Netflix fundamentally changes the way we watch movies and shows. We now have a vast number of shows available that we can watch at any time we like, anywhere, on any device. We can play and pause at will and create favorite lists. Start binging ladies and gentlemen!

Netflix (NFLX) is one of the most successful dot-com ventures ever with a current market capitalization of around 27 Billion dollars. In just over a year after its introduction in the Netherlands in September 2013, the national Netflix subscriber base has reached the 700,000 mark.

netflix

The conditions in The Netherlands are very favorable for Netflix. The fast growth in the Netflix customer base is in part fueled by the widespread availability of broadband internet and high-speed 4G/LTE mobile networks. Moreover, smartphone penetration in the country is expected to pass 50% in the near future.

And there are other factors that make Netflix successful. In their book Inside the Box, Drew Boyd and Jacob Goldenberg describe five underlying patterns that account for the majority of successful highly innovative products. They have called the method: Systematic Inventive Thinking, or SIT.

All five SIT patterns can be recognized in the Netflix service and business model when we compare it to traditional television. We will briefly look at a few of those patterns.

Let’s start with the Subtraction pattern, the pattern in which is a component that was formerly thought of as being essential has been removed. Notice that there are no commercial breaks anymore? Commercials have been taken out of the business model, they are no longer needed and the absence of it creates new benefits. We can now enjoy an uninterrupted program.

Let’s build on that: an uninterrupted program that can be paused and resumed at will. Something that wasn’t possible with traditional television in the past. The SIT pattern that you can see at work here is called Division. The viewer has the ability to divide the service over time. He can now decide himself when it’s time to get a cup of coffee instead of having to wait for the commercial break. That’s a great benefit.

The last pattern we will discuss here is Attribute Dependency. In this pattern, a dependency between two variables is created or removed. Consider the location where you needed to be in order to watch traditional television. You would have to be at home right? Now with the Netflix service, you no longer have to be at home to watch a show. You could do it anywhere provided you have a device that is connected to the internet. The dependency between the location and the availability of the service has been removed. It allows a lot more freedom.

The two other patterns, Task Unification and Multiplication, are also embedded in the Netflix service and business model. And if you look close enough, you can recognize the patterns even more than once. Netflix will undoubtedly remain successful for a long time and we will continue to see more examples of the SIT patterns in their service and business model.

© Ernst-Jan van Batenburg, FlyWheel Business


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