Caroline Oakes Samukelo Zuma Veronika Makarova
FINAL ASSIGNMENT: NETFLIX IS PROPOSAL CAROLINE OAKES SAMUKELO ZUMA VERONIKA MAKAROVA 05.08.2015
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Caroline Oakes Samukelo Zuma Veronika Makarova
Table of Contents NETFLIX ...........................................................................................................................................3 NETFLIX’S CURRENT SITUATION .....................................................................................................4 SYSTEMS USED .............................................................................................................................4 TECHNOLOGY INTEGRATION ................................................................................................7 STAKEHOLDER LANDSCAPE ..................................................................................................7 GARTNER’S 10 STRATEGIC TECHNOLOGY TRENDS ....................................................9 COMPUTING EVERYWHERE ...............................................................................................................9 INTERNET OF THINGS ...................................................................................................................11 ADVANCED, PERVASIVE & INVISIBLE ANALYTICS .......................................................................12 CONTEXT RICH SYSTEMS ..............................................................................................................13 CLOUD / CLIENT COMPUTING .....................................................................................................16 3D PRINTING .................................................................................................................................19 WEB-SCALE IT ...............................................................................................................................22 CONCLUSION .............................................................................................................................23 BIBLIOGRAPHY ..........................................................................................................................24
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Caroline Oakes Samukelo Zuma Veronika Makarova
NETFLIX Netflix is the leading Internet streaming entertainment network, available in over 50 different countries with 62 million active members.1 Streaming a variety of different content ranging from films to original television shows, members combined tally up a staggering 100 million hours of viewing per day.2 Headquartered in California with 2,450 employees 3 CEO Wilmot Hastings Junior is revolutionizing the way people consume entertainment and challenging the existing paradigms of linear TV networks by offering customers personalized video on demand which is available on a multitude of different connected devices. With a Market Cap of $25.5 Billion and sales reaching $5.51 Billion, Netflix has become a hugely successful business entity by offering customers huge value for money with extremely low membership prices starting from $7.99 a month for unlimited viewing4 and by eliminating adverts between episodes which is featured by other competing streaming websites such as Amazon Instant Video. It is Netflix’s passion for their customer satisfaction shown through their personalization flat-fee unlimited commercial-free viewing that strengthens the loyalty of their members who in turn, by word of mouth, encourage new members to join. Netflix is a passion focused movie and TV show Network that aims to deliver the very best streaming content that people love at affordable prices on a global scale.5 They are not a generic “video company” as they do not live stream, with their focus solely on TV Shows and Movies. Netflix offers a personalized platform for members who can enjoy 1
http://ir.netflix.com/
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http://ir.netflix.com/
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http://www.forbes.com/companies/netflix/
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https://www.netflix.com/ch-en/
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http://ir.netflix.com/long-term-view.cfm
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Caroline Oakes Samukelo Zuma Veronika Makarova the freedom of “binge watching” wherever they may be, on any platform and at any time.6 Netflix’s long-term view is for Internet TV streaming to replace regular linear TV viewing due to the freedom and flexibility of customers to watch a large selection of entertainment at a time that suits them.
Netflix’s Current Situation Business Activities Netflix is a leading US firm in the Internet TV and on-demand media industry and drives its business primarily. Its customers pay through a subscription-based model and are instantly able to watch an extremely large variety of TV with streaming through any Internet connected device. Depending on the customers plan, users can obtain the streaming platform compatible with up to 6 of their devices at any given time – tablets, mobiles, consoles, televisions and more. Though Netflix’s most profitable strategic business unit is international streaming, it also has 2 other SBU 7’s—domestic streaming and domestic DVD rental. The first and strongest SBU, international Internet TV / streaming generates the majority of the revenue which comes from subscription services for consumers. Next, the company generates revenue through their domestic DVD SBU, which is composed of a subscription-based model allowing customers to receive DVD & Blu-ray media in the mail. SYSTEMS USED Information systems used by Netflix are proprietary software, which means, majority of the technology used by Netflix to run the business is made in-house, allowing the company to not share specific details of exactly how their system works 8. The important systems used by Netflix include: 6
http://ir.netflix.com/long-term-view.cfm
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Strategic Business Unit
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https://www.coursehero.com/file/10043003/Netflix-case-notes/
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Caroline Oakes Samukelo Zuma Veronika Makarova 1. Netflix Mobile Application: The Netflix mobile application is a free application that is used as part of the Netflix membership to watch thousands of TV episodes and movies on any mobile device. The application can be downloaded on devices such as the Apple iPhone, iPad, iPod as well as Android and other tablet devices.
Figure 19
2.
Netflix Shopping Bot:
Netflix uses customer relationship management (CRM) systems as a way to better serve their customers and provide them with a seamless watching experience. Their CRM systems manage the need, wants and behaviours of the customer. One of the more important systems that support this is Netflix’s shopping bot. The purpose of the shopping bot is to limit any negative experiences on the website. The Shopping Bot is artificial intelligence software that functions that uses two methods to predict what the customer prefers; collaborative filtering and adaptive filtering. Collaborative filtering
9http://www.imore.com/sites/imore.com/files/styles/xlarge/public/field/image/2014/06/
best_cord_cutter_apps_netflix_screens.jpg?itok=MRhL0Esf
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Caroline Oakes Samukelo Zuma Veronika Makarova works through matching the customer with a group of users that have similar preferences, then presents the customer with a common selection in that group. 3.
Chaos Monkey:
Chaos monkey is open source software developed within Netflix by their engineers to examine the resiliency and recoverability of their Amazon Web Services (AWS). In simple terms, the software basically simulates the failure of instances of services that run within Auto Scaling Groups, by shutting down one or more of the virtual machines. The principle applied by Netflix for development of the Chaos Monkey software is “the best way to avoid major failures is to fail constantly.” The software can be opted in or out and has a configurable schedule, which allows for failures to happen at specific times at which the company can closely monitor them. 4.
Scumbler:
Scumbler is another of Netflix’s automated intelligence search tools, which searches websites such as Pastebin or other websites for any leaked names and passwords, or searches for compromised Netflix accounts that have been sold by criminals on eBay. The tool then sends back all its findings to Netflix, as a way to assist customers in regaining control of their accounts. 5.
Fully Integrated Defense Operation (FIDO):
FIDO is an open sourced system used by Netflix to automate incidence response. The system is able to automatically analyse and prioritise security events based on their severity. In other cases, the system has the ability to isolate problems such as disabling employee accounts that have been compromised by malicious software. FIDO checks internal systems should there be any security alerts from a firewall or intrusion detection system, it will check and monitor to see if there is any malicious software targeting internal areas such as executive, domain administrator or the PCI zone, which is the most secure part of the network dealing with financial transactions.
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Caroline Oakes Samukelo Zuma Veronika Makarova
Figure 210 TECHNOLOGY INTEGRATION Netflix are one of the business pioneers in web-scale IT that has been their focus in being able to strategically manage their growth since their pivot to incorporating domestic and international streaming into their business activities in 2007. Netflix have been able to achieve this level of operational agilities due to their leveraging of public clouds such as Amazon Web Services, Elastic Compute Cloud, as well as the use of NoSQL (Cassandra11) – a database solution that assists the retrieval and storage of data. STAKEHOLDER LANDSCAPE 1.
Customers
Customers and the value they receive is at the heart of driving success in industry for Netflix.
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http://techblog.netflix.com/2015/05/introducing-fido-automated-security.html
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http://cassandra.apache.org/ | A high scalability and availability database solution
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Caroline Oakes Samukelo Zuma Veronika Makarova 2. Employee In a highly competitive digital and technological age, the people are at the core of operating the technological tools to drive innovation, growth, and success within a company. This is definitely the case with a technologically intensive company like Netflix and it’s 2,189 full time employees. 3.
Management
Reed Hastings – Founder & CEO Kelly Bennett – Chief Marketing Officer Tawni Cranz – Chief Talent Officer Jonathan Friedland – Chief Communications Officer Neil Hunt – Chief Product Officer David Hyman – General Counsel Greg peters – Chief streaming and Partnerships Officer Ted Sarandos – Chief Content Officer David Wells – Chief Finacnial Officer 4.
Shareholders
Publicly disclosed information on Nasdaq indicated that Netflix is composed of 88.84% of institutional holdings – 568 holders holding 378,465,190 shares at a total value of $45,851,058,738. The top 5 institutional holders include Capital research global investors, Price T Row Associates Inc., Vanguard Group Inc., Jennison Associates LLC, and State Street Corp. The majority of important insider trades includes holdings from Ted Sarandos, the Chief Content Officer as well as the founding general partner of Technology cross over ventures, Jay Hoag. 5.
Production Studios
Though Netflix produce their own content with successful examples such as House of Cards or Marvel’s Daredevil, a lot of their content is hosted on the basis of licensing agreements or rights to distribute originally created content media. A large part of 6.
Cloud & IT solution providers
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Caroline Oakes Samukelo Zuma Veronika Makarova Web-scale IT and cloud/software based infrastructure is at the heart of Netflix’s operational agility and being able to act and change in response to consumer demand and subscription growth. In order to be able to manage this from a technical standpoint, Netflix are an avid customer of the argest public cloud system, Amazon Web Services. 7.
Competitors
Netflix are without a doubt a leader in the Internet TV / on-demand media / streaming industry and due to first movers advantage as well as significant investments in marketing & advertising, they have been able to build an iconic brand that resonates with its consumers on an international basis. Though Netflix are the clear market leader, they do face growing competition from the likes of Amazon Instant Video, HBO go, and Vudu who all offer alternatives to Netflix with different pricing models that consumers may find more attractive. In spite of the competition, Netflix still represent 57.5% share 12 in the video-streaming market.13 GARTNER’S 10 STRATEGIC TECHNOLOGY TRENDS
Computing Everywhere How Can Netflix Implement Computing Everywhere? Netflix has already successfully implemented aspects of Computing Everywhere into their business model. Netflix is currently available on a multitude of devices including: Smart TVs, Media Players, Gaming Consoles, Set Top Boxes, Blue Ray Players, Smart Phones, Tablets and PCs,14 with user data being interconnected across all these devices allowing members to access their personalized Netflix selection on any platform. For Netflix to fully integrate Computing Everywhere into their business they will have to consistently keep up to date with new and upcoming technology. Gadgets such as the Apple Watch are a prime example of this, as the Apple watch continues to grow in
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http://variety.com/2014/digital/news/amazon-streams-more-video-than-hulu-or-apple-but-its-still-milesbehind-netflix-1201154130/ 13 14
In March 2014, an increase from 52.5% in 2013. https://devices.netflix.com/en_us/
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Caroline Oakes Samukelo Zuma Veronika Makarova popularity among customers; Netflix should utilize this new technology and offer their streaming services on the Apple Watch to allow their customers another platform to view Netflix. The Software department would firstly be affected, being tasked with creating Netflix applications that would work on additional devices such as the Apple Watch, it may not be a huge stretch as Netflix has an App on the Apple Store, however due to the different dimensions on the screen and the potential software and hardware differences, the engineers at Netflix may have to recode/redesign their app so it functions correctly and is user friendly.
Stakeholders The most valuable stakeholder affected would be the customers, as Netflix’s integration with the Apple Watch is to give customers another platform to access their favorite TV Shows and Movies, giving customers even more value for money by offering them additional services for the same price. The advantages of implementing this trend would allow for Netflix to reach even more customers at different stages of their day, in doing so they would achieve another advantage which is amount of customer Data that Netflix would be generating which data could be sold to other businesses who may benefit from the insight.
Risks The risks of implementing this trend would be a potential large cost initially to create and App for the Apple Watch, which wouldn’t start generating more revenue until more customers buy the Apple Watch, as it is currently a new product so long term gains if the Watch is successful, if not Netflix may not get a good Return on Investment.
Budgeting If Netflix were to create an App for the Apple Watch it could cost them upwards of $200,000, depending on the features and services they wish to provide. As Netflix is a 10
Caroline Oakes Samukelo Zuma Veronika Makarova large service this number will be significantly higher as it would require even more features than app calculating websites contain.15
Internet Of Things How Can Netflix Utilize The Internet of Things? Netflix would be able to use this inter-connectedness to their advantage to provide their customers with seamless entertainment that fits into their customer’s lives. For example, Netflix could sync with the customers calendar to receive information on when a customer would be arriving home, this could then sent to their home device on their Xbox One for example, and Netflix would be instantly load the last TV show that the customer was watching for when the customer arrives home, ultimately providing the customer with a personalized Netflix experience. The departments that would be affected would be the software and engineering department, in order or orchestrate an algorithm that would allow for such a high level of interconnectedness.
Stakeholders The primary stakeholders that would be affected would be the customers, they would have been told about this new platform. Other stakeholders would include Netflix engineers who would have to create such a system and also employees from collaborating companies e.g. car manufacturers or alarm software engineers to be able to sync Netflix to phone applications. The risks of implementing this would be focused mainly on security. As technology becomes gradually more interconnected within our lives, people are often afraid of the control they have over this technology. Netflix would have to ensure that customers felt at ease with this level of integration to allow for a smooth transition of implementation.
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https://www.otreva.com/calculator/#
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Caroline Oakes Samukelo Zuma Veronika Makarova Budget To anticipate the budget of implementing such a high level of interconnectedness Netflix would have to expand their cloud services to be able to wirelessly connect with a multitude of other devices (cloud services and implementation is discussed later in this report). Once the infrastructure is in place to facilitate such a large amount of information, Netflix would then have to develop software that would enable this large amount of wireless data to be processed and transferred into the Netflix streaming app.
Advanced, Pervasive & Invisible Analytics Originally data had to be created, collected and the analyzed. However with the emergence of growing technology that operates faster, data can now be analyzed in real time as soon as the data is generated. We are learning how best to filter this data from the multitude of different sources such as social media and the Internet of things and send this data to the right person at the right time.16 Netflix relies hugely on the data they collect from the customers; it is this data that allows Netflix to create such personalized experiences for every single user of their service. Data is gathered on what each individual is watching allowing Netflix to suggest recommendations of movies or TV Shows.
How Can Netflix Build On This? Netflix can use Advanced Analytics to improve their personalization software to allow customers to get a better experience from Netflix by offering them real time suggestions based on more than what they were previously watching. Netflix could harness information from big data and analytics from internet search history, conversations on social media, to viewed links on the internet to establish their customers interests, likes
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http://www.tibco.com/blog/2015/04/14/data-analytics-how-to-be-advanced-pervasive-and-invisible/
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Caroline Oakes Samukelo Zuma Veronika Makarova and dislikes, transferring this information into a system that could establish what a particular consumer likes to watch and then generate a viewing list based on this. The main department that would be affected would be the software/engineering department, as they would have to create the software that would be able to analyze the information coming in to then provide the correct recommendations for customers.
Stakeholders The stakeholders that would be affected would be the customers, again for privacy related issues with regards to Netflix utilizing their data. Other stakeholders would include websites or applications where the data was being transmitted from, e.g. places such as Google and Facebook would have to collaborate with Netflix in order to share this data. The advantages of implementing this trend would be for Netflix to have a competitive edge over other streaming platforms, by offering their customers the most in-depth personal recommendations on movies and TV Shows so their customers can always watch what they want. The main risk would be the price of gathering such a large amount of data from different sources, it would cost Netflix a large amount in the short term, to only see the positive effects of this acquisition and implantation a few years down the line in the long term when customers have began experiencing this upgraded personalization experience.
Budget Netflix would have to pay to access this data; companies such as Facebook, Google and Twitter would all charge individual fees depending on the quantity of information needed by Netflix. Pricing depends on the way data is sold, whether it is based on individual user data or data in bulk, Google makes roughly between $5 - $20 per user, for Netflix to buy this data and utilize it at such a large scale would upwards of $900,000 depending on the amount of data they need.
Context Rich Systems
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Caroline Oakes Samukelo Zuma Veronika Makarova How Does Netflix Use This? Netflix relies on the data gathered from the context of their customers. By analyzing the context in which a customer makes a decision to watch a particular show they are able to understand the customer on an individual bases. For example, Netflix analyzes the following: •
When you pause, rewind, or fast forward
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What day you watch Netflix (Netflix has found people watch TV shows during the week and movies during the weekend.)
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The date & time you watch
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Where you watch in the World
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What device you use to watch Netflix
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When you pause and leave content (and if you ever come back)
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The ratings given for individual shows
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Searches that are made
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Browsing and scrolling behavior on different device17
Netflix uses this data to understand the context in which the customer is watching Netflix, by analyzing this data they can see what devices customers are using and also interpret their behavior patterns which feeds back to Netflix who can use this information when deciding on what recommendation to provide for individual customers.
The Future for Context Rich Systems Netflix also uses Context Rich Systems to understand Software streaming issues, if a particular area or customer has a problem streaming Netflix can use a particular algorithm to understand the issue, however it is not entirely successful: “Our current insight tools provide ways to visualize and analyse a metric and trigger an alert based on the metric. We use this to track stream-starts-per-second (SPS), a metric used to gauge user engagement. If SPS rises above or drops below its "normal" range, our monitoring and alerting system triggers an alert. This 17
https://blog.kissmetrics.com/how-netflix-uses-analytics/
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Caroline Oakes Samukelo Zuma Veronika Makarova helps us detect that our customers are unable to stream. However, since the system does not provide context around the alert, we have to use a variety of other means to diagnose the problem, delaying resolution of the problem�.18 Looking at this challenge Netflix is facing it becomes clear that if they wish to offer a more efficient service they have to be able to analyse the context surrounding their streaming services to get a more in depth understanding of why a certain thing happens, rather than just fixing the problem that has happened. If they can apply Context Rich Systems in this manner, Netflix will be able to understand the context surrounding issues and from this they can execute solutions more efficiently and stop this issues from arising again. The departments that would be affected would primarily be the Software & Engineering Department, as they would have to implement the Context Rich Systems and be well versed enough to understand the new system and use it. Also the Customer Service Department will also have to be able to understand certain elements of the system in order to explain to customers why a certain issue has arisen and the steps they are taking to mitigate this.
Stakeholders The main stakeholders that would be affected by this implementation would be the employees at Netflix tasked with creating, implementing and understanding this new system. The advantages for implementing this trend would essentially improve Netflix’s system for analyzing the problems customers face with streaming and the context that surrounds this. In analyzing this Netflix will be able to react faster to issues adding value for the customer, but it will also allow them to understand why this issue arose so Netflix can try to stop this from happening again.
Risks 18
http://techblog.netflix.com/2014/01/improving-netflixs-operational.html
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Caroline Oakes Samukelo Zuma Veronika Makarova The risks of implementing this trend would be the ability to create the analytical software that could interpret the context of situations and also the cost that would come with creating such a new piece of software.
Budget The budget for implementing a more complex Context Rich System would consist of hiring experienced software engineers to produce a more detailed Context Rich System, to do this they would have to be senior level engineers earning between $100,000 $250,000 per year.
Cloud / Client Computing One of the most prominent technological shifts that has changed the paradigm in the world of IT a strategic asset to the firm is the move from local storage based computing towards the era of cloud computing. Cloud computing in essence is the ability to store and access data over the Internet as opposed to accessing it through a physical medium such as a physical server or hard drive. Cloud is simply a metaphor for the Internet, which refers to the notion of shared computing resources rather than physical devices to manage and handle applications. This market is composed of the three pillars in cloud computing: 1)
SaaS – Where a company can choose to subscribe to an application it access over the Internet.
2)
PaaS
–
where
companies can create custom applications for use for all within the
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Caroline Oakes Samukelo Zuma Veronika Makarova company (IBM Smart Cloud) 3)
IaaS – Where large companies like Google or Microsoft can provide
cloud
infrastructure that can be rented by other firms. Provide
cloud
infrastructure that can be rented out.
How Netflix is Using Cloud | Amazon Web Services Netflix is a loyal customer to Amazon Web services in which they rely on Amazon’s cloud infrastructure to process the data and consumer traffic or Netflix, generating consumers ability to stream media content anywhere, anytime, and from any device.
Multi-cloud infrastructure One aspect of the emerging cloud trend is that of multi-cloud scalability that can decrease risk and provide the same level of stability and reliability that is provided by AWS. Netflix can take advantage of this trend by looking at alternative solutions to AWS that can prove to be an asset in terms of value for customers, as well as providing a sense of security with their performance and operations. The following solutions could be proposed: 1. Relying on load balancing solutions across a variety of cloud providers – this would be a long-term oriented solution that utilizes Amazon’s APIs across more than one provider, such as Eucalyptus, Google Cloud, Open Stack, Basho, or Cloudstack. 2. Creating a dedicated cloud – Though it would take huge initial investment as well as requiring a justifiable business case, Netflix could create a dedicated cloud that has its 17
Caroline Oakes Samukelo Zuma Veronika Makarova own multi-cloud streaming and subscription infrastructure that is also offered as an IaaS as part of Netflix’s B2B activities. This option could provide long-term cost savings. 3. Turning to Multi-Cloud Standard Netflix could work with providers such as IBM, Rackspace, HP and other OpenStack participants to build a multi-cloud service delivering system. The multi-cloud option gives Netflix much more control and direction on the infrastructure mix as opposed to standardized packages from AWS.
Risks •
Volatility as it will be shifting away from AWS which they have used for a very long time
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Smaller companies that may be much more cost effective may not be able to collaborate with others to build a full system – this could result in a domino effect a group of providers failing and netflix’s service being compromised
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More middle men to see to in the business – widespread costs
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May not be a cultural fit to the organization as well as AWS is
Advantages •
Extended computing abilities
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More flexibility – targeting different providers that offer different services, you can pinpoint what you want to change and why / how
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Reduces dependency on one vendor / provider – increases negotiation / bargaining and buyer power
Stakeholders affected •
Employees (engineers)
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Cloud providers winning new business from a client like Netflix
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Management – working with new businesses
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Caroline Oakes Samukelo Zuma Veronika Makarova • Customers – new cloud providers may hinder, or improve their experience of Netflix Budget •
500k – 1.5m to partner with cloud providers to build infrastructure as strong as the one as AWS
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100-300k – cost to implement / and make changes to the Netflix application on all devices
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50-150k – engineer training
3D Printing Netflix Application As Netflix are largely in an intangible business—Internet TV and streaming, 3D printing would not be an implementable trend or a strategic asset to the company. Netflix’s core business model is centered on a service that is delivered digitally. At no point throughout Netflix’s value chain is there some form of tangible product creation, production, or manufacturing, therefore rendering 3D printing as irrelevant to their business scope.
Smart Machines At the Gartner Business Process Management Summit 19 on the 19-20th of March in London UK, Gartner’s Vice President Tom Austin 20 declared that the “era of smart machines is emerging now.” With advances in the automotive industry with smart cars being produced by the likes of Google and Mercedes, as well as IBM breaking ground with their advisory platform IBMWatson, it’s undoubtedly easy to agree with Austin. Gartner qualify a machine as “smart” if it meets two main points of criteria21 , firstly – it must do what people thought only could people do, and second – it must surprise us,
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http://www.gartner.com/imagesrv/summits/docs/emea/business-process/BPM-2014-Brochure.pdf
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https://www.gartner.com/analyst/6540
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http://www.ibmbigdatahub.com/blog/rise-smart-machines-nothing-fear-now-austin
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Caroline Oakes Samukelo Zuma Veronika Makarova doing things people thought were impossible. Smart Machines were caterogized into three segments by Austin. 1.
Movers – autonomous robots, for example, the warehouse management and logistics system of smart machines that was vertically integrated into Amazon from their purchase of Kiva Systems in March 2012 for $755 million. 22
2.
Doers – This includes robotic technology that uses cameras, sensors, and machine-based learning to perform complex scheduling, handling, or manipulating of objects. Examples include the PR2 robot developed by Willow Garage23.
3.
Sages – Lastly, smart machines that are able to use context and familiarity with user behavior, patterns, and environment in order to provide options and recommendations for action. The most notable example is IBM’s newest big bet business unit, Watson that can observe, interpret, evaluate, and decide on millions of unstructured data within seconds.24
Business Opportunities Opportunities include using smart machines to optimize logistics and distribution systems such as Kiva’s integration into Amazon. Smart Machines can also assist in data processing, analyzing and evaluating that can allow companies to use data to make calculated decisions on going into markets, strategies for new or existing markets, as well as the best ways to gain access to consumers. Smart machines will have a widespread affect on business as they have the ability to replace workers (cutting costs attached HR processes), extend employees (providing the ability to act smarter through behavior enhancing products such as Google Glass), assist people in physical tasks (lifting,
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www.bostonglobe.com | Acquisition puts Amazon rivals in awkward spot
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http://www.willowgarage.com/pages/pr2/overview
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http://www.ibm.com/smarterplanet/us/en/ibmwatson/what-is-watson.html
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Caroline Oakes Samukelo Zuma Veronika Makarova scheduling, handling), as well as intellectual tasks (critically thinking, analyzing, evaluating, deciding).
Netflix Application After an evaluation of Netflix’s core business model, revenue as well as value drivers, it seems clear that the heart of Netflix is a customer-centricity. This customer focus is based on the value behind a great degree of flexibility, range of offering, and versatility in consumption methods – ‘the ability to watch anywhere from anything at anytime’. In order to enhance aspect of Netflix’s benefit, they could capitalize on the trend of smart machines, but more specifically, what Tom Austin refers to as ‘Sages25’. Based on the initial investment required to develop high processing technologies like IBM Watson, it would be a better move for Netflix to become a customer of IBM and implement the smart technologies in analyzing consumer habits, preferences, behaviors, and nature. Upon implementation of a smarter way to understand customers, they could render this into structured data, which can be kept or sold to other businesses (namely studios or networks that host licensed content on Netflix). In addition, this could generate a much more smooth and user-focused experience for Netflix customers.
Risks •
Volatile investment – hard to measure and monitor the return of investing in smart technology to drive consumer value.
•
If hacked, an extremely large amount of data on Netflix’s 60+ million users can be leaked
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Huge investment required in cyber security that also lacks a proven track record of working for companies on the scale of Netflix – If hackers can get into Sony in 2014 for example, why not Netflix?
Advantages • 25
Greater knowledge and ability to evaluate consumers and then generate foresights
Smart machines that are information-based helpers
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Caroline Oakes Samukelo Zuma Veronika Makarova • More efficient analysis of consumers that will not have to be done or interpreted by employees
Stakeholders Affected •
Primarily customers – driving value
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Employees – getting used to new technology / means of working
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Analysts – new ways of receiving and reading data
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Smart tech providers – such as IBM that are opening the market to smart technology
BUDGET •
100-500k to purchase Watson technolgoies applied to Netflix from IBM
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50k – 100k to train employees
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50-100k to monitor and measure the investment
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200-300k to take the data from Watson and turn it into executable action / business decisions
Web-scale IT Netflix Application With Netflix’ consumer and business growth, they have been using Web-scale IT through Amazon Web Services which is captured in the illustration below. (source: www.vmturbo.com / Moving to web-scale by Stephen Wilson)
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Caroline Oakes Samukelo Zuma Veronika Makarova
This web-scale system is built on three key pillars, performance, agility, and efficiency. Efficiency refers to your ability to have responsive IT infrastructure that will perform at the capacity your business requires. A company can be growing substantially from temporary shifts in industry, which can sky rocket your costs for that time of year, which can be volatile and unexpected, followed by months where costs are drastically lower. Efficiency in web-scale IT is the ability to scale in response to business requirements. Secondly, performance regards to much more tangible factors in IT such as memory, I/O, OPS, and CPU. These are the backbone of a healthy platform with resilience that are able to survive, thrive, and adapt in hugely dynamic and strenuous digital environments. Lastly, Agility – intertwined with the first two factors — is the systematic ability to increase or decrease the power and capacity of infrastructure in response to business demands. Agility focuses more on being able to remove friction or time from the enduser/consumer being able to enjoy your product or service. Currently, the best opportunity in the market for Netflix’s needs is being provided from Amazon Web Services, though Netflix may start to consider the importance of being able to build their own web-scale IT infrastructure as a more sustainable and viable option in the long-term (5-10 years. However, for now, Netflix is one of the leading firms in the implementation of Webscale IT due to their huge consumer activity and face no risks as there is no need for anything new. CONCLUSION This report explored one of the fast growing Internet companies within the Internet TV industry in the 21st Century. Netflix has been a significant example of companies capitalizing on technological trends and tools available to drive holistic stake and shareholder value as well as developing competitive advantage that managed to capture over 50% of the video streaming market. 23
Caroline Oakes Samukelo Zuma Veronika Makarova It is our hypothesis that in this day and age, innovation is no longer a notion belonging to the future, but rather, in company’s abilities to recognize present day trends, and capitalize respectively to be catapult themselves forward and ensure continued success and prosperity.
Analyst and consulting firms such as Gartner or Forrester serve, as a stepping-stone to being able to understand the role information, digital, and smart technologies will play in the development of global business landscapes. Trends such as cloud-based infrastructures, data & analytics, smart technologies, cyber security and risk protection are fundamental to not only understand, but to be able to critically evaluate, and act on – regardless of industry or function. If we shift away from the paradigms of business cases, we are also entering the new age in which millennials and generation C will set the new tone for consumerism, interactions, communications, and information consumption. This fact reiterates companies needs to equip themselves with the tools and know how to be able to address this booming new demographic that will take the global business market by storm. BIBLIOGRAPHY • "Overview." Netflix :. Web. 5 Aug. 2015. <http://ir.netflix.com/>. •
"The World's Biggest Public Companies." Forbes. Forbes Magazine. Web. 5 Aug. 2015. <http://www.forbes.com/companies/netflix/>.
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Web. 5 Aug. 2015. <https://www.netflix.com/ch-en/>.
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