Saturday 17th October 2020
By Thomas Badtke
Netflix starts as a DVD rental. Around 20 years later, the streaming service is the most valuable media company in the world, has won Emmys and Oscars and is worth more than 200 billion on the stock exchange. Founder and CEO Hastings now reveals the reasons for this success.
In 2000, blockbuster is synonymous with home theater. The US group is worth six billion dollars, operates almost 9,000 branches worldwide and employs around 60,000 people. “Blockbuster is 1000 times bigger than us,” said Reed Hastings at the time, founder and head of Netflix, a DVD rental company by mail. In 2000, Netflix had around 100 employees, a good 300,000 subscribers and was in the red. Hastings therefore wants to sell Netflix to Blockbuster in order to then build blockbuster.com as an online video rental platform. Blockbuster refuses. The price of 50 million dollars demanded by Hastings is too high for the top dog.
And how does it look today? Today, in 2020, there are no more blockbusters. The group filed for bankruptcy in 2010. He missed the jump from renting DVDs to streaming. Netflix, on the other hand, is the new biggest player in the entertainment and media sector worldwide: Netflix produces series and films itself, wins Emmys and Oscars with them – and is used by more than 175 million customers in over 190 countries worldwide. On the stock exchange, Netflix is worth more than 200 billion, more than Walt Disney with its “Star Wars” and “Avengers” series.
A question of corporate culture
Netflix has succeeded in what Blockbuster failed to do: successfully respond to massive upheavals in the industry, adapt, reinvent and grow. And Netflix has done it several times: the transition from DVD rental by post to streaming old TV series over the Internet; the transition from streaming old content to original productions like “House of Cards” that were taken over by outside film studios; the transition from broadcasting licensed products from outside film studios to setting up our own studio producing award-winning series and films such as “Stranger Things”; and the transition from a US-based company to a global company providing entertainment to viewers in more than 190 countries.
The key to this was defining our own corporate culture. It applies equally to Netflix in the US, Europe and Asia. The focus is on three points: talent density, openness and complete transparency.
For Hastings it is clear: “Talented people make each other better”. The more highly talented employees a company in the creative sector has, i.e. the higher the talent density in the company, the more successful it is. Everyone wants to work for a company with a high density of talent. The motivation increases, the work ethic increases. The work goes faster, successes come more often. “Performance is contagious,” says Hastings.
FC Bayern Munich is an example of the high density of talent and performance: every self-respecting player wants to play there because he knows that he will find excellent conditions there to develop himself further. Every player knows that he will meet other highly talented players there and the more of these players a team has, the better the chances of success: championship, double, triple, Supercup. In the end, the success of the FC Bayern Munich team also falls back on every single player who benefits from it: national team, higher salary, different offers.
Culture of openness
At Netflix, however, the company principle of openness also applies. For Hastings this means above all: direct and constructive feedback, both positive and negative, helps to accelerate work processes, to improve them and ultimately to be more successful. Problems are addressed directly. There should be no “behind-the-back whispering” at Netflix. “Say what you really think with a positive attitude,” said Hastings. “Just say something about someone that you would say to their face.”
Open expressions of opinion and constructive feedback remove the ground from political intrigue. The more often employees hear about areas in which they can improve, the better they do their work afterwards – the better the company works. The principle of openness applies not only to employees of equal status, but also from bottom to top. At Netflix, every normal employee can speak to Hastings and give feedback on memos, speeches or other – it doesn’t matter whether it is positive or negative, it just has to be constructive. “Tell the emperor when he’s not wearing clothes,” says Hastings, referring to the fairy tale “The emperor’s new clothes”.
Elimination of control mechanisms – complete transparency
And if you think now: If I really give my boss my opinion, I can pack my things straight away and fly out on edge – that’s wrong, at least with Netflix. Because in addition to talent density and openness, complete transparency is a cornerstone of corporate culture. According to Hastings, the prerequisite for complete transparency is the abolition of rules: Regulations for travel? Expenses? Expenditure? Vacation? Doesn’t exist on Netflix. This is intended to instill confidence that employees are doing the right thing. This in turn should increase the sense of responsibility of every individual and also the feeling of belonging to the company.
At Netflix, this also means that the company makes its quarterly figures available to all interested employees in advance before they are presented to Wall Street – with the only but unmistakable indication that disclosure or insider trading will result in prison sentences.
There is only one rule
These are three essential points of the corporate culture prevailing at Netflix, which the founder and boss Hastings and the management icon Erin Meyer have presented in book and audio book form. The title says it all: “No rules”. According to Hastings, there is only this one rule at Netflix – and that is why the company is more successful than ever, is worth more than Disney on the market, is now a guarantee for awards at Emmys and Oscars, loved by fans and even admired by critics.
“No rules” is not a dry management handbook for successful business. Rather, it is a textbook for everyone who wants to be successful: small start-ups, large corporations, entrepreneurs, employees, freelancers. Everyone finds something to make themselves or the company more successful. There are lessons, examples, summaries, interviews with Netflix employees – and there is a lot of interesting information in everything: Netflix pays according to the “rock star” principle or uses the so-called keeper test to find out whether an employee still meets the company’s requirements enough. At the end of “No Rules” every reader is as clear as day: The next upheaval in the industry can come, and Netflix will emerge stronger than before.