Embracing Change: Lessons from Netflix for Small Business Success

By Bob Rogers of SBTDC Asheville

Did you ever wonder why Blockbuster failed while Netflix grew into a $39 billion business? 

In 2004, Blockbuster was thriving, boasting 9,000 stores and $6 billion in revenue, far surpassing Netflix’s $500 million. Yet, just nine years later, Blockbuster filed for bankruptcy while Netflix’s revenue had surged to $4.37 billion.

Why Did One Business Fail While the Other Succeeded?

While several factors played a role, the primary reason was Blockbuster’s failure to anticipate and respond to change—changes in customer preferences, technology, competition, and delivery models.

Blockbuster remained committed to its brick-and-mortar model, believing that its past success meant there was no need to innovate.

In contrast, Netflix studied changing consumer preferences, recognizing that people preferred shopping from home and valued the convenience of home delivery. Consumers also preferred a monthly subscription plan to a per-movie fee model. Netflix also recognized the untapped potential created by advances in streaming technology. 

Netflix designed their model to capitalize on these changes. In 2007, they were one of the pioneers in entertainment streaming services. At the time, the only widespread streaming services were iTunes, YouTube and Amazon Unbox. There was no Amazon Prime, Disney+, Hulu, Apple TV, or Peacock. 

Innovation became a core company value. Netflix pursued global expansion and is currently in over 200 countries with local content and languages. They began creating original content including hits like “House of Cards”, “Orange is the New Black”, “The Crown” and others. They were also one of the first to use data analytics and machine learning to personalize content and tailor original programming. 

The result: a staggering 7800% growth in 20 years! In 2024, Netflix revenue was $39 Billion dollars. Their Net Income: $8.7 Billion dollars.

Applying Netflix’s Lessons to Small and Mid-Sized Businesses

How can small business owners learn from Netflix’s success??

Business owners must leverage strategies that focus on:

• Embracing change as a competitive advantage
• Building a culture of innovation and adaptability
• Leveraging technology
• Leading through change
• Implementing change management strategies

Since we cannot cover all these strategies in one article, let’s focus on one essential tool that every business, regardless of size, should implement immediately—an “Embracing Change Committee.”

The Role of an Embracing Change Committee

The purpose of an Embracing Change Committee is to ensure the company consistently and intentionally evaluates opportunities and challenges related to change. Even sole proprietors can incorporate this concept into their business planning.

The committee should include a diverse mix of employees from all departments and levels, including the CEO/owner. Business owners should also consider including younger team members, who often bring fresh perspectives and openness to change. The committee should meet at least quarterly, dedicating a half-day to discussions.

Focus Areas for the Committee

To maximize effectiveness, committees should concentrate on key areas of change that impact businesses. Below are 11 major areas that should be regularly assessed:

1. Market Conditions
   • Economic Trends: Fluctuations in the economy such as recessions or booms that influence consumer spending and business investment
   • Industry Trends: Shifts in the industry, emerging competitors and new market segments
2. Technological Advances
   • Digital Transformation: Adoption of new technologies like cloud computing, AI and data analytics
   • Emerging Technologies: Blockchain, Machine learning and other new technology
3. Regulatory Changes
   • Compliance Requirements: Introduction of new laws and regulations
   • Tax Policies: Impact of new tax laws
4. Competitive Landscape
   •  New Entrants: Arrival of new entrants can change competitive dynamics
   • Competitive Strategies: Shifts in competitors’ strategies can impact your business (pricing, products, marketing)
5. Customer Behavior
   • Changing Preferences: Evolving customer needs and preferences
   • Feedback and Satisfaction: Customer expectations change over time–bigger, faster, better
6. Internal Factors
   • Leadership Changes: Changes in Leadership that alter direction
   • Employee Dynamics: Hiring, layoffs, major changes in roles and responsibilities
7. Financial Health
   • Funding and Investment: Access to funding can either restrict or enable growth. May be impacted by internal factors, like revenue streams, or external factors like bank credit tightening
   • Cost Management: Changes in costs and supplies impact businesses
8. Innovation and Product Development
   • New Products and Services: Introduction of new products and services to meet market demand or capitalize on new opportunities
   • Research and Development: Ongoing or proposed R&D efforts to innovate and improve existing offerings
9. Operational Processes
   • Process Improvement: Improvements in workflows and processes resulting in improved efficiency
   • Quality Control: Implementation of quality control measures to ensure product excellence
10. Globalization
    • Market Expansion: Entering new geographic markets creates both opportunities and challenges
    • Supply Chain Management: Managing global supply chains by anticipating changes to take advantage of global cost savings
11. Crisis and Risk Management
    • Preparing and reacting to take advantage of crisis situations
      • Natural Disasters 
      • Economic Crisis 
      • Political Crisis

Running an Effective Committee Meeting

At each quarterly meeting, the committee should analyze developments in each of the above areas, focusing on how changes create new opportunities. For example, the Market Conditions discussion should focus on economic trends, shifts within the industry and emerging competitors. What is happening in the economy now and in the future? What new competitors have emerged or will emerge? Which competitors have left the market?

More importantly, they should discuss how these factors will affect their company and what new opportunities are now available. 

To optimize the process, assign an individual to be responsible for each of the eleven areas. In smaller companies, one person may oversee multiple areas. Prior to the quarterly meetings, each individual is responsible for gathering current data about their area of change. 

For example, the individual in charge of Market Conditions would gather information about economic forecasts, new competitors and industry trends. Having current background information enhances the effectiveness of the meetings. 

Turning Insights into Action

I encourage business owners to implement recommendations generated by the Embracing Change Committee. One of the biggest demotivators for employees is seeing great ideas discussed but never acted upon.

The Embracing Change Committee provides a structured way for businesses to proactively monitor shifts in the marketplace and leverage change as an opportunity rather than a threat. The SBTDC can help your business think like Netflix—not like Blockbuster!