The Netflix Success Story - Built on Culture Reinvention

Netflix started its journey in late 90’s as a postal DVD rental business. Turned down by its competitor “Blockbuster", Netflix decided to go the IPO route in May of 2002 at a $50mn valuation, the same price it offered Blockbuster for a buyout. Come 2010, within 8 years, Blockbuster was forced into bankruptcy and Netflix orbited into a $200bn club by 2020.

In a limited span of 20 years, Netflix became the world’s largest entertainment company, $100bn short of Disney with 200mn subscribers, a dominant position in 190 countries, 300+ Emmy nominations and multiple Academy Awards.

In 2018, it was also ranked the Best Employer and voted 2nd best “Happiest Employee” of America.

On strategic front, Netflix repivoted and transitioned through four phases of business models:

Postal DVD rentals to streaming of old TV content.
From old TV content to new original content with outsourced model.
From outsourced licensing model to in-house studio with lavish budgets.
From US only company to multi-lingual, multi country, local original content.

One may attribute the above to innovation, strategic thinking and leadership. But, for innovation to breathe, strategic thinking to aromatize and leadership brilliance to prevail, one needs a free-spirited culture. Without this even the best of innovation, sharpest strategic and finest leadership will suffocate and die a million death.

Netflix realised this way early in the game. It achieved all of this with one and only one key “Differentiated Strategy – Building a culture of “Freedom and Responsibility” with focus on “People over Process”. Rest all, is incidental to the process of Netflix becoming the world’s largest entertainment brand.

In my recent articles we talked about concepts such as “Cultural Transformation” “DNA Re-engineering” and “Legacy Paralysis”. Today, through the Netflix model we discuss how and why Culture Re-set is a Pre-condition and The Holy Grail to Business Transformation.

Netflix’s Culture Reinvention is built on three basic pillars, well documented principles with fair bit of detailing and action orientation. However, for lack of time we share the core belief supporting each pillar.

Talent Density (secret to 1/10th the workforce and 10x efficiency)

Netflix realised a fast and innovative workplace is made of “Stunning Employees”- defined as highly talented people who are exceptionally creative, purpose-driven, passionate, and collaborative. These high performers thrive in environments where overall talent density is high (more talent per employee). The moment you put average, non-committed, depressive people along with stunning performers the performance of the team and eventually that of the organizations drops by 30%-40%.

Netflix’s talent density philosophy is based on the belief, performance, good or bad is contagious, therefore “Do everything to maintain a high talent density, hire the very best, pay top dollar, coach managers to have courage and discipline to get rid of average-ers and be laser focused on hiring and retaining high performers right from receptionist to top executives”.

Candor - what you see is what you get (be open, honest, frank- else leave)

Netflix philosophy “If you fail to speak when you have an opinion or when you disagree you are being disloyal to the company. Continuous, anytime and every time feedbacks avoid misunderstanding, they create a climate of co-accountability and reduce the risk of hierarchy and rules”.

Of course, there are challenges implementing this, Netflix therefore invests in training and coaching to “address, accept, appreciate & action” on such feedbacks. It starts with employee to boss feedback, placing feedback as an agenda in every meeting, post feedback letting employees feel safe, trusted, endorsing a sense of belongingness and ownership. May sound cliché but Netflix swears by these and I personally believe it kills the conventional, most regressive and unproductive culture, "office politics", I find this disgusting and energy sapping and the biggest reason why stunning performers leave and averagers thrive (this is my belief, not quoted by Netflix).

You may like this: How Changing Culture Can Boost Employee Engagement

No Controls (stunning employees perform better when unleashed)

Once you have the above two in place now, you are ready for a culture of “Freedom and Responsibility”. Netflix philosophy “With a climate of candor, the boss is no longer the primary individual to correct, the entire community openly speaks about this and does not warranty detailed and continuous supervision. With candor high performers become outstanding performers. Frequent feedback exponentially magnifies the speed and effectiveness of your workforce”. There is no surprise during performance reviews.

So, how does Netflix unleash the culture of freedom and responsibility?

“Tear-off pages from employee handbook. No travel policies, expense policies, vacation policies. Lead with context, not control. Don’t seek to please your boss. Stunning employees have great judgement. Treat employees as grownups.”

This is based on the principle, high performers rarely consume their vacation and leave entitlements. My personal take, limits on travel and expenses lead to an opportunity loss. It does not feed the spirit of entrepreneurship. Also, high performers are too loyal to allow any wasteful expenditure or organizational inefficiencies in any form. Treating them as adults with a culture of “co-owners” changes everything.

Read more : The Six Pillars of Vibrant Workplace Culture

Netflix to me is the demi-god of “Business Innovation, Transformation and Re-invention through Culture Revolution”. In today’s fast paced digital transformation age, creativity, agility and speed are the bedrock of survival and growth. In today’s time the biggest risk is not making mistakes but failing to attract and retain best talent, to invent new products, innovate business models, pivot and re-pivot and build in an environment of entrepreneurship, agility and nimbleness to adapt and re-adapt. Each of these can prevail only in an environment of “Freedom with Responsibility” and prioritizing “People over Process”. "Building a pool of talent that is innovative, fast and flexible, keeping things a little loose, operating a little closer to the edge of chaos, embracing constant change". Creative talent and Enterprising culture are interdependent. Replace one, underplay the other and be prepared for a crash landing.

This article was also published on Raj Grover’s LinkedIn

Don't leave just yet! Watch this video and listen to what the employees of Netflix have to say about "Freedom with Responsibility". This is just awe-inspiring!!