Speaking to MPs on the Public Accounts Committee he said the BBC’s role “is not to beat Netflix”.
“We need to do something radically different,” he said.
Mr Davie added: “We are differently shaped. We always have sat alongside competitors.
“The issue is the BBC needs to be highly distinctive, whether that be Bitesize education provision, locally made drama.
“I remain optimistic that we can retain reach and retain our value.”
He said the BBC is “coming from a different point of view” to streaming services.
“We are not trying to make a paid subscription business work,” he said.
He added: “We have a different purpose. I’m not running a business for profit, I’m running… an organisation for purpose.”
Mr Davie added that “certain groups” are engaging less with the BBC than they were previously.
“They may be going elsewhere and doing different things. That is something we should be conscious of,” he said.
“That’s why we want to make sure representation across the country is there, we want to make sure we have got the right local provision.
“These things are critical in terms of holding up support of the BBC.”
Mr Davie added he thinks there is “real potential” for the BBC to expand commercially in the US.
He said he would like to see “further premium products” made for the American market.
“I think that remains an exciting area of opportunity,” he said.
During the committee session the BBC’s chief operating officer, Glyn Isherwood, also revealed the broadcaster’s income from the over-75s will be more than £400 million this year.
The universal right to a free TV licence ended last year for the age group and only those in receipt of pension credit do not have to pay.
Mr Isherwood said implementing the new policy has cost £65 million.
Last week Mr Davie said over-75s will not be threatened with legal action over non-payment of the licence fee.
