health stable.
The company encourages the formation of families by giving parental leaves to those who need them. Salaried employees enjoy unlimited parental leave of between 4 to 8 months but can even go for a year (Wong, 2021). Hourly employees are given 24 weeks off and both the salaried and hourly leaves are fully paid. The leaves allow the parents to take care of the babies and themselves (Wong, 2021). The employees negotiate with their managers for the time needed to fully recover and be ready for work. In the promotion of cultural support and flexibility, employees can come back on a part-time o full-time basis and can return home again if need be.
Netflix also has other considerations and perks counted as benefits for office days. The organization offers rideshare and shuttle programs to reduce employee stress. There are subsidized Lyft, uber, and other rides for employees commuting from home to work (Wong, 2021). The firm also provides food in abundance for the employees. There are free lunches and breakfasts served from Monday to Friday with snacks for in-between meals. The company does not have other commodities like a gym because they pay enough salaries to employees for such purposes.
Key Characteristics of Effective Change Leaders
Netflix employs organizational culture to derive the characteristics of leaders with whom to plan and implement changes. According to the study, Netflix CEO, Reed Hastings uses a hands-off approach to leadership (Xu, 2021). A hands-off approach means that the employer is not involved in employees’ plans of change. This type of approach gives employees a high level of autonomy but comes with a cost of high expectations in performance. The company is also run under a culture of direct feedback that links the line between constructive and critical.
Netflix operates under a culture of transparency and encourages employees to be honest and direct. During their daily practices, the firm expects the workers to be directly honest about their thoughts (Xu, 2021). They should communicate their opinions about change and point unattainable goals. In other words, the institution does not accommodate fear or rumors but speaks up about things concerning work. The work culture also encourages freedom and responsibility amongst employees. The organization believes that talent density and captivating challenges motivate the employees to be productive.
Netflix uses the expectancy theory of motivation to mold employees to fit the organizational culture. The theory is seen by how the firm motivates and keeps employees working for the business (Xu, 2021). Expectancy theory states that behavior is motivated by the expected outcomes or consequences. The theorist said that people often behave according to what is expected of them. Netflix gives employees the freedom to have unlimited vacations, plan and implement changes. However, the firm expects maximum performance in return so the employees use their freedom wisely. Netflix hires top talents in the industry as a way of ensuring high performance. Furthermore, top talents are expected to take the freedom to commit to their respective responsibilities because low-performing employees are often dismissed.
The expectancy theory applied by Netflix to define job characteristics entails five components. Skill variety, autonomy, feedback, task identity, and task significance are the characteristics that define the job (Kotter, 2012). The elements are used to predict possible job results and identify employee satisfaction or dissatisfaction (Xu, 2021). Netflix looks for highly skilled candidates during hiring to ensure that employees bring a variety of skills to the organization. The autonomy given to the employees gives them the flexibility to work and leave when they want. Autonomy motivates the workers to believe in individualism concerning performance and outcome (Kotter, 2012). In other words, each employee is responsible for their outcome and their practices are not supervised.
Expectancy theory aims at motivating and helping workers achieve job satisfaction. Identification of a task and its importance helps the employees know exactly what is expected of them and the needed results (Kotter, 2012). Netflix employs these components of the theory to allow employees to identify the need for change and implementation plans. The organizational CEO leaves the employees at the hands of managers in who they identify and implement changes (Xu, 2021). By clearly defining their tasks and learning the importance, managers allow the workers to come up with ways to solve problems. Direct feedback is also encouraged whereby employees give performance outcomes while indicating their level of satisfaction. It is at this point that Netflix employees are encouraged to be transparent about the results.
Netflix, the leading company in the entertainment streaming networks lives to accomplish its vision. Its desire to be the best in the industry has led to the making of several transformative changes. Changes that range from product, digital, and marketing have equally influenced employees to grow towards its vision. Netflix appreciates and values top talents by doing everything possible to retain them. The company workers are given the freedom to work and take breaks when they feel like it. The autonomy encourages them to be responsible in their duties as much is expected in return. The firm also rewards employees by giving them high salaries and several benefit packages as a way of recognizing their good work. The firm culture, based on expectancy motivational theory encourages transparency in giving feedback. Netflix employees are entrusted with identifying and implementing changes, hence maximum productivity is also anticipated. The company has a clear and open vision that allows various changes towards achieving its dreams.
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Kotter, J. P. (2012). Leading change, with a new preface by the author. Harvard Business Press.
Ruiz-Navas, S., & Miyazaki, K. (2017). Adapting Technological Capabilities for World Digital Business: The Case of Netflix. Management of Engineering and Technology, 1-10. Web.
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