Wednesday, November 25, 2015

Hulu: Large Companies in Blue Ocean

Clayton Christensen’s Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, he specified that most large companies have difficulties dealing with disruptive technologies. The small markets that stem from disruptive technologies do not solve the growth needs of large companies; therefore, these companies often fail to pursue emerging markets.

Although large companies traditionally do not fare well in emerging markets, the success of Hulu tells a conflicting story. A joint venture by NBC Universal, Fox, and Disney-ABC, Hulu is the epitome of disruptive technology (Callahan).  Hulu provided a new way for viewers to consume media content through streaming services, which took away market share from the traditional broadcasting networks and cable subscriptions (Nathanson). Ten months after its debut, Hulu became the sixth most visited online video viewing website and has captured two percent of all videos viewed (Callahan).

One of the main reasons that Hulu was able to break out of the principles laid by Christensen is Hulu acted as an independent company. Hulu took the core assets from its parent companies, but not their business models and culture (Callahan). When Hulu first started, Fox and NBC Universal recruited an outside CEO, Jason Kilar, for the venture (Callahan). As the CEO, Kilar shaped Hulu’s business model to meet the innovative content approach and distanced the venture from its corporate parents (Callahan). This allowed Hulu to strategize according to the blue ocean. If Hulu were to follow Fox and/or Universal’s approaches, it will be confined to red ocean strategies, failing to capture the right audience.

Hulu’s business model is a strong indicator that although large companies might not do well in small emerging markets, they could potentially spin off another company specifically for it. There are multiple advantages to spinning off an independent subsidiary. As an independent subsidiary, the company does not have to follow the traditional business models of large corporations; it can formulate new business models that best fit the emerging market. The subsidiary will still be able to receive a high degree of financial support and/or core assets from its parent company. This aligns with W. Chan Kim’s blue ocean strategy – incumbent creating blue oceans within its core business. Additionally, subsidiaries are more flexible, as it can invent the branding to tailor to the market.

Market leaders might disregard disruptive technologies, because blue oceans are seemingly less profitable. However, big companies should not limit themselves. Hulu is a prime example of large corporations venturing into blue oceans with disruptive technologies. This move has helped Fox, NBC Universal, and Disney-ABC capture a new audience and increase their revenues. Instead of shying away from unknown territory, companies should investigate new technologies and, potentially, grow an emerging market into a new profitable industry.

Callahan, Renee. "Hulu Is A Big Hit." Forbes. Forbes Magazine, 22 Jan. 2009. Web. 25 Nov. 2015.
Christensen, Clayton M. "Introduction: Why Good Companies Fail to Thrive in Fast-Moving Industries." The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Boston: Harvard Business School, 1997. Print. 
 Kim, W. Chan, and Renee Mauborgne. "Blue Ocean Strategy." Harvard Business Review 1 Oct. 2004. Print. 
Nathanson, Jon. "Hollywood Is Just Like the Roman Empire—but Not for the Reasons You Think." Slate, 11 Feb. 2014. Web. 25 Nov. 2015. 

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