We probably all have a subscription to the most famous streaming provider Netflix. It transformed from a DVD delivering company to a streaming service and is now more and more producing its own movies and series.
Netflix has over 209 million subscribers in over 190 countries and 15,000 titles across all international libraries. They’re one of the most successful streaming services with anannual revenue of over $25 billion. But how and why did Netflix choose to change directions?
Netflix’s Early Days
1997 August 29th – Netflix was founded
- Netflix was founded in 1997 by Marc Randolph and Reed Hastings as a video-rental company. They realized the big pain point for customers to pick up the DVD’s at stores. Therefore, they started offering to mail the DVD’s directly to the customers’ homes and found success in doing so. The founder tested the idea by posting DVD’s to their home and when it arrived without any damage, decided to test the idea.
1998 April 14 – Website launch
- On the first day Netflix got 137 orders, but needed to buy more servers the same day as the website crashed.
1999 – Subscriber-based business model
- Netflix changed their business model from fee per movie to unlimited DVD rentals for one low monthly price.
In 2002 Customers complained about delivery time of the DVD’s
- Netflix opened regional warehouses as a response for overnight delivery.
2007 – Netflix begins streaming content
- As technology advances and enables streaming, Netflix decides to test streaming in Canada with 1,000 titles (included in the 5,99$ per month physical subscription).
2010 – Blockbuster files for bankruptcy.
- As Blockbuster didn’t focus on the needs of its customers it went out of business.
2012 – Netflix starts making original shows
- They released the first show Lilyhammer and then House of Cards, which was a big success.
2016 – Instant Trailer launch instead of pictures
- User Engagement was increased by directly starting the trailer from movies, instead of just showing a still image.
Design Thinking @Netflix
There are 4 phases of design thinking, which can and should be iterated.
- Clarify “observing a situation without bias”
- Ideate “brainstorm possible solutions”
- Develop “develop potential solutions, test, experiment”
- Implement “implement the successful solution, reiterate if needed ”
To encourage innovation Netflix built an environment that allows failure and motivates employees to try out new ideas. They’re given a high degree of independence.
In addition Netflix created constant feedback loops for employees.
Results
- DVD (overnight) delivery
- Online Streaming
- In-House production (Squid Game, House of Cards, …)
Lessons Learned
Netflix never stopped to apply Design Thinking and could grow to the industry giant it’s today. They keep innovating and don’t sleep on new customer needs and therefore new opportunities.
- Think Big, but start small
- When the opportunity due to technological advancement occurred to stream movies online, Netflix took it (tested it at one location).
- Fail Quickly
- Dropped early efforts to offer streaming, because the technology wasn’t advanced enough yet.
