Netflix and Disruptive Innovation
Netflix and Disruptive InnovationBackground
Who is the king of the movie rental industry? Is it Blockbuster, Redbox or Netflix? Blockbuster was the king of VHS rental with their brick and mortar stores for more than 20 years. Netflix was the first to market with the idea of shipping DVDs directly to consumer’s homes but are now focusing their resources and attention to online streaming. Netflix is slowly getting out of the DVD and Blu-ray rental game by raising the prices of their DVDs and Blu-rays. Netflix is spending more money to increase the size of their online library for streaming. The two companies that are battling it out to be the king of the rental industry are Redbox, a company owned by Coinstar Inc., and Blockbuster. This paper will focus on how Redbox entered the market through Disruptive Innovation and what Redbox needs to do to better position themselves in a volatile market place. I will also look at the mistakes Blockbuster made and offer solutions on how Redbox can avoid the organizational decline that Blockbuster experienced. I use Wall Street Journal and peer-reviewed academic journals for my references.
To understand the full scope of how Redbox entered the market I will look at the Disruptive Innovation Theory. Disruptive Innovation Theory is a term that was coined by Clayton Christiansen. Clayton Christiansen is a professor at Harvard Business School. He has written a number of books on the subject. In an interview done by Smith, Christensen defines disruptive Innovation Theory as, “a technology that brings a much more affordable product or service that is much simpler to use into a market. And so it allows a whole new population of consumers to afford to own and have the skill to use a product or service, where as historically, the ability to access was limited to people who have a lot of money or a lot of skill.” (Smith, September, 1 2007, p.1) According to Yu and Hang, “Disruptive Innovation Theory has created a significant impact on management...