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Just as Netflix disrupted the media landscape to find success, other businesses must innovate or risk becoming obsolete.
The past 20-plus years have been a fantastic journey in the world of technology, changing the complexion of most businesses that survived the ride. Netflix, for one, went from a modest and now defunct, DVD movie rental subscription model to a digital media powerhouse that has forever changed how we view entertainment.
Netflix’s ability to pivot, stay ahead of the competition, set trends and recover from downturns provides lessons for all businesses seeking success, growth and longevity in the digital age. We’ll take a closer look at Netflix’s journey, how it disrupted the media landscape and what we can learn about digital transformation and innovation from the company’s growing pains and successes.
>> Read next: Confessions of an Entrepreneur — Technology Leads to New Opportunities
Netflix’s evolution is a modern business success story with plenty of twists and turns. Here’s a brief history of the company and how it disrupted the entertainment industry:
Here are some lessons businesses can learn from Netflix’s continued success:
The Great Netflix Correction of 2022 was an eye-opener for the industry. Netflix lost more than 200,000 users in the first quarter — the first time it had lost subscribers since 2011. The value of its stock price had fallen by 68 percent by that June.
Perhaps more surprising than Netflix’s setback, however, was its comeback. Here’s what businesses can learn from the company’s growing pains:
Thanks to these measures, Netflix looks to have turned itself around — the company had an operating margin of 21 percent in 2023, up from 18 percent in 2022. If it continues to innovate and disrupt the status quo, the brand will remain a leader in both streaming and original content.
Netflix isn’t the only digital disruptor. Here are some other significant examples of innovation by companies that today are considered industry leaders.
iTunes was the first major platform for providing widely distributed digital content and the concept turned the music industry upside down. An antiquated system of music production, distribution and in-store sales gave way to a new method of paying for only what you wanted, such as a single song instead of an entire album and accessing it immediately via the internet.
Industry resistance to the iTunes distribution model was fierce, but Apple prevailed. Artists could even self-produce and release music without studios or physical music stores, thanks to the company’s innovations. Today, iTunes and the Apple Music app, which lets users stream and download millions of songs and access their personal music library, are essential for every music fan.
eBay was founded in 1995 as AuctionWeb and went public in 1998. It was one of the first “killer apps,” becoming the core of the burgeoning e-commerce industry. The site’s online auction model quickly took hold and became a favorite of internet-savvy shoppers.
Initially, traditional retailers weren’t concerned because eBay was considered a place where people sold their junk. However, eBay became a formidable e-commerce player with a PayPal digital payment integration and the addition of more traditional online sales features, such as implementing a “Buy It Now” button to avoid auction haggling. Today, shoppers and online merchants may prefer Amazon (see below), but there’s no denying how eBay changed the commerce game.
Amazon’s online book sales proved that the internet could house a hugely scalable retail platform that didn’t require a massive real estate and workforce investment. Still, many retailers didn’t see the promise initially. The thought of shipping costs, packaging and returns gave them a headache and adoption was slow.
However, Amazon began selling more than just books and the concept exploded. At the same time, shipping companies, such as UPS and FedEx, saw the promise of this digital retail world boosting their businesses, too. Today, Amazon is the undisputed e-commerce leader, with offshoots such as Amazon Prime, Amazon Prime Video and its own digital devices like Amazon Alexa. There are even Amazon business features that help small businesses operate.
AI was, for a long time, widely regarded as akin to robots taking over the world. But as it has developed and its use cases have grown, its value as a boost to human capabilities is gaining traction. Enter OpenAI’s ChatGPT, a chatbot released in late 2022.
Many have enthusiastically adopted the tool as the answer to creating original content at scale. It can output human-like text and engage in conversation with users, making it a helpful assistant for tasks, such as copywriting, dealing with customer inquiries and automating workflows. It can also offer insights and forecasts. Now, not only are other technology companies like Google, Microsoft and Meta racing to build a better chatbot, but everyday businesses are figuring out how best to incorporate AI tech into their operations for better efficiency.
The internet space isn’t the only sector undergoing massive changes. Here’s a glance at some other industries facing digital disruption, the companies doing the disruption and how businesses like yours may be affected.
Disrupted industry or corporation | Disrupter | Disruption |
---|---|---|
Credit cards (Visa, Mastercard and American Express) | Mobile payments, like Apple Pay and Google Pay | Digital payments and omnichannel payments are increasingly popular and the infrastructure rails of major credit card providers are soon to be the “horse and buggy” of the digital age. Be prepared to have the middleman cut out of the payment game, leading to reduced processing fees and a streamlined sales process. |
Traditional technology companies (HP, Intel, IBM and Cisco) | Amazon Web Services, cloud information technology infrastructure services | Cloud infrastructure (computers and network) providers support a pay-as-you-use model (like renting movies). While traditional tech companies will always have a market, no longer will there be half-utilized hardware on the data center floor of large corporations. Instead, businesses will increasingly rely on cloud services. |
Airlines and transportation | Skype, Zoom and other video communication technology; Uber, Lyft | With the use of video teleconferencing services, such as Zoom, now the norm, businesspeople are becoming less inclined to travel for work meetings and presentations. If they do hit the road, they may skip the rental car and opt for a ride-share instead. |
Recording studios | Apple’s GarageBand and similar products | Recording studios across the world have seen their profits dip dramatically as amateur production engineers can now record their own music with “good enough” quality and release it themselves. However, studios will likely always exist for musicians who don’t want to do things do-it-yourself-style. |
Kodak | Digital photography services like Shutterfly and Google Photos | Kodak reinvented itself as a manufacturer of print production technology with a workforce of more than 60,000 at its peak in the 1980s. But it wasn’t able to keep up with the times and declared itself bankrupt in 2012, selling its Kodak Gallery site to Shutterfly — one of many digital image-sharing businesses that has changed how people interact with their photos. |
Comcast, Time Warner and Verizon | Satellite, wireless, cellular technology | While these businesses are deeply entrenched in internet operations, they’ll need to adjust how they do business. One day, wired infrastructure will be defunct and we’ll see more of what Google is doing with Google Fiber. |
Digital technology has been a massive disruptor in many industries, including retail, entertainment, communications and travel. Trying to track industry trends and predict their impact is complicated. However, seemingly unrelated or new innovations from rivals can damage your business or industry if you don’t take notice — and you can be sure someone will. Netflix’s evolution is a prime example of that.
Sometimes, businesses have invested so much in infrastructure that it’s almost impossible to turn the ship, so getting an early start is crucial. Digital makes everything fast; it won’t take 30 years anymore to scuttle an outdated business concept. No matter what your industry is, keep an eye on digital innovations and look toward the future to keep your business not just afloat but ahead of the pack.
Mark Fairlie and Kimberlee Leonard contributed to this report.