Case Study Description of Netflix: Designing the Netflix Prize (B)
This supplemental case follows up on the Netflix Prize Contest described in Netflix: Designing the Netflix Prize (A). In the A case, Netflix CEO Reed Hastings must decide how to organize a crowdsourcing contest to improve the algorithms for Netflix's movie recommendation software. The B case follows the contest from the building of the platform in 2006 to the awarding of the highest prize in 2009. The B cause also considers the aftermath of the contest, and the issues of successfully implementing a winning idea from a contest.
Authors :: Karim R. Lakhani, Wesley M. Cohen, Kynon Ingram, Tushar Kothalkar
Swot Analysis of "Netflix: Designing the Netflix Prize (B)" written by Karim R. Lakhani, Wesley M. Cohen, Kynon Ingram, Tushar Kothalkar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Netflix Contest facing as an external strategic factors. Some of the topics covered in Netflix: Designing the Netflix Prize (B) case study are - Strategic Management Strategies, Innovation, Knowledge management, Technology and Technology & Operations.
Some of the macro environment factors that can be used to understand the Netflix: Designing the Netflix Prize (B) casestudy better are - – increasing commodity prices, increasing energy prices, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , technology disruption, challanges to central banks by blockchain based private currencies, there is backlash against globalization,
banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Netflix: Designing the Netflix Prize (B)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Netflix: Designing the Netflix Prize (B) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Netflix Contest, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Netflix Contest operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Netflix: Designing the Netflix Prize (B) can be done for the following purposes –
1. Strategic planning using facts provided in Netflix: Designing the Netflix Prize (B) case study
2. Improving business portfolio management of Netflix Contest
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Netflix Contest
Strengths Netflix: Designing the Netflix Prize (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Netflix Contest in Netflix: Designing the Netflix Prize (B) Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Netflix Contest in the sector have low bargaining power. Netflix: Designing the Netflix Prize (B) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Netflix Contest to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Netflix Contest is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Karim R. Lakhani, Wesley M. Cohen, Kynon Ingram, Tushar Kothalkar can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the Netflix: Designing the Netflix Prize (B) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Technology & Operations industry
– Netflix: Designing the Netflix Prize (B) firm has clearly differentiated products in the market place. This has enabled Netflix Contest to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Netflix Contest to invest into research and development (R&D) and innovation.
High brand equity
– Netflix Contest has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Netflix Contest to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Netflix Contest has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Netflix: Designing the Netflix Prize (B) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Netflix Contest has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Netflix: Designing the Netflix Prize (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Netflix Contest is present in almost all the verticals within the industry. This has provided firm in Netflix: Designing the Netflix Prize (B) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Innovation driven organization
– Netflix Contest is one of the most innovative firm in sector. Manager in Netflix: Designing the Netflix Prize (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Netflix Contest is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Netflix Contest is one of the leading recruiters in the industry. Managers in the Netflix: Designing the Netflix Prize (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Netflix Contest in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Netflix: Designing the Netflix Prize (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix: Designing the Netflix Prize (B) are -
Products dominated business model
– Even though Netflix Contest has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Netflix: Designing the Netflix Prize (B) should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Netflix Contest is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Netflix Contest needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Netflix Contest to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Netflix Contest, firm in the HBR case study Netflix: Designing the Netflix Prize (B) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study Netflix: Designing the Netflix Prize (B) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Netflix: Designing the Netflix Prize (B) can leverage the sales team experience to cultivate customer relationships as Netflix Contest is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study Netflix: Designing the Netflix Prize (B) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Netflix Contest 's lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Netflix Contest is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Netflix: Designing the Netflix Prize (B) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Netflix: Designing the Netflix Prize (B), it seems that the employees of Netflix Contest don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Netflix: Designing the Netflix Prize (B), is just above the industry average. Netflix Contest needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Need for greater diversity
– Netflix Contest has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Netflix Contest has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Netflix: Designing the Netflix Prize (B), in the dynamic environment Netflix Contest has struggled to respond to the nimble upstart competition. Netflix Contest has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Netflix: Designing the Netflix Prize (B) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Netflix: Designing the Netflix Prize (B) are -
Learning at scale
– Online learning technologies has now opened space for Netflix Contest to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Netflix Contest has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Netflix: Designing the Netflix Prize (B) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Netflix Contest to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Netflix Contest can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Netflix: Designing the Netflix Prize (B) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Netflix Contest can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Netflix: Designing the Netflix Prize (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Netflix Contest can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Netflix Contest to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Netflix Contest to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Netflix Contest is facing challenges because of the dominance of functional experts in the organization. Netflix: Designing the Netflix Prize (B) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Netflix Contest has opened avenues for new revenue streams for the organization in the industry. This can help Netflix Contest to build a more holistic ecosystem as suggested in the Netflix: Designing the Netflix Prize (B) case study. Netflix Contest can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Netflix Contest can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Netflix Contest can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Netflix Contest can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Netflix Contest to increase its market reach. Netflix Contest will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Netflix Contest can use these opportunities to build new business models that can help the communities that Netflix Contest operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Leveraging digital technologies
– Netflix Contest can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats Netflix: Designing the Netflix Prize (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Netflix: Designing the Netflix Prize (B) are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Netflix Contest can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Netflix: Designing the Netflix Prize (B) .
Increasing wage structure of Netflix Contest
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Netflix Contest.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Netflix Contest can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Netflix Contest needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Netflix Contest can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Netflix Contest in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Netflix Contest has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Netflix Contest needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Netflix Contest needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Netflix Contest business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Netflix Contest demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Netflix Contest in the Technology & Operations sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Netflix Contest will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Netflix Contest high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Weighted SWOT Analysis of Netflix: Designing the Netflix Prize (B) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Netflix: Designing the Netflix Prize (B) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Netflix: Designing the Netflix Prize (B) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Netflix: Designing the Netflix Prize (B) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Netflix: Designing the Netflix Prize (B) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Netflix Contest needs to make to build a sustainable competitive advantage.
