Netflix soars to new heights by jettisoning old business models

Netflix is expected to kiss the 200m subscriber mark by the end of 2020.

Building on what were already astonishing numbers, even more people around the world have flocked to the video streaming service as Covid-19 lockdowns forced them indoors.

While there are no current statistics available for SA, estimates suggest that Netflix could have as many as a million subscribers in the republic next year, with that number expected to double by 2025.

The platform has been nothing short of a phenomenon that has decimated traditional video consumption models.

Originally a DVD and Blu-ray rent-by-mail service, its founders latched onto the transformative powers of the internet early on as others sat back in the hope their past successes would see them through.

But a new book by Netflix co-founder Reed Hastings, in collaboration with internationally renowned business academic Erin Meyer, shows there is far more to the company’s mercurial rise than Golden Globe-winning series and fancy algorithms.

No Rules Rules: Netflix and the Culture of Reinvention, not only describes the tech giant’s growth but explains how this was achieved by throwing corporate convention out the window.

In Silicon Valley and other technology hubs on the planet, ‘disrupter’ is a term used to describe a digital revolutionary, a kind of cool moniker for someone who changes the status quo.

Yet no company has managed to change the way things are done in business the way Netflix has — not even Google.

The book itself is different to the hundreds of ‘How I Made Its’ weighing down the business bargain bin at your local bookstore.

Where these tend to be littered with narcissistic ramblings about what makes this or that CEO special (read Donald Trump’s Art of the Deal), Hastings shares even his smallest secrets.

What becomes clear is that Netflix, while not exactly a free-for-all, is based on freedoms.

One of its standout corporate innovations is the ‘no vacation policy’, which is not at all as it sounds.

Basically everyone within the company, from the CEO to the food delivery practitioner, is allowed to take a holiday whenever they feel the need to — provided, and this is key, it does not jeopardise the interests of the operation.

No tabs are kept on when or how long people are away for, on condition they understand that they have a role to play and perform it at optimum levels.

By Hastings’ own admission, he had sleepless nights when he first introduced the policy in 2003, but as time progressed, he and other senior managers found that it had vastly improved creativity among staff.

The reason is simple: the more people are able to strike a happy homework balance, the more secure and relaxed they feel. Under these conditions, the mind is free to explore new ideas, which, in a company like Netflix, is everything.

Another part of the culture is the expectation that everyone provides candid feedback, regardless of the subject matter.

What Hastings came to understand during the course of his career was that people were often too afraid to confront others for fear of either being called out for insubordination or hurting peers’ feelings.

But that meant that often good ideas were never allowed to see the light of day.

At Netflix, employees are expected to provide feedback, and if they don’t, they are seen as not having the best interests of the company at heart.

That is not to say people can simply go around being critical of others to make themselves appear superior or more competent.

There are strict guidelines in place to ensure whatever is said promotes positive change for the good of the company.

As Hastings puts it, “tell the emperor when he has no clothes”. 

“The higher you get in an organisation, the less feedback you receive, and the more likely you are to ‘come to work naked’ or make another error that’s obvious to everyone but you.

“This is not just dysfunctional but dangerous. If an office assistant screws up a coffee order and no-one tells him, it’s no big deal. If the CFO screws up a financial statement, and no-one dares challenge it, it sends the company into crisis.”

By far and away Netflix’s biggest game-changer is its principle of ‘talent density’. 

If a company is packed to the rafters with exceptional workers whose love of innovation helps it grow, there is no need for traditional policies like disciplinary procedures or banal human resource interventions.

The talent wants to be there to show what it can do, so why adhere to restrictive processes that have become the norm in most firms? 

High performers, Hastings found, also thrive in environments where there are others like them, which again can only be good for a company. Coupled with the freedom to bounce around ideas and give or receive feedback, the stars are able to shine brighter than ever.

These are only some of the lessons contained in No Rules Rules, but there are many more.

The Covid-19 pandemic has necessitated rapid change in the workplace, marking the end of decades-old managerial structures and behaviours.

Those companies that succeed going forward will be the ones that best understand the importance of flexibility and giving their employees what they need to perform at their peak.

Netflix has set the standard.

• No Rules Rules is published by WH Allen, part of the Penguin Random House group of companies.