Netflix: An Open-Source Innovation Ecosystem Platform Leader
A platform is a set of systems, technologies, and tools that are the foundation for developing complementary products and services. Netflix is a platform technology architecture that allows for regulated participation in a multi-sided market. As an innovation ecosystem, Netflix has created a robust platform while serving as a platform leader. Netflix has committed to the development of open-source projects. As the leading internet television network, Netflix provides and leverages open-source technologies to serve its 223 million paid subscribers worldwide. As a platform leader, Netflix balances scope, product technology, and external and internal relationships to create, obtain, and sustain its competitive advantage. In addition, the Netflix platform effectively manages appropriability, coherence, and leverage opportunities for its external and internal partners (Cusumano & Gawer, 2003; Gawer & Cusumano, 2014; Nambisan & Sawhney, 2011; “Netflix Open Source Software Center,” n.d.).
The Netflix ecosystem choreographs and orchestrates capabilities, microservices, and other technology platforms: Amazon Web Services (AWS) for content storage, banks for payments, Internet Service Providers (ISPs) for wireless mobility service, and tradeshows to connect with media and entertainment stakeholders. The ecosystem consists of competitors and complementors that aim to increase their market share. Netflix produces original content with ABQ studios, a Netflix subsidiary. Netflix has also acquired MillarWorld and StoryBots to develop new and educational content for children. Netflix manages innovation appropriability by implementing systems that enhance transparency related to the sharing and usage of intellectual property (IP) rights. To provide content variety, Netflix also licenses contact from DreamWorks and other studios; these studios also license contact to Netflix competitors. In addition,, original Netflix content is created by actors, producers, and writers, but many content producers also work for other intellectual property (IP) holders. BMG manages IP rights for Netflix outside the continental United States; BMG also helps Netflix to devise norms and policies related to IP rights management. Netflix has also partnered with airlines to provide streaming content and technology, improving the user experience on airlines. Consumers also enjoy Netflix-streamed content variety, which includes Gwyneth Paltrow’s Goop. Goop sells health advice to consumers. Additionally, gaming companies stream gaming content to Netflix and its competitors. To harness growth opportunities, Netflix has received investment from Blackrock, Capital Group, and Vanguard. Effective external and internal relationships management has allowed Netflix to manage better innovation coherence and innovation leverage opportunities (Cusumano & Gawer, 2003; Nambisan & Sawhney, 2011; Wieringa, 2019).
As a platform leader, Netflix’s open-source community includes its developers, external contributors, and an active user base. As a recipient of the 2015 JAX award, Netflix demonstrates the power of internalizing development operations (DevOps) to support the technology architecture. Initially, Netflix was an early cloud adopter and pursued an extensive in-house capability to create its complementary microservices. However, Netflix has transitioned its streaming services to operate upon AWS cloud infrastructure. After the transition to AWS, Netflix paid the initial pioneer tax — Netflix encountered and worked through many corner cases, issues, and limitations. As a result, Netflix was able to capture patterns that worked within platform architecture components and automation tools. Netflix has benefited from the scale effects of other AWS users adopting similar approaches and will continue working with its partners to develop the Netflix ecosystem further. However, over time, Netflix has found an effective balance between external and internal contributions needed to obtain technological architecture goals within the innovation ecosystem and platform. The technical architecture is a business differentiator and gives Netflix a competitive advantage. With external ecosystem partners, Netflix continues to partner with its developer community to create functionality that benefits everyone. Social coding — a form of software engineering peer pressure — has improved open-source software engineering practices on the platform. Social coding peer pressure led to the establishment of forums to better involve partners in designing and developing leverageable assets. Furthermore, social coding has enabled better guidance based on usage context. As a platform leader, Netflix effectively balances the coordination of internal and external contributors to harvest platform leadership benefits (Cusumano & Gawer, 2003; Nambisan & Sawhney, 2011; “Netflix Open Source Software Center,” n.d.).
Netflix’s centralized technology infrastructure facilitates innovation leveraging opportunities using ecosystem software build and development tools. In addition, the ecosystem employs shared runtime libraries and services. Runtime containers, libraries, and services power Netflix technology microservices. Netflix has developed many software development tools for developer use, simplifying and enabling better software development practices. Netflix has open-sourced many of its Gradle plugins under Nebula to simplify software developer use. Standardized plugin development has lowered the barrier to building composable and modular code. Gradle provides a common framework to shape partners’ perspectives on the innovation platform. However, Netflix requires additional tools to transition software builds from the developers’ desks to the cloud. Netflix runs several thousand instances, but each instance runs on an image created by another open-source tool, Aminator (AMI). Once packaged, these AMIs are deployed to the cloud using their Continuous Development Platform (CDP) entitled Spinnaker. Spinnaker supports software change management and releases with high confidence and velocity. Social coding also allows partners to disseminate information on innovation changes based on a common vocabulary and framework, improving software engineering practices (Blog, 2017, 2020; “Netflix Open Source Software Center,” n.d.).
As a platform leader, Netflix has pursued a robust platform architecture underpinned by its commitment to open source. The cloud platform serves as the technology stack foundation for most services within Netflix. The platform technology architecture consists of application containers, application libraries, and cloud services. Netflix provides the technology to operate microservices responsibly; the platform allows Netflix to capture and monitor operational insights, peak performance metrics, and security-related details. Netflix also provides technologies for persistent and semi-persistent data that support the real-time load of its 223 million members. Netflix ecosystems microservices continue to grow and mature. Therefore, Netflix must consistently evaluate assumptions regarding communication and database protocols needed to effectively deploy and test its systems for optimal availability and resiliency to optimize the user experience. As thinking evolves at Netflix, the underlying technological platform architecture must evolve, grow, and scale to serve its users better. The technology platform offers distributed configuration, resiliency, intelligent inter-process communication, service discovery, and service communication. Using modern user interface technologies, Netflix engineers build rich client applications that support runtime on thousands of devices. Netflix strives to create a cinematic, immersive experience that delights its members, exhibits exceptional performance, and works seamlessly. Big data analytics allow Netflix to make informed decisions to improve service delivery quality. Data-driven insights are used to improve the platform through A/B experimentation testing continuously. Previous modularity decisions have sustained the competitive advantage for the platform and innovation ecosystem (Blog, 2017, 2020; Cusumano & Gawer, 2003; Nambisan & Sawhney, 2011; “Netflix Open Source Software Center,” n.d.).
As an innovation ecosystem, Netflix has created a robust innovation platform and is a platform leader. As a platform leader, Netflix works to effectively balances scope, product technology, and its relationships to develop better, obtain, and sustain competitive advantage. In addition, Netflix effectively manages innovation appropriability, coherence, and leverage. Technology architecture ecosystems exist because it allows Netflix complementors and competitors to survive and thrive. Big data analytics enables Netflix to make informed decisions to improve service delivery quality and user experience continuously. Based on its Open Connect standard, Netflix shares technical knowledge with ecosystem members to obtain new information and feedback. To achieve its goals, Netflix relays on robust analysis and recommendation insights to optimize performance and improve user experience (Cusumano & Gawer, 2003; Nambisan & Sawhney, 2011; “Netflix Open Source Software Center,” n.d.).
Works Cited
Blog, N. T. 2017, April 18. Open Source at Netflix. Medium. https://netflixtechblog.com/open-source-at-netflix-c2c4e036e144.
Blog, N. T. 2020, July 29. Netflix Platform Engineering — We’re just getting started. Medium. https://netflixtechblog.com/neflix-platform-engineering-were-just-getting-started-267f65c4d1a7.
Cusumano, M. A., & Gawer, A. 2003. The elements of platform leadership. IEEE Engineering Management Review, 31(1): 8–8.
Gawer, A., & Cusumano, M. A. 2014. Industry Platforms and Ecosystem Innovation: Platforms and Innovation. Journal of Product Innovation Management, 31(3): 417–433.
Nambisan, S., & Sawhney, M. 2011. Orchestration Processes in Network-Centric Innovation: Academy of Management Perspectives, 18.
Netflix Open-Source Software Center. n.d. . https://netflix.github.io/, November 5, 2022.
Wieringa, R. 2019, December 6. An ecosystem business model shows the value network and should allow quantitative scenarios to assess long-term economic viability. The Value Engineers. https://www.thevalueengineers.nl/what-is-an-ecosystem-business-model/.
