Businesses are always searching for innovative ways to fulfill the increasing customer demand. Companies use information technology to gather data about customers to improve their businesses (Buchalcevova & Pour, 2018). Netflix is one of the companies that has utilized information technology to modify its business model. Reed Hastings, the CEO, established the company in 1997, mailing DVDs to its consumers. Today, the company has over 109 million subscribers globally. In 2001, Hastings had the vision to stream movies through the internet direct to people’s screens at home. Over ten years, he tested and got consumers used to the concept of streaming rather than playing DVDs. Netflix is one technology innovator standing alongside Amazon, Google, and Facebook. The company has used information technology to change the way people consume entertainment.
The Trigger for Change
The business scenery of the globe is besieged with companies that have remained stuck shielding old business models such as Nokia, Blackberry, and Blockbuster. In an age where continuous innovation is needed to compete, Netflix has polished swiftness by changing its business model twice (Allegretti et al., 2021). Initially, the company was mailing DVDs to its users. This business model was in direct rivalry with brick-mortar movie rental stores. However, Netflix’s vision was never limited to the DVD rental business model as this was only a temporary solution while the technology of streaming developed. The company always knew where it was headed. In 2007, it started its streaming service after YouTube established that this technology was ready. This was the first transformation of its business model. Nevertheless, numerous companies like Netflix noticed streaming technology; thus, the company was in danger of being cut off. Therefore, Netflix conquered the risk by developing a new business model and creating and launching its content.
One of the critical issues that made Netflix change its business model is that the creators could look at it from an outsider’s perspective. They were never satisfied with the way their business model was at a specific time as they were always looking at where the market headed in the next five to ten years. They mixed numerous building blocks for expansion by searching for innovative ways to elucidate problems for their consumers (Pijl, 2021). This was done with digitalized services by using the lean method. For instance, in 2007, Netflix recognized that the DVD rental business model was no longer profitable. They were aware that people needed not only to rent videos but also needed to pay for a user-friendly and large subscription. They predicted the change, used their information technology background to generate appropriate digital solutions, and revolved it in a lean way.
When Netflix changed their business model, they were also looking to gain more insight into their consumer’s preferences and generate a community of admirers with suitable content for each individual at any period. The company evolved its system to an open-source inventiveness because they understood that with more information and the technological acquaintance of more people, the Netflix experience would improve. In September 2009, an award of one million dollars was given to team “BelKor’s Pragmatic Chaos” for refining Netflix’s endorsement model (Pijl, 2021). In 2013, the company began to cultivate their production and shows grounded on analyzing their own consumer’s information. Through this, Netflix predicted what their consumers would like next and acted upon it, going far beyond their competitors. For example, House of Cards was the first successful Netflix Original created using this model. Whereas other studios were only looking to make a pilot movie, the company already knew, founded on their data, that this series would become a success and instantly signed up for two seasons. All these elements were combined to trigger the change in the current business model of Netflix.
List of Implemented Technologies
Netflix has been successful due to the selected content that it has established, attained, and can make obtainable to its users. Additionally, the company appears to be savoring customers and gaining new consumers because of its technology based on its understanding of the market and customers. Over the years, Netflix has regularly made headlines due to its use of artificial intelligence and machine learning technology. These technologies are used to increase recommendations to users, decode subtitles, and modify posters on movies in their selection based on consumers’ tastes and preferences.
Artificial intelligence (AI) is the capacity of a computer to carry out tasks that humans usually do because they need human aptitude and understanding. Netflix utilizes AI to market shows and calculate their success so that conservative box office numbers probably would not match. Successfully, the technology breaks down to discovering links and defining the probable audience sizes (Fingas, 2020). The technology depends on transfer learning, where the factors erudite from a home task increase performance of an objective task. Netflix generates a ‘similarity map’ for thematic assessments where AI customs a show’s workflow, tabs, and synopses to determine connections to other titles. Also, Netflix has an AI model that relates the audience sizes of similar work in a specified region. For example, if a thriller is expected to be successful in the UK, Netflix might upgrade marketing in the area and prepare labels and subtitles earlier. The schemes are self-supervised, allowing them to contact a broader collection of titles. Artificial intelligence makes it easier for Netflix to market a series of originals.
Machine learning is another technology that Netflix has implemented. The technology involves studying computer algorithms that inevitably progress through data and experience. They execute tasks and absorb from their implementation without any human intervention. Machine learning is much used to run Netflix. For instance, when one opens their homepage on Netflix, they find it filled with shows previously watched and those recommended by Netflix to watch. Netflix uses a machine-learning recommendation engine to propose movies and series to its users (Vadapalli, 2022). Moreover, the company uses this technology to determine the thumbnails that its consumers are likely to click. Netflix has diverse thumbnails for each show and movie; their machine learning algorithms frequently test them with the users. The thumbnails that acquire the most clicks and make the most attention get likings over those that do not. Machine learning assists Netflix give customized auto-generated thumbnails for each series and movie. Additionally, machine learning helps Netflix be keen on their customer’s usage of their services (Vadapalli, 2022). It also assists them with content creation. Machine learning algorithms carry out market research and discover which kind of content would be most appropriate for a specific market segment; hence, helping Netflix stay ahead of market trends.
Conclusion
Generally, information technology is essential for the successful running of a business and creating its model. Netflix is among the companies that have used information technology to transform their business models and maintain competitiveness in the current innovative era. The company uses various information technologies such as artificial intelligence and machine learning to keep up with market trends and run its business model successfully. Information technology is an essential factor in a business to maintain its competitiveness in the ever-evolving market.
References
Allegretti, S., Seidenstricker, S., Fischer, H., & Arslan, S. (2021). Executing a business model change: Identifying key characteristics to succeed in volatile markets. Leadership, Education, Personality: An Interdisciplinary Journal, 3(1), 21–33. https://doi.org/10.1365/s42681-021-00020-x
Buchalcevova, A., & Pour, J. (2018). Business-IT alignment within the management of Business Informatics Model. Proceedings of the 20th International Conference on Enterprise Information Systems. https://doi.org/10.5220/0006778506960703
Fingas, J. (2020, December 12). Netflix explains how it uses AI to sell you on a show. Engadget. Retrieved February 12, 2022, from https://www.engadget.com/netflix-explains-ai-for-show-marketing-201524601.html
Pijl, P. V. der. (2021, February 8). How Netflix shift its business model from product to service, from DVD to streaming. LinkedIn. Retrieved February 12, 2022, from https://www.linkedin.com/pulse/how-netflix-shift-business-model-from-product-service- Vadapalli, P. (2022, February 11). How Netflix uses Machine Learning & AI for Better Recommendation? upGrad blog. Retrieved February 12, 2022, from https://www.upgrad.com/blog/how-netflix-uses-machine-learning/
Vadapalli, P. (2022, February 11). How Netflix uses Machine Learning & AI for Better Recommendation? upGrad blog. Retrieved February 12, 2022, from https://www.upgrad.com/blog/how-netflix-uses-machine-learning/
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