OIM 210 Exam #2 (Netflix, Moore's Law, Disruptive Technologies)

Professor Nora Junaid 2025-2026 UMass Amherst

What is a disruptive technology?

A technology that starts with features mainstream customers don’t value but improves to overtake dominant products.

Who introduced the idea of disruptive technologies?

Clayton Christensen.

What company is a classic example of disruption failure?

Kodak.

What was Kodak’s market share at its peak?

About 90%.

Why did Kodak fail?

It ignored digital photography because it threatened its profitable film business.

What happened to Kodak after digital disruption?

It went bankrupt and sold assets to survive.

What are the two main traits of disruptive technologies?

Initially poor performance and later rapid improvement that invades established markets.

Why don’t big firms invest in early disruptive technologies?

Customers don’t want them yet, and margins are low.

What are sustaining innovations?

Incremental improvements that help existing customers.

What is a “value network”?

The system of customers, suppliers, and partners that defines how a firm delivers value.

How are early customers of disruptive tech different?

They belong to a different value network than incumbents’ customers.

When do big firms realize disruption is a threat?

When new tech becomes good enough to attract mainstream customers.

Why do executives at large firms make rational decisions that lead to failure?

They focus on serving existing customers and maximizing profits.

Why do disruptive technologies often seem unattractive early on?

They perform worse and have smaller markets with weak profits.

How can firms detect potentially disruptive innovations?

Track cheap, fast-improving technologies and talk to innovators.

What is the importance of “technology trajectories”?

They show how quickly tech improves in performance and affordability.

What type of people can alert firms to disruption early?

Top researchers, venture capitalists, and passionate employees.

What does “Don’t fly blind” mean for managers?

Stay aware of emerging technologies beyond current customer needs.

Why are cross-team conversations valuable?

They connect business and technical insights to spot innovation trends.

Why might an employee leaving to start a tech firm be significant?

It could signal a disruptive opportunity worth watching.

What is Moore’s Law?

the principle that the speed and capability of computers can be expected to double every two years, result of increases in # of transistors a microchip can contain

Who is Moore’s Law named after?

Gordon Moore, cofounder of Intel.

What does Moore’s Law apply to?

Chips—mainly processors and storage.

What is a microprocessor?

The part of a computer that executes program instructions.

What is RAM?

Volatile chip-based memory for active processing.

What is flash memory?

Nonvolatile storage that retains data when power is off.

Why are chips called “solid state”?

They have no moving parts and draw less power.

How often does data storage capacity double?

Every 12 months.

How often does optical fiber data transmission double?

Every 9 months.

What is price elasticity in tech?

Demand increases as prices drop.

What are the six waves of computing?

Mainframe, minicomputer, PC, Internet, mobile, and pervasive computing.

What defines the era of pervasive computing?

Tech is embedded everywhere and cheap.

Give examples of pervasive computing.

RFID tags, smart speakers, robot vacuums, wearables.

What limits Moore’s Law physically?

Size, heat, and power issues as chips shrink.

Why do smaller chips generate more heat?

Tighter electron packing causes overheating.

Why do data centers need cooling?

To prevent processor meltdowns.

What is cloud computing?

Renting computing services online instead of owning hardware.

What are main benefits of cloud computing?

Scalability, cost savings, and reduced maintenance.

What is latency?

The delay between sending and receiving data.

Why is latency a concern in the cloud?

Some applications need instant responses.

What is e-waste?

Discarded electronics from rapid tech turnover.

What materials can be recovered from e-waste?

Silver, platinum, copper, plastics, and aluminum.

What drives e-waste growth?

Rapid obsolescence due to Moore’s Law.

Why is recycling e-waste challenging?

It’s complex and costly to separate valuable materials.

What are examples of new tech using fast, cheap chips?

Amazon Go, wearables, smart home devices.

Who is Netflix’s cofounder and CEO?

Reed Hastings.

Why is Netflix studied in business and tech?

It shows how technology creates lasting competitive advantage.

What are Netflix’s two business “acts”?

DVD-by-mail and streaming.

Why did Reed Hastings face criticism early on?

Investors doubted the sustainability of the DVD model.

What major transition did Netflix face?

From physical DVDs (“atoms”) to digital streaming (“bits”).

Who are Netflix’s major streaming competitors?

Amazon, Apple, HBO, Warner, ViacomCBS, Comcast, and others.

What strategic assets helped Netflix dominate?

Brand, scale, and a powerful data asset.

What was Hastings’s biggest regret?

Taking Netflix public too early.

Why was going public risky for Netflix?

It revealed profitability and attracted competitors like Blockbuster and Walmart.

How did Netflix build a strong brand?

By providing top-rated customer experience.

Why did Blockbuster and Walmart fail to compete?

They lacked Netflix’s distribution scale and customer focus.

How many Netflix distribution centers existed at peak DVD era?

Fifty-eight centers.

What percentage of the U.S. population could Netflix reach overnight?

97%.

What is the “long tail” concept?

The idea that niche products collectively make up a big market.

How many DVD titles did Netflix offer vs. stores?

Netflix had ~125,000 vs. ~3,000 in stores.

What software powers Netflix’s recommendations?

Cinematch.

What type of algorithm is Cinematch?

Collaborative filtering.

How does collaborative filtering work?

It analyzes user ratings to suggest similar content.

What is churn rate?

The percentage of customers who cancel a service.

How does Cinematch reduce churn?

By personalizing recommendations and improving satisfaction.

What operational benefit does Cinematch offer Netflix?

It favors in-stock titles to minimize wait times.

What are fixed vs. marginal costs?

Fixed = one-time setup costs; Marginal = cost per additional unit.

What is the marginal cost of digital goods?

Almost zero.

What is “coopetition”?

When rivals also cooperate—Netflix uses Amazon’s cloud but competes with Amazon Prime Video.

What is the First Sale Doctrine?

Legal rule allowing resale of physical media but not digital streaming.

Why can’t Netflix freely stream purchased DVDs?

Streaming requires separate licensing rights.

Why are streaming licenses expensive?

Few studios control most content—creating supplier power.

How many firms control 90% of U.S. media?

Six.

What is windowing in media distribution?

Offering content to certain channels for limited time periods.

Why won’t HBO license content to Netflix?

It competes directly with HBO’s own service.

What deal did HBO make instead?

Licensed limited back-catalog content to Amazon for $300M.

Why is the “long tail” harder in streaming?

High costs and licensing limits prevent full catalogs.

What is the “long-enough tail”?

Offering enough variety to satisfy most viewers even without every title.

What is Netflix’s pricing model?

Single monthly subscription, no ads or pay-per-view.

How does Netflix’s simplicity differ from rivals?

Competitors offer tiered or ad-supported pricing; Netflix keeps it flat.

What event damaged Netflix’s brand temporarily?

The pricing split and failed “Qwikster” launch.

How did Netflix recover from that failure?

By refocusing on streaming and user satisfaction.

Why is scale critical for streaming firms?

Larger user bases enable higher content spending and better deals.

How does Netflix outperform Amazon despite Amazon’s resources?

Netflix’s user engagement is about five times higher.

Why is growth itself a competitive advantage for Netflix?

More subscribers = more revenue = stronger position in licensing deals.