Blockbuster Becomes a Casualty of Big Bang Disruption case study looks into the factors which influenced Blockbuster and how it went out of the market. It discusses the participation of Netflix as a radical innovator in the industry.
Larry Downes and Paul Nunes
Harvard Business Review (H00I9M-PDF-ENG)
November 07, 2013
Case questions answered:
- Identify and analyze what pushed Blockbuster out of the market?
- How did Netflix disrupt the industry i.e. by being a radical innovation?
- Delve on the failures of one-time market-dominating video rental chain Blockbuster Inc at the hand of the upstart disrupter Netflix.
- Compare and contrast using Innovation items and paradigms, outcome expectations, and any elements of design thinking that you can identify!
- Try to identify the types of business models used in these innovations!
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Case answers for Blockbuster Becomes a Casualty of Big Bang Disruption
Blockbuster vs. Netflix
Blockbuster and Netflix can both be considered as radical innovators of their time. Blockbuster was the place where people could rent movies for a limited time, face late fees if not returned on time, and not always sure whether the picked videos would be of customers’ taste (Downes & Nunes, 2013).
With rapid technological advances, the customers’ preferences have also changed. Due to time limits, convenience and cost-effectiveness was valued more. Based on a job map, during the monitoring of the experience phase, the customers noticed losing too much time, car costs, and money on late fees.
Netflix, observing this phase, resulted in opportunity identification where they could help customers to achieve their outcome expectations. Consequently, Netflix’s business model built upon the criteria of convenience, firstly by mailing the movies and later building on the online streaming service. This helped Netflix gain a competitive advantage in the movie industry, leaving Blockbuster far behind.
Netflix has revolutionized the way we access and watch movies. In terms of innovation items, Netflix can be considered a service innovation since it changed the way movies were supplied, namely through streaming (Downes & Nunes, 2013). Looking at the Netflix’s innovation process, we could divide it into three major phases.
In the first phase, Netflix mailed DVDs or CDs through the US delivery services, which is an incremental innovation since they built upon the existing products of Blockbuster, but they improved the service.
The second phase is when they switched to an online subscription-model, which can be considered a radical innovation due to its being a giant development from the way the market used to operate at that time.
The third phase is when Netflix adopted the streaming way of supplying movies, resulting in radical innovation, fundamentally gaining a lead in the market due to its high convenience and easy access.
Comparing Netflix and Blockbuster in terms of innovation terms, it can be said that Blockbuster achieved a modular innovation due to its replacement of TV movies with DVDs and CDs in stores. Netflix used the existing components of mailing service, streaming service, DVDs, thus resulting in architectural innovation.
Netflix is a disruptive innovation, coming at a time when Blockbuster was leading the market. Due to rapid digitalization and technological innovation, Blockbuster did not manage to keep track of the changing customer needs (Vance, n.d.). Thus, Netflix was a new competitor in the market, while Blockbuster was the incumbent, trying to keep a competitive advantage with incremental changes only.
Netflix, however, with its disruptive innovation, managed to replace the incumbent with its cheaper and more improved service. Consequently, Netflix reached those customers who, for example, did not have the time or patience to go physically rent a DVD, or wanted to sacrifice of other related costs (e.g., gas by using the car to get to the store). This strategy results in reaching a broader customer base; thus, it can be named as a…