When a firm attempts to match the benefits of a successful position while maintaining its existing position Blockbuster Closed 570 stores 2006 2007 During 3 years including launch of online service BB lost 4 Billion Wal Mart dumped their rental effort in a year What Did Netflix have that BB and Wal Mart did not have and could not replicate Competitive advantage comes from doing things differently in such a way as to create or obtain rare valuable inimitable Netflix Straddling non substitutable resources For Netflix o Brand o Cinematch o Scale How did Netflix Build Brand How does any company build brand o Brand comes from good customer experience Netflix Tech behind the Brand o Distribution system allows fast reliable service o Online system provides wide selection good recommendations o Allow customers to set up a list so they can always send you something you want right away Cinematch Collaborative Filtering How does it Work The Netflix Prize Crowdsourcing Customer returns are scanned and an email is generated asking the customer to rate it Compare customer ratings to others Recommend based on inventory if only 500 copies don t recommend to 50 000 people 1st to raise accuracy by 10 1M prize Stripped data and made it available to anyone to try to improve the software algorithm Cost of 4 programmers for 1 year 40 000 teams from 186 countries entered the contest Data Asset Average customer has rated 200 movies Use collaborative filtering to make recommendations The data and software together create switching costs o Blockbuster doesn t have your data o Blockbuster doesn t have the millions of others rating to compare to your data The Long Tail Impact of the Internet The web enables near zero cost dissemination of information about products Enables easy searching for that information Overcomes problems of limited shelf space and geographically distributed audience Key Take Aways from the Netflix Case Pure Play vs Straddling Long Tail Collaborative Filtering crowd sourcing Building rare valuable inimitable non substitutable resources o Brand o Scale Keep running but not too fast
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