netflix organizational change & structure case study 2022

Netflix Change Management Case Study

Netflix is one of the world’s leading internet television networks with over 100 million members in 190 countries. It has a wide variety of award-winning original programming, documentaries, TV shows and feature films. 

Netflix offers a subscription services to its users to watch all its content online. Now Netflix is producing its own content and also adding quality content of other producers for its users. It has become one of the popular online video streaming web portals and been on first top 50 websites globally.

But Netflix transformed itself and it embraced change with ever changing technology and business market.

What is Netflix successfully change story? How it happened and what challenges it faced to cope with change?

For this questions, we are presenting here Netflix change management case study.

This case study will explore how Netflix has successfully managed change in the past and present. It will also provide recommendations for other businesses on how to approach change management.

The story of Netflix change management

Netflix is a streaming service for movies and TV shows. It has a library of over 200,000 titles that you can watch on your phone, tablet, computer, or TV. You can also download shows to watch offline. Netflix offers a variety of plans, including a basic plan that starts at $7.99/month and a premium plan that starts at $11.99/month.

Netflix was founded in 1997 by Reed Hastings and Marc Randolph. They started the company with the intention of offering a DVD-by-mail service. In 2007, they introduced streaming, which allowed instant streaming of TV shows and movies on your computer. In 2013, they introduced the concept of ” binge watching” with the release of House of Cards, which all episodes of the first season were released at once so that viewers could watch them all in one sitting. In 2015, they launched their own production company, Netflix Originals, which produces movies and TV shows that are only available on Netflix. 

Netflix has undergone several changes since it was founded. The most notable change was the introduction of streaming in 2007, which changed the way people watched TV and movies.

Netflix made two big changes since its started business. First, it introduced the subscription option in 1999 to store DVD rental. This option allows users to rent unlimited DVD rental without late fees. It was a drastic change in the business model of Netflix.

The second big change was happened in 2007, when it launched an online video streaming service. It was a highly disruptive change which completely revolutionalized the concept of watching movies and Tv shows online. Consumers also welcomed this change because this change was the need of time. Because everyone was using smartphone, laptops and computers and trend of going to cinema to watch a movie was on decline. Netflix also used social media and present its content to reach out their customers.  

Netflix’s Change Management Process 

Netflix’s change management process is a model for other organizations to follow. The company has a dedicated team that is responsible for managing change. This team works closely with Netflix’s engineers and product managers to ensure that changes are made in a controlled and safe manner. Netflix has also implemented a series of mechanisms to help prevent and mitigate the impact of changes. For example, all changes are assessed for risk before they are implemented. Netflix also conducts regular post-change reviews to identify any issues that may have arisen from the change. As a result of these measures, Netflix has been able to successfully manage change while minimizing disruptions to its business.

How Netflix manages organizational change forces

There are many factors that affect organizational change . But primarily these are two broad forces of organizational change: a) external and b)internal. Among the external forces there were rapid changes in technology, globalisation, social media etc. These all external factors led to organizational change at Netflix. .For instance, people’s expectation and behaviour, likes and dislikes in terms of watching content was changing due to new technology. New tools, techniques were also affecting business of movies watching and TV shows. But Netflix managed all those forces of change and responded in a big way to meet expectations of its consumers.

There were also internal forces of organizational change like new skills of employees and employees expectations, need of change in work environment, cost of business model etc. Netflix taken all these factors into consideration before going to execute change. And that’s the reason behind their successfully implementation of change.

How Netflix Uses Data to Drive Change 

Netflix’s data team is made up of over 800 people, including statisticians, analysts, and engineers. Their mission is simple: “to help Netflix understand its business and the world.” To do this, they collect and process tons of data every day. This data comes from a variety of sources, including things like clickstream data (what you watch and when you watch it), surveys, social media activity, third-party research, and more. 

Once all this data is collected, it’s organized and stored in a massive data warehouse. This is where things start to get really interesting. The team then uses a combination of qualitative analysis (looking at the meaning behind the numbers) and quantitative analysis (using statistical models to draw conclusions) to glean insights from the data. These insights are then used to inform everything from what new shows to green-light to which actors should star in them. 

For example, let’s say the team notices that a lot of people who watch Stranger Things also tend to watch You. They might then use this information to suggest Stranger Things to people who haven’t watched it yet or recommend You to people who have finished Stranger Things and are looking for something similar. This is just one small example of how Netflix uses data to drive change within its business. 

It’s clear that data plays a big role in everything Netflix does. From deciding which new shows to produce to suggesting content for individual users, data is at the heart of the company’s decision-making process. And as our watching habits continue to be tracked and analyzed, we can expect even more personalized recommendations and a more tailored streaming experience overall.

Learning from drastic changes

In order to maintain a successful business, it is important to occasionally review your company’s methods and make changes where necessary. This is especially true in today’s ever-changing marketplace. Netflix, a leading provider of streaming video content, knows this well. In 2011, the company made a drastic change to its business model that upset many of its customers. However, thanks to careful planning and execution, the change was ultimately successful and resulted in increased profits for the company.

The introduction of drastic changes can be a difficult process, but with proper planning and execution, it can be successful. Netflix provides a great example of how to successfully navigate a major change. By carefully considering the needs of its customers and taking the time to properly execute its plans, the company was able to weather the storm and come out stronger than ever before.

Final Words

Netflix is a great example of change management. Business organizations can learn from Netflix change management case study to keep up with the latest changes and trends. Netflix has been successful in managing change by using data to drive their decisions. There are multiple lessons for other business entities that how Netflix capitalised on its human resources and rightly understood needs of modern-day customers.

About The Author

Tahir Abbas

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Netflix Organizational Change & Organizational Structure 2024

Netflix Organizational Change. Netflix Organizational Structure 2024. Case Study Netflix Change Management. Organizational Structure of Netflix.

Netflix is an online video streaming platform that allows users to watch movies, dramas, TV shows, and cartoons. The user can watch all these videos through a subscription service. Netflix regularly adds new films, series, and TV shows to the chart so users can watch them instantly.

It ranks top 50 sites, following Google, YouTube, Yahoo, Facebook, and Twitter. Thus, Netflix has become the most popular video streaming site or web portal in the world now.

What is Organizational Change?

Organizational change means business transformation in which a company changes its business tools, such as policy, strategy, operation, structure, and culture. The critical reasons for organizational change are technology, globalization, new market condition, poor performance, and customer demand.

The management changes enable the company to cope with the digital era. Therefore, many organization has accepted technological changes to adjust to the digital age. It assists the company in changing old systems with new tools to achieve the business goal.

Organizational Change Examples

Netflix is one of the best examples of management change. It accepts the changes to cope with the new context. Netflix’s organizational change is a real-life example of Lewin’s change management model . The management needs to pass a few stages to complete the full process. Technology, culture, and environment are the most significant factors that foster an organization to accept change.

Netflix’s Organizational Change has replaced the old procedures with new techniques to adjust to the current situation. So, Netflix is the most general example of management change. Additionally, Wipro, Infosys, Samsung, and Amazon accepted the change to achieve business success.

Netflix Change Management Case Study

The Netflix change management case study includes the organizational change at Netflix. Additionally, It describes the history of the Netflix business change model. The author presents a change management case study of Netflix for students.

Netflix Organizational Change

Technology has changed the world in many ways, including education, business, sports, entertainment, etc. Many renowned companies have been closed due to new technology such as computers, smartphones, and social media. Some have managed to cope with the force of change by applying sophisticated strategies and accepting organizational change.

Netflix is one of the best examples that has changed its business model and strategy to survive. It has handled the force of organizational change to achieve a competitive advantage. Hence, it has become netizens’ most popular video streaming site.

Netflix was founded in 1997 in California, USA. However, In 1998, Netflix started its business by selling DVDs and rentals by mail.  The product was a rent-by-mail DVD, and the payment system was the pay-per-rental model.

The following year, in 1999, Netflix launched its new subscription feature for customers to rent DVDs at a monthly rate. This service allowed the subscribers to enjoy unlimited DVD rental with monthly payments. So, the change was from the pay-for-use model to a monthly subscription model. The subscribers choose the movie and video titles from Netflix’s official website. After that, the distributors send the shows in the form of DVDs to the subscribers.

In 2007, Netflix introduced a new video streaming feature for films and television series. The proper utilization of the force of change has helped to achieve success. However, it is believed that Netflix is one of the most popular platforms for watching new movies, drama series, TV shows, and so more. They have achieved competitive advantages by adopting new features as per audience demand.

The three main divisions of Netflix management are functional, geographical, and product teams. The operational division includes the CEO, content, communication, talent, finance, legal, etc. Additionally, the geographical team consists of local and international services. Finally, the product team controls and ensures quality content.

Additional Change Management at Netflix

In 2011, Netflix introduced its mobile apps and ios service for smartphone users. Smartphone users can download the apps free from the play store.

Recently, Netflix changed from HTTP to HTTPS encryption to ensure viewers’ privacy.

In 2016, Netflix launched its offline playback system to cache the contents. Therefore, Netflix mobile app users can watch high-quality cache content without an internet connection.

In 2018, Netflix added “the Skip Intro” option for customers to avoid intros of the shows. So, the users can skip the video if they want.

In 2022, Netflix started alerting customers to share their account IDs and passwords with others.

In 2022, Netflix intended to extend its business into the video gaming industry. The 200 million subscribers of Netflix can reach with a bundle of games like Apple Arcade. Video games play a significant role in attracting potential customers.

In 2023, Netflix launches a new advertising tier for subscribers. The new AVOD tier increases revenue. Users can buy a subscription at a lower cost but must encounter ads while watching videos.

Over the years, Netflix has navigated numerous organizational changes to stay competitive and meet the evolving needs of its customers in the rapidly changing entertainment industry. These changes have been driven by factors such as technological advancements, shifting consumer preferences, and global market expansion. Let’s delve into some key organizational changes that Netflix has implemented:

Shift to Streaming Services

One of the most significant organizational changes for Netflix was its transition from a DVD rental service to a streaming platform. This shift was propelled by the growing demand for online streaming content and the declining popularity of physical media. By investing in streaming technology and acquiring digital content licenses, Netflix successfully repositioned itself as a leading provider of on-demand streaming services.

Emphasis on Original Content

Recognizing the importance of exclusive content in attracting and retaining subscribers, Netflix made a strategic decision to invest heavily in original programming. By producing hit shows like “House of Cards,” “Stranger Things,” and “The Crown,” Netflix aimed to differentiate itself from competitors and create a compelling value proposition for subscribers. This organizational change required significant investment in content production capabilities and talent acquisition.

Global Expansion

Another key organizational change for Netflix was its aggressive international expansion strategy. Realizing the potential for growth in untapped markets, Netflix launched its streaming service in numerous countries worldwide. To support its global expansion efforts, Netflix localized its content offerings, established regional offices, and formed partnerships with local content creators. This expansion into new territories diversified Netflix’s revenue streams and solidified its position as a global entertainment powerhouse.

Data-Driven Decision-Making

Netflix leverages data analytics and machine learning algorithms to inform decision-making across various aspects of its business. By analyzing user behavior, viewing patterns, and content preferences, Netflix can personalize the user experience, optimize content recommendations, and inform content acquisition strategies. This data-driven approach has enabled Netflix to stay agile and responsive to changing market dynamics, driving innovation and growth.

Organizational Culture

Netflix fosters a unique organizational culture characterized by freedom and responsibility. The company operates with a flat organizational structure, empowering employees to make autonomous decisions and take ownership of their projects. Netflix values innovation, creativity, and risk-taking, creating a dynamic and entrepreneurial work environment. This culture of experimentation and continuous learning enables Netflix to adapt quickly to market changes and drive innovation across its business.

In conclusion, Netflix’s organizational changes reflect its commitment to staying at the forefront of the entertainment industry by embracing technological innovation, investing in original content, expanding globally, and fostering a culture of creativity and experimentation. These organizational changes have been instrumental in Netflix’s success and its ongoing evolution as a leader in the streaming entertainment landscape.

Netflix History Timeline

Netflix has become one of the most famous American production companies worldwide. It was established in 1997 by Reed Hastings and Marc Randolph in California. However, Marc Randolph left Netflix in 2002. In 1998, Netflix introduced its official website with 925 items. These items were available to rent for a pay-per-month approach. It started its journey with only 35 employees.

Netflix launched its operation with the first and largest online DVD rental store. Since 2012, Netflix has produced and distributed its original content, including film and television series entertaining many viewers. This variety of content has been stored in the online library for viewing by subscribers. Since 2016, it has been providing services in around 190 countries. This company has established its office globally, including in Brazil, the Netherlands, France, the United Kingdom, Japan, India, and South Korea. In 2023, Netflix owned more than 231 million subscribers globally involved in a pay-per-month payment.

However, Netflix is available worldwide except in China, Syria, and North Korea. According to a report in 2020, Netflix earned $1.2 billion in operating income for its excellent performance with updated tools.

Netflix Organizational Structure

Netflix has a flat organizational structure that provides ample freedom for employees. It is also known as a decentralized organizational structure that allows the respective person to make quick decisions. Netflix maintains the unitary organizational structure, also known as the U-form organizational structure. It influences the employees to be more responsive to their duties. Netflix’s organizational structure avoids top-down decision-making strategies to create a conducive working environment for employees. It also focuses on creating a favorable environment to promote employee performance. Netflix has a labor division that works to improve performance. The authority reviews the performance regularly. They opt for a multi-rater feedback system that is also known as a 360-degree review method.

Netflix’s management team always focuses on practicing and maintaining the principles of total quality management tools. The TQM helped to become the most popular company worldwide.

According to McGraw Hill, Netflix wanted someone as HR director who prioritizes business first, clients second, and talent third. It also did not require Competencies For HR Professionals in SHRM certificate, change agent, or organization development practitioner. The authority considers three core issues such as who is good for the company, how we communicate with that employee, and ensure high performance.

Netflix Organizational Structure 2023-2024

Netflix CEO in 2023

Netflix Founder Reed Hastings stepped down from his CEO role and joined as the company chairman in 2023.  Ted Sarandos is the current CEO of Netflix. In 2020, Ted Sarandos joined Netflix as co-CEO. Initially, Reed Hastings and Marc Randolph were the co-chief executive officers of Netflix. Marc Randolph left Netflix in 2002.

Netflix Organizational Transformation

First-change in 1999, (pay-for-use model into a subscription model).

Netflix has made two significant changes since its launch. First, it began the subscription option in 1999 to store DVD rentals. This change allows clients to rent unlimited DVD rental without late fees. It was the first change in the business model in the history of Netflix.

Second-Change in 2007

(streaming service).

Later, in 2007, Netflix made its second change by launching an online video streaming service. Consumers have accepted this change. It is believed that it has become the prime business pillar of income.

Purpose of Netflix Organizational Change

Netflix is becoming famous daily for its ease of access, quality, and updated tools. After all, new technology adoption is necessary to exceed customer demand. The technology adoption models and theories , including TAM, ETAM, UTAUT, and DOI, have described why and how people accept the changes. In the 21st century, people do not want to spend extra time in the cinema hall.

People used to go to the cinema hall to watch new movies before watching movies at home on Netflix. New technology, including computers, laptops, and smartphones, easily entertain people through internet service. In addition, the social media revolution changed the way we communicate with each other. It has become an excellent site for sharing user-generated content, including photos and videos.

Most people globally use social media in many perspectives, such as in education, entertainment, and marketing. Netflix’s authority had perceived the upcoming market demand. Therefore, they have changed the business model to watch movies and television series on computers and smartphones. The management of Netflix realized that consumers do not like to store video, so they changed the business model.

Additionally, Netflix is always aware of the approaches of competitors. Blockbuster is a crucial Netflix competitor; hence, they added a new feature to distinguish it from competitors. The reason for changing the business model of Netflix was appropriate and effective to bring success.

How Netflix Handles the Organizational Change Forces

Organizational change refers to the adjustment and transformation of a company’s operations. The company brings a minor or significant change to improve productivity and cope with the new context. There are two types of forces of change in a company: external forces and internal forces. External forces include technological change, social and political change, and managing ethical behaviors.

For example, technological change is the primary external force that compelled Netflix to change the feature.

New technology changes people’s expectations and behaviors, changing the company product or service’s features, tools, and patterns. Netflix handled the forces of change effectively to bring success and prosperity to the company. Internal forces influence the organization to change management, such as changing managerial personnel, work climate, effectiveness, employee expectations, and crisis.

For example, Netflix realized that watching movies at home would reduce the entertainment budget and transportation crisis. Therefore, Netflix accepted the organizational change.

Netflix started its journey as an ordinary company. Now but it has achieved a competitive advantage by changing its business model to fulfill customer demand. The authority of the company changed its feature to cope with new technology. It made two changes in 1999 and 2007. However, the video streaming service brought immense fame and income to the company in 2007.

The author mentions some critical points for other companies that want to change business. Firstly, changing the business tools is significant to exceed customers’ demands. Additionally, digital technology must be accepted by employees and customers. Finally, the company must add updated tools for better function, such as Netflix starting its online video streaming in 2007. “The measure of intelligence is the ability to change” -Albert Einstein.

Netflix has followed the blue ocean strategy to achieve its business goals. The Blue Ocean strategy refers to creating a new business market. The red ocean strategy refers to competing with other companies in the same market. Blue Ocean’s strategy creates a unique market context. It also designs a new feature to attract new customers.

Hence, Netflix accepted the blue ocean strategy and has become one of the most successful companies worldwide.

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Author: M M Kobiruzzaman

M M Kobiruzzaman is a researcher, lecturer, and academic & creative content writer. He studied for a Master of Management By Research at the School of Business and Economics Faculty, Universiti Putra Malaysia. Previously, he graduated from the Department of Communication, Universiti Putra Malaysia. His research interests contained Journalism, Social Media Communication, Information and Communication Technology (ICT), and Corporate Communication. He has published several journal articles globally. He prefers to impart academic knowledge to other people through content writing.  View all posts by M M Kobiruzzaman

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Netflix: reinvention across multiple time periods, reflections and directions for future research

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Netflix’s Structure & Structural Characteristics

Netflix’s structure involves a centralized hierarchy for operational consolidation, core business functions, and some degree of regionalization for different markets. This business structure shows that the company depends heavily on monthly membership fees, as well as the profitability of entertainment content suited to regional markets. Many of the competitive advantages and weaknesses discussed in the SWOT analysis of Netflix are related to support or barriers based on the company structure and organizational design. For example, centralized multinational operations strengthen the company’s competitive pricing based on economies of scale in the video streaming market. Netflix’s organizational structure facilitates business growth and profitability despite competition with many large media, entertainment, and streaming service providers.

Netflix’s structure affects how competitive strategies are developed and implemented. Structural characteristics influence the company’s strategies for addressing competitors, including Disney , Sony , and NBCUniversal, as well as the content production and streaming businesses of Apple , Amazon , Facebook (Meta) , Microsoft , and Google’s (Alphabet’s) YouTube. The Five Forces analysis of Netflix depicts a competitive environment where the company’s organizational structure needs to support competitive advantages. For example, competitive advantages linked to economies of scale are enabled through the centralization of some operations in Netflix’s business structure.

Netflix’s Structure – Characteristics

Netflix’s organizational structure focuses on business functions and a centralized hierarchy for multinational business operations. The centralization of communications and decision-making processes for the business structure’s divisions revolve around the entertainment and streaming company’s headquarters. The following are the main characteristics of Netflix’s structure:

• Single operating segment
• Centralized executive offices for business functions
• Geographic divisions

Single Operating Segment. Netflix’s business structure has only one operating segment accounting for revenue generation. Instead of using regional divisions, subscriptions or monthly membership fees are consolidated through this centralized structural characteristic of the business organization. This segment of Netflix’s organizational structure encompasses the global market. This global scope allows for economies of scale, such as in processing monthly membership fees and data for determining personalized movie and series recommendations for individual subscribers. The company structure optimizes global market reach, which is a strategic goal based on Netflix’s mission and vision . Growing the market share and expanding the customer base are supported through economies of scale achieved with this characteristic of Netflix’s structure.

Centralized Executive Offices. Executive offices represent the corporate departments and groups for leadership and business functions in Netflix’s organizational structure. For example, the company’s organizational design includes a Technology department that implements technological solutions for all groups and teams and for streaming services provided to customers. Also, Netflix’s marketing mix (4Ps) and related marketing strategies and tactics are managed through the marketing department in this company structure. This characteristic of Netflix’s business structure involves an organizational hierarchy and lines of authority, control, and communication that disseminate strategic decisions from the company’s headquarters. The following are the departments or senior executive offices in Netflix’s structure:

• Offices of the Co-Chief Executives (Co-CEOs)
• Communications

Geographic Divisions. Netflix’s structure has geographic divisions representing regional markets. For example, the company has a geographic division for Europe, Middle East, and Africa (EMEA). The purpose of these regional divisions is to provide structural support that facilitates managerial control and reporting, including financial reporting, accounting, and monitoring of market-specific variables in growing the entertainment content production and streaming business. In relation to the Content department of Netflix’s business structure, decisions for region-appropriate content come from Vice Presidents, such as the Vice President for content for the Latin American market. The geographic divisions in the organizational structure facilitate Netflix’s competitive strategy and growth strategies , especially strategic implementations for product development targeting regional markets. Also, the company’s headquarters direct market penetration strategies for regional entertainment markets through these structural divisions. The following are the geographic divisions in Netflix’s company structure:

• United States and Canada
• Europe, Middle East, and Africa
• Latin America
• Asia-Pacific

Strategic Implications of Netflix’s Organizational Structure

Netflix’s structure affects strategic formulation, implementation, and effectiveness. The company’s structural characteristics determine how business processes are used to achieve strategic goals. For example, the Talent department of the business structure influences the development of Netflix’s company culture (work culture) . Also, the company structure influences resources and processes that support strategies and measures used in Netflix’s operations management . For instance, the achievement of operational productivity and efficiency targets in content production depends on the adequacy of structural support for operations. This strategic significance means that Netflix’s organizational structure may need to change to accommodate changes in operations, such as when the company develops new products in addition to its video streaming operations.

• Davis, S. (2023). What is Netflix imperialism? Interrogating the monopoly aspirations of the ‘World’s largest television network’. Information, Communication & Society, 26 (6), 1143-1158.
• Netflix, Inc. – Form 10-K .
• Netflix, Inc. – Leadership .
• Netflix, Inc. – Teams .
• Permana, I. T., Rahayu, A., Wibowo, L. A., Dirgantari, P. D., Yulianto, E., & Nurgraha, R. (2023, September). Company Strategy Formulation Approach Through Organizational Structure Transformation to Optimize Business Performance. In 7th Global Conference on Business, Management, and Entrepreneurship (GCBME 2022) (pp. 1603-1616). Atlantis Press.
• van Es, K. (2023). Netflix & big data: The strategic ambivalence of an entertainment company. Television & New Media, 24 (6), 656-672.
• Copyright by Panmore Institute - All rights reserved.
• This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s.
• Educators, Researchers, and Students: You are permitted to quote or paraphrase parts of this article (not the entire article) for educational or research purposes, as long as the article is properly cited and referenced together with its URL/link.

Netflix organizational change and structure

Case study 2022.

2022 – Netflix is an online video streaming platform that allows users to watch movies, TV shows, documentaries online.

Workplaceinnovation

Netflix shows itself to be an innovative company that has achieved a competitive advantage by changing its business model a few times to better meet customer requirements, using new technologies. Netflix has a flat organizational structure that provides ample freedom for employees. It is also known as a decentralized organizational structure that allows the respective person to make quick decisions. Netflix’s organizational structure avoids top-down decision-making strategies to create a conducive working environment for employees. It also focuses on creating a favourable environment to promote employees’ work performance. Netflix has a labour division that works to improve performances. The authority review the performance regularly. They opt for a multi-rater feedback system that is also known as a 360-degree review method.

The application and adoption of new technology is an inevitable answer to the customer demand that develops through the use of a computer, laptop or smartphone also for relaxation.

Netflix has used the ‘blue ocean strategy’ to innovate. That is, they have opened up a market for a new product and business model.

How the employees are included in this is not explained in the article.

Netflix is one of the most successful international companies.  A result in terms of improvement of quality of work, is not mentioned.

Kobiruzzaman, M. M. (2022, January 08).  Netflix Organizational Change & Structure Case Study 2022 . Newsmoor- Best Online Learning Platform. https://newsmoor.com/netflix-organizational-change-organizational-management-change-examples/

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Management , People & Culture

Netflix Organizational Structure: How the Streaming Giant Manages Its Global Business

In case you've been living under a rock - Netflix is a media-streaming and video-rental company that has revolutionized the entertainment industry. Founded in 1997 by American entrepreneurs Reed Hastings and Marc Randolph, Netflix started as a DVD-by-mail service that offered customers a convenient and affordable way to rent movies without late fees.  The idea came to Hastings after he was charged $40 for returning a copy of Apollo 13 past its due date .

In 2007, Netflix launched its streaming service, which allowed subscribers to watch unlimited TV shows and movies online. This was a groundbreaking move that challenged the traditional cable and broadcast TV models. Netflix also invested heavily in creating and acquiring original content, such as House of Cards, Orange Is the New Black, Stranger Things, and The Crown. Netflix’s co-CEOs, Reed Hastings and Ted Sarandos, have been the driving force behind the company’s vision and strategy. They have fostered a culture of innovation, customer focus and risk-taking.  As Hastings once said , "Most entrepreneurial ideas will sound crazy, stupid and uneconomic, and then they’ll turn out to be right." It has also won numerous awards and accolades for its content and service. Netflix is widely regarded as one of the most successful and influential companies of the 21st century.

What is Netflix's Organizational Structure?

Netflix’s success and growth are not only the result of its innovative products and services, but also of its effective organizational structure. It reflects the company’s core philosophy of people over process, which aims to create a dream team of talented employees who can work together to entertain the world. Netflix's organizational structure is based on three main divisions: functional, geographical and product teams.

Functional Division

The functional division is made up of different business functions, such as content, communication, talent, finance, legal and so on. These functions are led by executives who report directly to the co-CEOs, Reed Hastings and Ted Sarandos. The functional division provides strategic direction, coordination and support for the other divisions. The functional division has a hierarchical structure, which means that the decisions from the top are passed down through vertical lines of authority and communication. However, the functional division is also relatively flat, which means that there are few levels of middle management between the top and the bottom. This allows the company to respond quickly to changes in the entertainment industry. The functional division also supports the company’s corporate culture, which encourages open communication and cooperation among employees, regardless of their positions or functions. The top executives at the corporate headquarters are responsible for the strategic management decisions for the entire organization’s streaming operations.

Geographical Division

The geographical division is composed of regional teams that manage the local and international streaming operations in different markets. These teams are led by vice presidents who report to the co-CEO and chief content officer, Ted Sarandos. The geographical division allows Netflix to tailor its marketing strategies to the regional market characteristics and customer preferences. For example, Netflix develops its advertising campaigns with the geographical division in mind. These geographical segments reflect the most important market trends for the company’s strategic plan to grow its member base. 

Product Team Division

The product team division consists of various teams that focus on creating, acquiring and distributing different types of content, such as original programming, licensed content, films, documentaries and so on. These teams are led by directors or managers who report to the vice presidents of content in their respective regions. The product team division enables Netflix to offer a diverse and high-quality content portfolio that appeals to its subscribers. The product team division is divided into two main categories: original programming and other content. Original programming refers to the TV shows and movies that Netflix produces or co-produces, such as The Witcher, The Queen’s Gambit, The Irishman, and so on. Other content refers to the TV shows and movies that Netflix licenses or streams from other sources, such as Friends, Breaking Bad, Avengers: Endgame, and so on. The strategic objective of these product team divisions is to achieve operational effectiveness in separately managing content production and content distribution.

What are the Advantages of Netflix's Organizational Structure?

Netflix's organizational structure has several advantages that contribute to its success and growth. Some of these advantages are:

• It fosters a culture of freedom and responsibility among its employees, who are encouraged to make decisions, take risks and be accountable for their actions.
• It promotes innovation and creativity by allowing employees to experiment with new ideas and projects without excessive bureaucracy or hierarchy.
• It enhances communication and collaboration by sharing information openly, broadly and deliberately across the organization.
• It improves efficiency and agility by reducing layers of management and enabling faster decision-making and problem-solving.
• It supports diversity and inclusion by hiring talented people from different backgrounds, identities, values and cultures.

What are the Challenges of Netflix Organizational Structure?

Netflix organizational structure also faces some challenges that may affect its performance and sustainability. Some of these challenges are:

• It requires a high level of trust and alignment among its employees, who need to share the same vision, values and goals.
• It demands a high level of competence and performance from its employees, who need to deliver excellent results or face termination.
• It exposes the company to external threats and competition from new entrants or existing rivals in the streaming industry.
• It entails a high cost of producing and acquiring content, which may affect its profitability and cash flow.

Netflix’s organizational structure is a unique and effective way of managing its global business. It enables the company to offer a diverse and high-quality content portfolio that appeals to its subscribers across the world. It also fosters a culture of freedom and responsibility among its employees, who are encouraged to make decisions, take risks and be accountable for their actions.

However, Netflix’s organizational structure also poses some challenges that require constant adaptation and improvement. The company constantly faces external threats and competition from new entrants or existing rivals in the streaming industry. It also demands a high level of trust and alignment among its employees, who need to share the same vision, values and goals. It also entails a high cost of producing and acquiring content, which may affect its profitability and cash flow.

As Netflix continues to grow and evolve, it will need to balance its strengths and weaknesses to maintain its competitive edge in the streaming industry. Netflix’s organizational structure is not only a reflection of its past achievements, but also a blueprint for its future aspirations.

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Teaching and learning

Time period, geographical setting.

• Harvard Business School →
• Faculty & Research →
• June 2022 (Revised March 2024)
• HBS Case Collection

Netflix’s Culture: Binge or Cringe?

• Format: Print
• | Language: English
• | Pages: 14

About The Authors

Hubert Joly

Leonard A. Schlesinger

Related work.

• April 2023 (Revised April 2024)
• Faculty Research
• Netflix’s Culture: Binge or Cringe?  By: Hubert Joly, Leonard A. Schlesinger, James Barnett and Stacy Straaberg

Netflix Organizational Change Case Study

Introduction.

In a business environment where companies always experience competition from their rivals who manufacture and sell similar products, change is not only an inevitable undertaking, but also a necessary aspect of driving innovation and attaining a competitive advantage (Goffin, Lemke & Koners 2010). Since it is considered as an imperative aspect of innovation, a company cannot let change to happen without managing it in a manner that will fit the organization’s structure and achieve the desired results (Willard 2009; Wysocki 2011).

As a result, managers must adopt suitable models of change management in order to ensure that all stakeholders embrace the change without much or any resistance (Ball 2010). This paper will discuss the various models used to manage change, define a case study of a company in regard to the Netflix organizational change, identify problems that appear in the case study, and provide solutions for them.

Literature Review

Practically, the various steps included in the models of change cannot take place completely in the real-life situations (Bernoff & Schadler 2010; Blood 2013). As a result, most of the change models that are evident in Netflix are not necessarily complete in accordance to the theoretical stipulations (Berry & Fazzio 2010). In some instances, the agents of change skip some steps or undertake several stages at the same time so that it becomes difficult to isolate the distinctive levels (Cooper 2012; Deshmukh & Naik 2010.

Lewis Three Step Model

Lewis proposed a model that introduces a change in three steps, including unfreezing, moving and freezing. Following the struggles that Netflix has undergone in an attempt to introduce price plans in correspondence to the cost of the Internet and licensing fee, the company adopted strategies that envisage the Lewis Three Step Model.

The CEO first expressed dissatisfaction of customers with one price plan. He stated that all customers are not satisfied with one price plan bearing in mind that the customers have different need (Barr 2011; Bell & Koren 2010). In essence, this was a tactic of unfreezing the existing price plan to prepare customers for change. Second, the company has expressed their intention to introduce the proposed model. This implies that the company is prepared to make the change (Bransley 2010; Bell & Koren 2007; Delimitrou & Kozyrakis 2013). However, they have not accomplished the last stage of freezing back to normalcy.

The Process of Transition

There are various aspects of the process of transition that have been shown in the Netflix’s attempt to introduce three tiers of price plan. In regard to the process of transition, there are three steps that have been portrayed including anxiety, fear and threat. In this case, it is important to understand that the company is in the process of introducing the new price plan, but it has not implemented it at this point. When the CEO announced their intention to change the prices in January, 2014, the customer expressed fear and anxiety that the plan might lead to a situation such as the one experienced in 2011. In addition, the change has been challenged by investors because they seem to have little confidence in regard to the ability of Reed Hastings to introduce the change successfully.

Kotter’s-8-Steps Model.

In regard to Kotter’s eight steps, it is evident that the company has already implemented the first step of this model. In this case, the CEO has successfully convinced the customers about the importance of making changes in the price plan. When he was announcing about the company’s intention to introduce the plan, Hastings said that one price was not fit for all customers. This argument seeks to capture the attention of the customers since it portrays the company’s commitment to their welfare.

Additionally, the CEO has shown diligence in regard to creating a strong coalition. In this case, he has included his co-founders when making this decision in contrast to what he had done in 2011 where one of the executives had opposed the decision publicly. In addition, he has created a strong vision with the help of his coalition members. In essence, this implies that they have implemented the third step of Kotter’s model. Besides the creation, the CEO and his co-founders have accomplished the fourth step of this model by communicating their vision to the customers and investors.

According to their report, they aim at introducing a price plan that caters for all customers in accordance to their preferences and financial capabilities. Accordingly, the company has implemented the first four stages of Kotter’s-8-step model.

The Technology of Leading Sustainable Change

Another model of change management that is essentially evident in the company’s attempt is the technology of leading sustainable change (Durrant, J & Holden 2009; Erskine 2013; Feher & Towell 2010).

The technology of leading this change incorporates three aspects that include the mind-set, emotional conviction, and capability. The CEO has been capable of harmonizing the three aspects considering the difficulties he experienced in 2011 when he introduced price hikes (Feuerverger & He 2012; Gallaugher 2010). First, the CEO has facilitated the collection of factual data in order to support the importance of introducing new price plan. In this case, he stated that the company needed a different price plan based on the fact that customers are not satisfied with one service provision.

Importantly, this step has occurred simultaneously with that one of the motivational conviction. In this case, the reason that was provided shows the urgent necessity of changing the old price plan which is both conservative and insufficient. He has also formed a strong team stating with his co-founders. This implies that the CEO has implemented the three steps of this model. Essentially, these are the models that the company has employed in its quest of introducing a new price plan.

Successful Netflix Change Management

When focusing on how Netflix is planning to introduce the new price plans, Gallaugher (2010) stated that the company is seeking for a breakthrough rather than incremental change. Incremental change refers to situation where success is achieved gradually due to undertakings that build on the members’ skills and commitment. On the other hand, breakthrough refers to profound success that is realized over a short period of time. Bransley (2010) stated that a company realizes breakthrough when it changes the paradigms of the organization.

On the hand, he revealed that if it needs incremental changes, it must concentrate on the behaviors and attitudes of the various stakeholders (Bransley 2010). In the case of Netflix, the CEO is concentrating on changing the organizational structure by splitting the company and introducing two additional price plans. This implies that the company is seeking to achieve a breakthrough rather than incremental change that needs a lot of time to give real results.

Role of Sponsor Change Agent

Bransley (2010) stated that change can be introduced successfully if the agents sponsoring it are involved actively in the process of implementation. Reed Hastings, who is the CEO and the sponsor of price changes, has been involved in the process of implementing the proposed plans. In this regard, he has been involved in making critical decisions, communicating them to the public, and defending the company against criticisms that arise in relation to the proposed changes. The active involvement has been a crucial force in regard to implementing the new price plans.

Netflix Change Management: Case study

Netflix is known as one of the most successful companies in the technological field where it has been providing streaming services and selling DVDs by sending them through email. These services are provided to the customers on a constant subscription that warrants them the opportunity to access unlimited materials such as movies and e-books. The companies have been struggling to introduce changes in its organizational structure and pricing plans. The most important attempts of introducing such changes were experienced in 2011 where the company entered into severe crises owing to the introduced changes.

In 2011, Reed Hastings, who is the CEO of the company, announced that the company had sought to split the DVD-by-mail form the streaming services. In this case, he stated that DVD services could operate as a different company known as Qwikster. According to his report, he explained that the name of the new company was chosen to portray the company’s intention of quick delivery. He stated that the two services were based on the premises that the two businesses had different benefits (Villarroel & Taylor 2013).

As a result, the management felt that the two services needed distinct marketing strategies and cost structures. During the announcement, it was made stated clearly that this plan could start applying to new subscribers immediately while the existing subscribers were affected after one month. However, the company reversed their decision whereby Qwikster was dissolved so that the two services were provided from the same company (Tuzhilin & Koren 2008).

Besides splitting the company, Netflix changed its price plan where it abandoned the original one that required customers to pay a monthly subscription of $7.99 for unlimited access of DVDs and streaming. In the updated price plan, they split the DVD and streaming provisions where the customers were required to pay $7.99 for each of those services (Vickers, A & Fearn 2010). This implied that the customer could either choose to subscribe to one of the services at $7.99 or both at $15.98.

This plan was introduced amidst sustained criticisms claiming that the access for DVDs was not satisfactory since the company had limited stock. According to business analysts in USA, the company experienced a shortage of DVDs’ supply due to the increased licensing fee charged by DVD owners in order to distribute their content. In fact, this shortage forced the company to start developing its own content despite the lack of the required human resources. This undertaking also led to the overloading of the employees due to the added job description.

Introduction of Drastic Changes

In this case study, it is evident that the company sought to introduce two critical changes in regard to their structure and pricing plan. Pricing and organizational structures are sensitive areas that can lead to insolvency if they are not changes carefully and strategically (Ghimire 2011; Gilbreath 2010; Girard & Parsons 2012).

In essence, when the company split the services into streaming provision and DVD-by-mail service, it meant that most of them had to quit one of the services and maintain the other. Practically, splitting the company implied that the customers would be forced to visit the two websites in order to find for a movie (Harmon 2007).

Whereas the change presented customers with operational difficulties, the company announced their plan and implemented it immediately. Expectedly, the introduction of Qwikster, could come with other provisions that customers needed some time to learn (Goldfayn 2011; Harmon 2007; Harris 2010). As a result, immediate split was a completely doomed decision that could only see customers abandon the company and subscribe with their competitors (Goffin, Lemke & Koners 2010).

Additionally, the decision to split the company into two sections was followed by a new price plan that presented another challenge to the customers. In this case, the provision of DVD and streaming services separately led to division of price subscription. After these changes, the customers were needed to pay twice the original amount in order to access the two services since they were provided under different protocols.

Also, the customers were notified about one month prior to the implementation thus leading to drastic change of budget besides the operational difficulties. As a result, they did not have enough time to conceptualize and understand the necessity of those changes as explained by the CEO. This implies that the two changes were implemented drastically rendering them risky, destructive and financially invalid.

Changes Insensitive to Company’s Credibility

When making any changes in an organization or a business, it is extremely important to consider the credibility of the company in the face of its stakeholders (Hamada 2010; Harmon 2007; Ingwer 2012). It is fundamentally necessary to maintain their trust towards the company by ensuring that the company’s principles are upheld (Hastrup 2013; Hernaez 2011; Holgersen 2011).

It was clear that Netflix has made severe mistakes in regard to securing their credibility in the face of their customers (Healy 2010; Linden & Conover 2009; Lusted 2013). For example, it was evident that the company reversed the decision of splitting their services whereby they re-integrated the two services and continued with the original business model in which DVDs and streaming services were provided under the same company.

The re-integration took place after few weeks of lamentation and criticisms from various quarters. This portrayed lack confidence and raised critical questions on the company’s foresight and research. It also implied that the company did not have a well-defined plan of implementing their original plan of splitting their services. In addition, their attempts to regain respect and credibility have been impeded by strong resistance from stockholders and consumers.

In addition, the investors put pressure on the CEO since they almost lost their holdings during the splitting. In this case, splitting the company meant that the returns for the investors could reduce drastically since they had invested under the Netflix Company rather than Qwikster (Ransohoff 2010). In response to the investor’s complaints, Reed Hastings mocked them stating that he needed a food taster, and that is why he could not blame them for their criticisms.

This was an additional insult that resulted from poor implementation of change. In essence, change should be introduced in a manner that does not disparage the dignity of the company since it needs to maintain the trust and loyalty of the customers.

Lack of Proactive Approach to Change

In light of introducing and managing change managers are required to exhibit a proactive approach when handling the process (Komives & Wagner 2012; Lawes & Rider 2010). In this regard, they are required to anticipate and foresee problems and risks that could necessitate a change (Legutko 2012; Martin & Fellenz 2010). This implies that the company could be prepared to initiate the process of change gradually in order to avoid afflictions that could paralyze the organization (Marquardt 2011; Paul 2011).

However, the case study portrayed lack of proactive approaches in various instances. In the first instance, the company should have anticipated the increase in licensing fees bearing in mind that the company did not have its own content. In this case, the management should have anticipated such risks since the company did not develop its content, but practiced brokerage between the DVD developers and consumers (Rettie 2001; Roebuck 2012).

This implied that at the long-run, the DVD developers could have sought to sell their content directly and discourage brokerage by putting measures such as increasing licensing fee. If they had anticipated such eventualities, they could have been prepared to make changes in a manageable manner rather than take drastic measures that could paralyze the company.

In addition, the case study shows that the company decided to introduce price plans despite the criticism regarding the limited availability of DVDs. This undertaking showed that the management did not foresee the possible backlash of customers owing to increased prices without improvement of services’ quality or fixation of sustained problems. This problem is intensified by the insensitivity of the CEO towards the company’s investors, although they play an important role to determine the success of a company. In fact, it is regrettable that the CEO could afford to mock the investors claiming that he did not blame them because he needed food tasters.

Change Insensitive to Stakeholders’ Needs

Changes that are introduced to an organization should not be implemented for the sake of the management and the financial prosperity without considering the welfare of the customers as well as other stakeholders (Ryle 2011; Sarin 2010; Tihanyi 2012). In response to the question of the price changes, the company spokesman explained that the DVD and streaming services were split since the company felt that the two were different businesses.

Further, he stated that the splitting was necessitated by the need of the company to market the two services differently. However, they did not explain how they considered the operational and financial need in light of making their decision. In addition, the CEO mocked the investors showing his insensitivity towards the needs and concerns of stakeholders in the process of inducing change (Zeng & Gualdi 2013).

In regard to the problems identified in the case study, the company should apply the Kotter-8-steps model. First, it should create urgency such that all stakeholders want the pricing plan to change and the company to split. In this case, the executive must come up with idealistic proposals explaining the reasons as to why splitting and changing the price plan is important to all stakeholders (Weinberg, Sutherland & Cooper 2010).

Second, the executive must form a strong coalition with people who have influence in terms of politics, expertise and job status. This will call for identification of true leaders within the organization such that the coalition is capable of leading change. Thirdly, the CEO must harmonize all the identified opportunities, threats, and concepts in order to come up with a vision for the process. The vision should be easily understood by all the stakeholders so that they can embrace the process.

In the fourth stage, the CEO should communicate this vision to the stakeholders and make sure that he repeats it often bearing in mind that it will face competition from many people daily. After communicating the vision to people and establishing buy-in, the CEO should identify the obstacle that could be inhibiting change, including employees and company’s structure. Having streamlined the organizational structure, then he should create short-terms wins to give the company members an early taste of success in order to motivate them.

Then, Mr. Reed Hastings should go a step ahead to build change and incorporate the attained change in the company’s structure so that it becomes a part of the organizational culture. This will help the company to cope with the existing pricing conflict since the process is gradual and inclusive contrary to the one introduced in 2011 that was not only drastic, but also unilateral.

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Netflix Inc.’s Organizational Structure & Its Strategic Implications

Netflix Inc.’s organizational structure is hierarchical but with modifications that account for business flexibility and responsiveness to global market changes. Through this corporate structure, the company is able to continually evolve to offer original entertainment content and on-demand media streaming service that attract target customers around the world. Thus, the organizational structure allows for the achievement of Netflix Inc.’s corporate mission statement and corporate vision statement , which point to the strategic goal of leadership in the online entertainment industry. A firm’s organizational structure is the practical manifestation of organizational design elements that influence how various components of the business function and work together. In this business analysis case, Netflix’s structural framework provides the necessary form and composition to ensure that the business responds well to changes in consumer preferences. Through its corporate structure, the online enterprise keeps its corporate headquarters up-to-date with operational concerns that require changes in strategic management direction.

Netflix Inc.’s corporate structure is based on the business need to make rapid decisions as a way to respond to changes in the online entertainment market. This organizational structure allows the company to effectively perform against strong competitors, such as Amazon , Walmart , Apple , YouTube (Google), Disney, and HBO, among others. Netflix Inc.’s business model, generic strategy for competitive advantage, and intensive growth strategies are all linked to the company’s corporate structure and how its configuration supports strategic implementations.

Netflix’s U-Form Organizational Structure

Netflix Inc. has a U-form or unitary organizational structure that involves a hierarchy for maintaining executive control and direction throughout the organization. However, this corporate structure is relatively flat compared to many businesses that have a hierarchical organizational architecture. For example, in Netflix’s organizational chart, all the main business executives directly report to the CEO. This organizational structural design reduces the management levels needed to escalate issues from the online company’s bottom-line to its organizational headquarters. The following are the main characteristics of Netflix’s corporate structure:

• Functional groups for online and non-online operations
• Geographical divisions for managing regional markets
• Divisions for various product types and operation types

Functional Groups are based on business functions, such as human resource management, which in Netflix’s corporate structure is called “Talent.” The hierarchy in the online company’s structural system is based on these groups. For example, strategic initiatives from Netflix’s CEO are disseminated downward through vertical lines of authority and communication. Despite this hierarchical design, the company’s organizational structure is relatively flat because of the minimized levels of middle management, enabling the business organization to rapidly respond to changes in the entertainment industry. This flatness is related to Netflix Inc.’s corporate culture , which promotes open communication and cooperation, despite the unitary and hierarchical nature of the corporate structure. Top executives at the corporate headquarters provide the strategic management decisions for the entire organization’s streaming operations. As is represented in its organizational chart, Netflix’s organizational structure has the following main functional groups or offices:

• Communications

Geographical divisions in Netflix’s organizational structure enable strategic management specific to regional market characteristics. The online entertainment company addresses strategic challenges in marketing through the support of its corporate structure. For example, Netflix develops its advertising campaigns with this organizational structural aspect in mind. These geographic segments reflect the multinational market trends that are most significant to the company’s strategic plan for growing its member base, in terms of aligning marketing strategies to target customers’ entertainment preferences. The SWOT analysis of Netflix Inc. enumerates some of the strengths and competitive advantages that the corporation uses to effectively compete in these markets. The on-demand digital content streaming company’s corporate structure has the following divisions for its operating segments:

• Domestic Streaming
• International Streaming

Divisions for products and operations are a corporate structural aspect that represents the two main types of outputs in Netflix Inc.’s business model: original programming and other content. The company’s organizational structure is more closely associated with “other content,” considering that the online platform distributes or streams such content. However, original programming operations are a major factor in Netflix’s corporate structure, as the business attracts customers and generates revenues through its original TV series and movies. The strategic objective of these organizational structural divisions is to achieve operational effectiveness in separately managing content distribution and content production. In summary, the following divisions are an aspect of Netflix’s corporate structure:

• Original Programming
• Other Content

Key Points on Netflix’s Corporate Structure

Netflix Inc.’s organization is a structural framework that prioritizes executive control from the company headquarters, as evident in the unitary form of the corporate structure. The online business ensures flexibility based on the flatness of this organizational structure. In addition, with geographical divisions, Netflix achieves marketing effectiveness through its organizational design. This structural analysis case also shows that the corporate structure supports strategic management for content distribution (via Other Content) and content production (via Original Programming). As a result, Netflix’s organizational structural system has evolved to accommodate original programming. As original content production increases, so does the significance of the Original Programming division in the company’s corporate structure. The VRIO/VRIN analysis and value chain analysis of Netflix Inc. offer insights on how organizational structural components, such as product/operations divisions, are linked to operations management and the creation of value to satisfy customers.

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Netflix Organizational Change: The Change Event

Reason for the happening of the change event, the success of the change, reasons why the change was a success, lessons learned and recommendations for future use.

The transformation that was inculcated into the company happened in the year 2007. This change was the second transformation after the first in 1999, where selling DVDs through mails and rentals was shifted to the DVD subscription model. According to Snyman & Gilliard (2019), Netflix incorporated an online video streaming service in this transformational change. In essence, this was a new development for the company that had never been incorporated before. Notably, significant steps precluded the development of online video streaming. Therefore, understanding the history of the development is pertinent to appreciate the role of the change in itself.

Having been pioneered in 1997, within the boundaries of California USA, the initial set up for sales and distribution centered on the selling of DVDs through renting to users and sending some to the mails. By the time this was happening in 1998, just a year after it was brought into the market. By 1999, Netflix allowed for the subscription of the same services. The subscription feature allowed the customers to access monthly payments and unlimited rental services for DVDs. The transformation in this category highlighted pay for use kind of agreement. In the terms, the users had first to make payments through a subscription and then select all the movies they wished to watch (Kobiruzzaman, 2021). The company then sent it to them in the form of DVDs to watch and not necessarily from the official website.

The transformation is a good example of episodic change. Weick and Quinn (1999) describe an episodic change as infrequent, discontinuous, and intentional. Nadler and Tushman’s (1989) ‘Organisational Change’ model describe episodic change as anticipatory or reactive and whether the change needed a strategic shift in operations (Gibson, 2019). The change at Netflix is episodic because it was caused by external forces, especially from clients. There was a need for streaming television series and general films. Failure to accommodate the change would have sent the organization’s sales down the losses lane. The change was necessary to meet the demands of the rising technological invention and innovations and meet the public’s ever-growing demand. There was a transformation in the way clients wanted to watch the movies and the films that shifted the desire of the clients to have this need met.

In 2007, Netflix began to face stiff competition from organizations such as Amazon, Apple, and Walmart. All of these companies had shown resilience in meeting their customers’ demand. In particular, long before Netflix had raised its antenna on the issue of meeting its customer’s demand, all of these companies had revolutionized how they did allow their customers to interact with their respective channels for online downloads (Walker et al., 2017). With the digitalization of the era, it was becoming outdated to deliver discs in wrappers and mail them to clients. This means that while other clients were accessing movies and films quickly at the tap of a button, Netflix clients suffered delivery delays.

External forces played a role in the change performed by Netflix. According to McGahan (2004), industries usually change due to threats to the industries’ core activities and assets. One of the driving forces for the change was the problems faced while using the system. The company delayed receiving the discs back after the clients had watched them already. The system was becoming strenuous and with lots of liabilities. It is essential to understand that the fragile disc wrappers could also get spoilt during the shipment, resulting in losses. A new invention would be essential to help Netflix regain its stand and guarantee business operations continuity with all these liabilities.

According to Kotter’s model of change, eight steps lead to the administration of change. The initial step of the model primarily intervenes in analyzing the reason for the need for change. In the first step of the model, urgency is needed (Kotter 1996; Galli, 2018). From the situation in which Netflix found itself in 2007, change was imminent and essential. Other rival companies gained dominance because of their accessibility to downloadable movies and films. There was a need to shift from more extended waiting periods of mailing and DVDs, according to Ruiz-Navas & Miyazaki (2017). The urgency of action at the time was in the offing. Additionally, there was a need to incorporate all the other steps of Kotter’s model to cement the required change. A team was to be built and have a vision sold to them before taking action. Short-term goals were created, and relentless work was done to realize a change. The change would then need to stick for the entire company’s future operations.

The transformation was pertinent to allow for faster streaming of videos, including Hollywood classics, mini-series, cult movies, and sometimes foreign films. The library at the Netflix collection amounted to over 70,000 videos that could then be accessed at $5.99 a month, which earned every subscriber six hours of unlimited streaming in a month (Boyd, 2017). With the new development, streaming was made easy as simply tuning in to a television network in the present day and having a watch. The limitations of the user interphases were marked with the archaic nature it held, but it was bliss for the time in which it was inculcated. It reduces the general time of accessing and watching the movies. An additional feature to counter the competition was introduced in the streaming and movie market. There was an introduction of queue and dock titles in which users could dock some of the movies to be able to watch them later. The developments were under the leadership of Reed Hastings, the then CEO of Netflix Inc.

With the introduction of the streaming system in 2007, Netflix has grown to a whelming 87 million subscribers instead of the initial 4.3 million clients that majorly used their DVDs on the worldwide scope. This increment is recorded by evidence of research conducted by Kobiruzzaman (2021). This is a clear sign that it was a calculated step to counter the competition emanating from the companies that operated similar activities, including Amazon, Walmart, and Apple. The evidence is the growth in the number of subscribers and clients that Netflix serves worldwide ever since they did cultivate the idea of streaming movies and films coupled with the intervention of monthly subscriptions.

The affirmative answer to whether the strategy of change and transformation deployed by Netflix succeeded. Netflix did succeed in its step to make a transformational change by incorporating the aspect of streaming movies instead of having to sell DVDs, rent them and send them to clients via the mail systems. Before 2007, Netflix had users and clients amounting to 4.3 million clients who mostly consumed rented DVDs and mails to demonstrate the level of success. In the present day, owing to the utility of the intervention of the streaming of videos since 2007, the company has a whooping subscription of over 87 million subscribers. An analysis of these numbers could function to explain the success level (Kobiruzzaman, 2021). Firstly, from the company’s inception in 1997 to 2007 is roughly a decade. The same is the timing from 2007 to the present day. Arguably, for the same period, Netflix has been able to rise over and above 20 times its subscribers through the utility of the streaming. There cannot be success greater than this where a company rises in its profitability by more than 200% within a single decade.

The success of the change event was partly due to the leadership style demonstrated by the company CEO at the time. Being a transformative leader, Hastings deployed tactics of conveying his vision to all his employees such that they agreed to all they wanted to do. As a result, it was easy to realize the success goal, having shared the vision with all of his employees. In addition, research highlights that Reed Hastings is among the best transformative and innovative leaders (Tjemkes, 2021). These are qualities that cemented the success of the change plan.

To contribute to the success of the business model change, the leadership of Hastings allowed for consideration of the reviews of customers’ feedback, employees’ reviews, and opinions and discussions that are promotional of change. Whenever there is room for discussion of the possibility of failure and success in a business, highlighting mistakes that would pull the business to losses is easy. Moving forward as an organization is guaranteed to be synonymous with success and avoidance of costly business mistakes. Additionally, clients and employees feel appreciated, enhancing their trust in the company. Sales improve, and the employees feel respected, translating to an increment in the level of output (Barik and Kochar, 2017). With these arsenals, the success of Netflix Company was just but a matter of time.

The management vividly used Kotter’s eight-step model towards change to achieve the monumental change and shift in 2007. The model stipulates that there should be an increment in urgency (Kotter 1996; Yeng, 2017). First, there was a need for action in response to the competition emanating from Apple, Walmart, and Amazon. The next step needed to build a team; with the leadership of Hastings, this was also done. A vision is to be developed in the third step; Hastings envisioned transforming the company into a web-based service provider instead of the physical distribution of discs and mails. Communication for buying-in is the fourth step in which the CEO made deliberately with all employees, as has already been highlighted.

The action was then taken as required in the sixth step, in which an online library of videos and films was made available and subscription features as well. Ever since then, the organization has been recording small wins that have ultimately accumulated to the present voluminous company it is presently. Over time, they have shown resilience with no backing off the main goal required by Kotter’s model (Kotter 1996; Yeng, 2017). The last step of the model is to make the change stick. Today, the company provides online streaming of videos with more advanced features as opposed to what it did offer at the inception stages of the change. The usage of this model has guaranteed the success of the change. Additionally, using Kotter’s model as a yardstick to measure the progress of the conception of the change was elementary in the plan for success.

Effective stakeholder engagement during change management is an important lesson to learn. Many changes fail to reach their full potential because stakeholder interaction was not an essential aspect of the process (Galli, 2018). Stakeholder involvement from the start fosters interest and a sense of continuity to a new future. Allow enough time and planning to include all important parties and give them time to debate, grasp, and internalize each project milestone or step in the process. Stakeholders who do not grasp the plan will struggle to stay involved and move in the desired direction afterward (Galli, 2018). For instance, the success of the change process at Netflix was due to effective stakeholder engagement. Netflix effectively involved its clients and employees in the process. As a result, they received feedback from clients during the change process. Therefore, stakeholder engagement cannot be overlooked during a change process.

The change plan depicted by Netflix as a company can be used to inform several other decisions in the future regarding the success and choices of different companies, particularly those concerned about continuity of operations. Firstly, businesses and companies need to understand their scope of operations and the scope of competition within the market base they share (Galli, 2018). For example, Netflix Inc. understood that they function to provide production and sales of films and movies in all available forms. This culmination allowed the management to understand the level of competition and to earmark the competitors who deal in the same line of products and services. It was a step that was essential in determining appropriate steps that the competitors take so that counteraction is implemented to water the impact of the rival firms. In the future, businesses and companies interested in the success of the operations and sustenance have to understand the dynamics of the markets in which they operate.

Needs assessment for any organization or company is of the essence. According to Kotter’s change model, the initial step is identifying urgency. However, the need for urgency cannot be determined unless there is an assessment of the organization’s needs. Netflix, on its account, did assess to determine that other companies were way ahead of them by allowing for services such as downloading movies while it was still distributing wrapped DVDs. As a result, there was a need to understand the clients’ demands and incorporate systematic technological advancement within the company to maintain relevance and operability. This is a lesson that can be implemented across all other organizations and companies to grow their market share and increase the scope of their operations to profitability.

Acute leadership is vital in spearheading the progress and administering the implementation of a change in a company. This lesson is one of the vitals deduced from the change plan incorporated by Netflix Inc. According to Kotter’s change model, the eight steps require strong leadership to implement (Galli, 2018). In other words, forming a team, selling a vision to the team, and organizing the team to spring into action requires the intervention of a visionary leader and one that possesses transformative leadership qualities. These were the same qualities that cemented the progress and success of the change plan of Netflix Inc. from the year 2007 under the leadership of the then CEO, Reed Hastings. He led the group of employees to acquire his vision for the organization and teamed them up to realize the goal. Today, the streaming of videos has never been phased out. On the contrary, it is only getting better with new features to fulfill the eighth step of Kotter’s model of change, making the change stick (Galli, 2018). These, among many others, are some of the lessons learned in the change plan demonstrated by Netflix Inc.

The Netflix Inc. organizational change and structure was achieved on streaming of videos and movies and to the present day is still being practiced since 2007 through the intervention of Reed Hastings (Kobiruzzaman, 2021). As much as the company was at a crossroads and on the verge of making losses due to the competition, it faced rival companies like Amazon, Walmart, and Apple. The intervention of a change concept salvaged its potential downfall. The change was beneficial to the company due to the fact that they were able to meet the needs of their clients in the market. The change was developed to solve the issues that Netflix was experiencing on their system and retain its clients. Therefore, an effective change structure is integral during a change process.

Using Kotter’s change model, the company’s CEO invented streaming of videos to replace the old usage of DVDs that were initially sent to clients through emails and hiring. This is because the latter was commonly marked with the problem of delays. This intervention saw the company grow from 4.3 million users to over 87 million users to mark and demonstrate the company’s level of success (Kobiruzzaman, 2021). Several lessons can be learned from the change model, including transformative leadership, needs assessment, and knowledge of market base and competitors. In addition, companies can use this analogy to maintain their operability and guarantee continuity in their businesses.

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