2. Quick Netflix Overview Netflix is the world’s largest subscription viewing service for streaming movies and TV episodes over the Internet and DVDs by mail. Netflix, founded in 1997, has changed the nature of the in-home entertainment market through it’s proprietary recommendation and rating system and subscription plans with no due dates or late fees. The company believes that continuous success means continuous growth in revenue, profit, and reputation. To foster this, Netflix believes in a culture that supports rapid innovation and excellent execution, effective teamwork and high-performance people, and a culture that avoids rigidity, politics, mediocrity, and complacency
3. Netflix’s Nine Valued Behaviors & SkillsThese will all be represented within the four quadrants of the Competing Values Framework
4. With the right people, instead of a culture of process adherence, there’s a culture of freedom and responsibility, innovation and self-discipline
5. Green Quadrant The green quadrant is fundamental at Netflix. The company changed the way viewers watch and rent movies. It started when they anticipated the shift from VHS to DVDs, and they are constantly looking for market shifts in demand for new products.
6. Leaders Reed Hastings, CEO/Co-Founder Founded company during time when DVDs only had a US household representation of 5% Saw an under-represented market & created a new movie watching platform for home viewers Neil Hunt, Chief Product Officer Consistently encourages his website team to produce breakthrough innovations Created the Netflix rating system for subscribers Constantly updating and renewing the Netflix website to become easier for customers Ted Sarandos, Chief Content Officer Realized early that Netflix had value in the monthly subscriptions and featuring smaller/independent films instead of hit movies because no one had done it before Recognized as an innovator in film acquisition and distribution
7. Organizational Culture Increase, not limit, employee freedom as Netflix grows Continue to attract and nourish innovative people Employees are encouraged to think outside the box and strategize change, while envisioning new market demand Netflix has developed a culture of freedom, responsibility, innovation and self-discipline by hiring the “right people” to work there 1 of the 9 Netflix Values Represented Curiosity: learn rapidly & eagerly; help outside of specialty Innovation: re-conceptualize issues; create new ideas that prove useful
8. Business Outcomes Netflix has been able to capitalize on being an innovator in many areas, leading the way for competitors to follow
9. We’re a team, not a family. We’re like a pro-sports team, not a kid’s recreational team. Coaches’ job at every level of Netflix is to hire, develop, and cut smartly.
10. Blue Quadrant Netflix’s beginnings were filled with short-term goals to allow them to become innovators of their market. Now, they continue their blue structure with their constant intent to increase their subscriber base.
11. Leaders Leslie Kilgore, Chief Marketing Officer Believes success comes with strong products are combined with superior value Grew Netflix subscriber base from under 100,000 to 12.3 million in 9 years While marketing tends to be more “green,” Leslie’s position has focused mostly on goal attainment and creating shareholder value David Wells, Chief Finance Officer Focuses on strategic planning and analysis Extremely “blue” focus with finance; he creates and aims to exceed set financial goals and maintains a strong profit focus in his position
12. Organizational Culture Netflix pays their employees at the top of the market – this is core to obtaining their high-performance culture The follow a motto that “one outstanding employee gets more done and costs less than two adequate employees – we endeavor to have only outstanding employees” At Netflix, hard work is not directly relevant, it’s about effectiveness and getting work done as efficiently as possibly They value growth & being the first ones there 1 of the 9 Netflix Values Represented Impact: accomplish amazing amounts of important work; focus on results Courage: make tough decisions without excessive agonizing; take smart risks
13. Business Outcomes Netflix maintains a profit focus and, since it went public in 2002, has been driven to deliver shareholder value.
14. “There is also no clothing policy at Netflix, but no one has come to work naked lately” – Patty McCord, Chief Talent Officer
15. Red Quadrant While Netflix is not an inherently “red” company, the organizational culture is very metrics driven. They have established a culture that promotes freedom and openness, while removing all policies. Netflix has two rules: prevent irrecoverable disaster and adhere to moral, ethical and legal issues.
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19. Business Outcomes (From the first paragraph in the 2010 Q4 Letter to Shareholders) In addition to the traditional metrics reported in annual reports (i.e., profit, ROA, operating income, etc.), Netflix provides its own unique metrics (i.e., subscriptions, etc.) showing where the company places value
20. The best managers figure out how to get great outcomes by setting the appropriate context, rather than by trying to control their people.
21. Yellow Quadrant Netflix’s employee strategy is to provide employees with freedom to grow and nourish innovations that breed long-term success. They also value teamwork over individuality, and thus possess strong yellow tendencies.
25. Bottom-line Value Netflix provides an environment that fosters talent and does not stifle creativity or freedom.
26. How can Netflix Improve? They may need to add some “red” Netflix, so far, has intentionally been avoiding the red quadrant. While this is currently working for them, as the company continues to expand, it may find itself in unforeseen legal issues. Eventually, some policies may be necessary to insure their culture is replicable in all locations. They cannot become complacent Although they’ve yet to do so, Netflix cannot stop conducting market research. They need to be consistently on the lookout for the next big customer demand.
27. “There’s usually room in a marketplace for more than one, but in this case there really isn’t” – Michael Pachter (Wedbush Morgan Securities analyst)
