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UNIVERSITY OF TECHNOLOGY, SYDNEY
MANAGEMENT
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Managing Knowledge, Innovation & Change:
“Do disruption and change have an impact on organisational performance?”
There are environmental circumstances that occur where organisations can either decide to
innovate quickly into new growth vectors, or to respond rigidly and into organisational
decline. These scenarios are important as they dictate the fate of the organisations’
performance, that being survival or death. (McKinley et al, 2013). As such, disruption and
change can be defined as an event that can affect an organisation either directly or indirectly.
When responding to new markets, disruptive innovation can be treated as an opportunity;
however, when treated as a threat, it results in overreaction and failure (Gilbert & Bower,
2002).
While technological disruption and change can lead organisations to success, It can, however,
lead to similar firms to struggle and ultimately fail (Part 1). More importantly, up to the
managerial side of the organisation to choose to implement these changes, and in doing so,
needs to alter their organisational structure to that which suits the disruption in the market
(Part 2).
In saying this, I will argue as well as explore that Netflix was able to respond to technological
changes while also adapting its organisational structure to mould to market needs. While
Blockbuster neglected these disruptive changes, and whose management decided to stay with
their own lacking structure. Both firms ability to adapt to change and disruption through new
technology and organisational structure either led them into creating new growth vectors or
eventually dying off, respectively.
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Part 1: Technology
It is up to organisations to implement these new technological disruptions and changes
into their business structure for them to be successful.
Firms need to be able to respond to the increase in competition and change of the current new
normal environment by being more innovative (Loon et al., 2020). An example of a firm that
has used these changes to its advantage, and in turn, given higher levels of value to its
customers is Netflix (Cohan, 2013). It’s these disruptions and environmental changes which
happen around the organisation which are seen as the driving force of organisational
innovation (Damanpour & Gopalakrishnan, 1998). For Netflix, new technology, such as
DVD’s were used by the firm, even while VHS dominated the market. The same is said for
their early adoption of subscription payments and video streaming services (Oomen, n.d,).
All industries experience technical change; incumbent firms are sometimes able to pre-empt
and adapt to these challenges and competitive changes emerging (Chesbrough, 1999). Netflix
was able to see where the market was going with DVDs as well as video streaming,
ultimately leading them to dominate the video rental market and become one of the highest
performing organisations in its market. Netflix was able to see technological innovation and
hence adapted to it by changing their entire business model (Moskowitz, 2015). Netflix’s
company culture of innovation and change demanded that the company follows and goes
where the market needs it to go with its strategy; this ultimately resulted in Netflix
reinventing its business model repeatedly (Pinker, 2020).
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However, while change and disruption can lead to some organisations utilising and
adapting to these new technological changes, resulting in new growth vectors, there are
those firms that fail to advance their technological abilities, ultimately leading to their
death.
Implementing new technologies and systems into daily operations of a firm is found to be a
challenging operation for well-established organisations (Leonard, 2011). It has been shown
that both product and process innovation shows a relatively stronger relationship with
organisational performance (Prajogo, 2006). These features can be related to the case of
Blockbuster; while similar to Netflix in its market and service, Blockbuster’s reluctance to
innovate quickly and let in new information into the organisation, eventually resulted in
blockbusters failure (Satell, 2014).
For organisations that have a heavy foundation in the market with a large market share, the
implementation of certain changes could be seen as something trivial and necessary. At an
environmental level, a highly institutionalised corporate firm may actually restrict efforts to
produce or accept innovations when experiencing a decline (Mueller et al., 2001). Notably,
Blockbuster’s lack of insight into new and emerging technologies as well and new techniques
that could be utilised in a new business plan failed. With Blockbusters high market position,
the firm was given the opportunity to purchase Netflix at a fraction of its value today; this led
to one of their most profound mistakes (Donnelly, n.d), and furthers the idea that some
organisations restrict innovation before or during a decline. This is shown with Netflix
offering to sell to Blockbuster at a fraction of its current net worth while Blockbuster was in
the decline phase (Sloan, 2020).
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Part 2: Organisation
The managerial and organisational side of the business is at the heart of implementing
changes and needs to shift its structure itself according to disruptions in the
environment.
While the ability to anticipate and adapt to new and emerging technologies is vitally
important for firms to continue performing well and growing, the implementation of changes
and disruption to organisational culture and structure is also another driving factor to
organisational performance. This is shown with companies needing to enhance their
corporate performance through the stimulation of links between stakeholder engagement,
innovation, and co-creation (Loureiro, 2020). It is shown that with many organisations, these
organisational level changes are conditioned and coerced through the dynamics of the
specialised field where the firm operates in (Morgan & Spicer, 2009). Along with external
technological change, Netflix also had to adapt to a more internal organisational change.
These internal forces influenced Netflix to change its managerial personnel, work climate,
effectiveness, employee expectation and crisis (Kobiruzzaman, 2021). These forwardthinking changes resulted in Netflix leading ineffective organisational performance and
success for the firm (AUEssays, 2019).
Organisations constantly need to change and update their organisational structure due to
changes in the environment around them. By doing this, a firm can change the way it
interacts with both its internal and external stakeholders and, in turn, towards large scale
organisational change (Whitney, 1998). In the case of Netflix, the firm did not set out to
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design a perfect culture, but one which was built around organisational flexibility (Caredda,
2020). This flexibility allowed Netflix to engage with both internal and external stakeholders
for ideas about change and innovation to deliver a service that rivalled its competitors. The
organisation looked at a culture that enabled prioritising people. By doing so, Netflix was
able to ensure that it was able to address the needs of its customers and human resources.
That ultimately contributed to positive employee morale, effectiveness and performance
(Anderson, 2019).
However, there are times when management and organisational structures fail to adapt
to changes in the external environment to meet new market needs, ultimately affecting
its own performance.
As mentioned previously, it is not just technological change that dictates an organisation’s
ability to sink or swim. A firm’s ability to change and adapt its organisational structure
depending on the environment and changes in the market around them can also impact the
overall performance of the organisation. Many organisations are being found to be failing at
executing ‘mission critical’ change due to failure from their leadership (Dovey & Fenech,
2007 ). As mentioned before, Netflix, whose leadership adapted its structure quickly to the
changing market around it, was able to stay ahead of the curve. However, firms that refuse to
do adapt will undoubtedly lose the ability to keep up and get up to speed with changes and
disruptions around them and risk being sidelined very quickly (McKinsey & Company,
2018). With Blockbuster, it utilised a very tall hierarchical structure, with a very’ heads
down’ management approach, resulting in the firm to make decisions in a ‘vacuum’ and
failing to integrate innovation and change into their daily management responsibilities (Dunx,
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2013). Hence, lead to disconnection with the customer, as well as loss of future insight and
eventually Blockbusters failure.
The way an organisational structure is set out and runs ultimately steers the firm in a positive
or negative direction, however, the management of these firms are often blamed for the
failure of organisations (Druckman et al., 1997), and it is up to them to adapt and change their
structures depending on their surrounding environment. Failure from top management has
been shown to be a number of things such as ignoring change, executive arrogance, relying
on past success and pursuit of the wrong vision (Longnecker, 2007). Management that would
have been otherwise very successful in a more stable environment has been shown to fail
when rapid adaptation, as well as change, is required (Longnecker, 2007). For a business as
large as Blockbuster, it is difficult to implement change, especially with its deep nested
organisational structure, making more horizontal collaboration incredibly difficult to achieve,
resulting in the firm becoming slow-moving and bloated (Fenn, 2010) to different changes,
both managerial and technological. With a large organisation such as Blockbuster,
management is at the core of the organisation, and ultimately it was a failure from
management that let the company down. With everything from arrogant strategic direction,
customer dissatisfaction, fiscal irresponsibility, and as mentioned before, a lack of innovation
(Hanna, n.d) leading to Blockbuster filing chapter 11 and ultimately failing in the market it
once strongly dominated (De la Merced, 2010).
Both organisations show how accepting and failing to embrace changes and disruption can
ultimately lead to their success or failure. The evidence provided shows how embracing and
utilising new innovations and change in both technology and organisational structure can lead
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to firms flourishing with brand new growth vectors in a once dominated market. Conversely,
we can see how in the same market, failure to adapt quickly and shift structures in a firm can
lead to it dwindling and ultimately dying. Hence it is ultimately the firm’s responsibility to
adapt and to these changes and disruptions for its long-term success in its respective market.
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References:
Anderson, D. (2019, November 18). Netflix Inc.’s Organizational Culture & Its Strategic
Implications. Rancord Society. https://www.rancord.org/netflix-inc-organizational-culturehrm-strategic-implications
AUEssays. (November 2018). Change Management at Netflix.
https://www.auessays.com/essays/management/netflix-change-management.php?vref=1
Caredda, S. (2020, September 15). International Organisation in Action: Netflix. Sergio Caredda.
https://sergiocaredda.eu/organisation/organisation-design/intentional-organisation-in-actionnetflix/
Chesbrough, H. W. (1999). The organisational impact of technological change: A comparative theory
of national institutional factors. Industrial and Corporate Change, 8(3), 447485. https://doi.org/10.1093/icc/8.3.447
Cohan, P. (2013, October 13). Netflix’s Reed Hastings is The Master of Adaptation. Forbes.
https://www.forbes.com/sites/petercohan/2013/10/22/netflixs-reed-hastings-is-the-master-ofadaptation/?sh=68388992671b
Damanpour, F., & Gopalakrishnan, S. (1998). Theories of organisational structure and innovation
adoption: the role of environmental change. Journal of Engineering and technology
management, 15(1), 1-24. https://doi.org/10.1016/S0923-4748(97)00029-5
De la Merced, M. J.. (2010, September 23). Blockbuster, Hoping to Reinvent Itself, Files for
Bankruptcy. New York Times.
https://www.nytimes.com/2010/09/24/business/24blockbuster.html
Donnelly, C. (n.d). Failure to Innovate – Why did Blockbuster Fail.VERB Brands.
https://verbbrands.com/news/thoughts/failure-to-innovate-why-did-blockbusterfail/#:~:text=One%20extraordinary%20example%20of%20the,largest%20DVD%20rental%2
0companies%2C%20Blockbuster.&text=To%20compound%20their%20mistake%2C%20due
,business%20offering%20a%20postal%20service.
Dovey, K., & Fenech, B. (2007). The role of enterprise logic in the failure of organisations to learn
and transform: A case from the financial services industry. Management Learning, 38(5),
573-590. https://doi.org/10.1177/1350507607083208
Druckman, D., Singer, J. E., & Van Cott, H. (Eds.). (1997). Enhancing organisational
performance. National Academy Press.
Dunx, B. (2013, November 17). My thoughts on the demise of Blockbuster. BobbyDunx.
https://bobbydunx.wordpress.com/
Fenn, D. (2010, September 27). What can small businesses learn from Blockbusters failure? Plenty.
CBS News. https://www.cbsnews.com/news/what-can-small-businesses-learn-fromblockbusters-failure-plenty/
Gilbert, C., & Bower, J. (2002). Disruptive change. When trying harder is part of the
problem. Harvard business review, 80 (5), 94-101, 134.
Hanna, P. (n.d). The Closing of Blockbuster Video’s Stores [Unpublished Thesis]. Southern New
Hampshire University.
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Kobiruzzaman, M. M. (2021, January 30). Netflix Organizational Change: Organizational
Management Change Examples. Educational Website For Online Learning.
https://newsmoor.com/netflix-organizational-change-organizational-management-changeexamples/
Leonard, D. (2011). Implementation as mutual adaptation of technology and organisation. Managing
Knowledge Assets, Creativity Innovation, 17, 429.
Longnecker, C., Neubert, M., & Fink, L., (2007). Causes and consequences of managerial failure in
rapidly changing organisations. Business Horizons, 50(2), 145-155.
https://doi.org/10.1016/j.bushor.2006.11.002
Loon, M., Otaye‐Ebede, L., & Stewart, J. (2020). Thriving in the new normal: The HR
microfoundations of capabilities for business model innovation. An integrated literature
review. Journal of Management Studies, 57(3), 698-726. https://doiorg.ezproxy.lib.uts.edu.au/10.1111/joms.12564
Loureiro, S. M. C., Romero, J., & Bilro, R. G. (2020). Stakeholder engagement in co-creation
processes for innovation: a systematic literature review and case study. Journal of Business
Research, 119, 388-409. https://doi.org/10.1016/j.jbusres.2019.09.038
McKinley, W., Latham, S., & Braun, M. (2014). Organisational decline and innovation: Turnarounds
and downward spirals. Academy of management review, 39(1), 88-110.
https://doi.org/10.5465/amr.2011.0356
McKinsey & Company. (2018). Disruptive forces in the industrial sectors.
https://www.mckinsey.com/~/media/mckinsey/industries/automotive%20and%20assembly/ou
r%20insights/how%20industrial%20companies%20can%20respond%20to%20disruptive%20
forces/disruptive-forces-in-the-industrial-sectors.pdf
Morgan, G., & Spicer, A. (2009). Critical approaches to organisational change. The Oxford handbook
of critical management studies, 251-266.
Moskowitz, D. (2015, May 16). Who Are Netflix’s Main Competitors?. Investopedia.
http://www.investopedia.com/articles/markets/051215/who-are-netflixs-main-competitorsnflx.asp
Mueller, G. C., McKinley, W., Mone, M. A., & Barker III, V. L. (2001). Organisational decline—A
stimulus for innovation?. Business Horizons, 44(6), 25-34.
Oomen, M. (n.d). Netflix: How a DVD Rental Company Changed the Way We Spend Our Free Time.
Business Models Inc .https://www.businessmodelsinc.com/exponential-businessmodel/netflix/
Pinker, A. (2020, May 6). What Can We Learn From The Innovation Culture at Netflix. Medialist
Innovation. https://medialist.info/en/2020/05/06/what-we-can-learn-from-the-innovationculture-at-netflix/
Prajogo, D.I. (2006). The relationship between innovation and business performance—a comparative
study between manufacturing and service firms. Knowledge and Process Management, 13(3),
218-225. https://doi.org/10.1002/kpm.259
Satell, Greg. (2014, September 5). A Look Back At Why Blockbuster Really Failed and Why It Didn’t
Have to. Forbes. https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-whyblockbuster-really-failed-and-why-it-didnt-have-to/?sh=565bfcea1d64
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Sloan, M. (2020, June 1). Netflix vs Blockbuster – 3 Key Takeaways. DRIFT. drift.com/blog/netflixvs-blockbuster/
Whitney, D. (1998), Let’s change the subject and change our organisation: an appreciative inquiry
approach to organisation change, Career Development International, 3 (7), 314319. https://doi-org.ezproxy.lib.uts.edu.au/10.1108/13620439810240746
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Reflective Response: 518 words
The purpose of this reflective response is to go over previous comments made about former
writing and respond to these in improvement for my essay draft. To do this, I will be taking
on board tutor feedback, both in-person and written comments, as well as suggestions from
AcuWriter and Grammarly.
With the group essay, the comments that were given back were:
Fig 1.
Fig 2.
Fig 3.
As the feedback suggests in Fig1, the introduction of my previous essay could be more
convincing and logical regarding the idea and argument. And as suggested, backed up with
references. To follow this, my introduction was structured to clearly point out the main idea
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and address the question being asked, backing itself up with at least two in-text references
and presenting relevant arguments, which will be explored further on in part 1 and part 2.
To address Fig 2., the question I will be answering is placed at the top of the essay to ensure
that I can consciously remember to address the question throughout the rest of my essay.
In Fig. 3, to ensure I didn’t just present a catalogue of theories, I decided to split the
paragraphs evenly into theories and practical examples for both companies.
I was given verbal feedback from my tutor about my first iteration of my introduction. My
tutor suggested that I should include a separate section for my arguments as well as to make
the argument itself clearer. Following this, the introduction was segmented with an area
where I could clearly state my arguments and link them to their respective paragraph body.
Along with that, the suggestion of bolding a clear topic sentence for every new section was
recommended; hence, every part of the essay which looked at a new idea and its respective
company included a new bolded topic sentence.
Following the draft of my essay, I used AcuWriter to check the style of my writing and give
me feedback on and hint on what else should be included in my essay. The feedback that was
given was:
Fig 4.
As stated in Fig 4., my conclusion laced linking words that presented that I had answered the
essay question. Looking back at my intro, I made sure to include the necessary linking words
in my conclusion to answer the question.
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Grammarly was the final software used to aid in my writing. It was used to help with minor
errors such as grammar, spelling and puntctuation. This allowed me to finally go through my
essay and polish up small minor errors that I might have otherwise missed if I didn’t use
Grammarly.
Fig 5.
Overall, Grammarly
picked up 85 errors throughout my essay; all of these were fixed and resulted in a Grammarly
report of 0 correctness
alerts.
Fig 6.
This showed me how many simple and easy to miss grammar and punction errors I made
throughout my writing. Going forth, I aim to achieve more consistency with my overall essay
writing, Implementing what my tutor has suggested as well as a serious review of my
grammar, spelling and punctuation.
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