Netflix: A Disruptive Innovator

Remember visiting your nearest Blockbuster to rent a movie or anxiously waiting for the premiere of your favorite show provided to you by your cable company? Those days are now behind us as video streaming has disrupted the cable industry and video rental stores. When Netflix launched its streaming services in 2007, it completely shifted the industry by bringing television shows and movies directly to the homes of viewers. Now, Netflix has even evolved by creating and owning exclusive content that continues to draw viewers to this platform. 

That’s what disruptive innovation is all about. According to an article from the Harvard Business Review, “The term ‘disruption’ describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others.” Clayton Christensen, who is known for coining the term “disruptive innovation”, stated that the main reason why Netflix is considered to be disruptive is that it didn’t chase the customers of the core competitors within the industry. The 3 types of customers that Netflix targeted were: movie buffs who weren’t into new releases, online shoppers, and early adopters of DVD players. 

One of the keys to disruptive innovation is to target consumer segments that have been neglected. Once this group has been identified, the company has the advantage of gaining customers by providing an alternative option at a competitive price. This is how Netflix was able to reel in customers and ultimately takeover once video streaming was implemented.  

Disruptive innovators are similar to the underdog effect, as they are typically viewed as inferior until a shift occurs where customers are suddenly willing to adopt the new product or service. As marketers, it is vital that we pay attention to consumer segments that may have been overlooked because it can either make or break a company. Which brands do you consider to be disruptive innovators?