Everyone we tested the idea on loved it. But at Sky, everything had to be approved by the CEO. The CEO was the one person who didn’t get it. He killed that idea in about three and a half minutes.
Paolo was hired at Netflix to promote shows to Italians. The popular Netflix original Narcos was one series he was sure would be a big hit. It’s the story of the Colombian drug lord Pablo Escobar. Pablo is handsome, with 1980s coiffed hair and a bushy mustache. “Despite all the deplorable things he does you find yourself rooting for him,” explains Paolo. “Italians—who love Mafia shows—were going to love it. Over dozens of wakeful evenings pacing in my flat, I developed a plan for how to get all of Italy hooked. It was so clear to me I could taste it. It would be expensive, and I’d need to use all of the Italy marketing budget.”
But Paolo wondered if his new boss, vice president of marketing Jerret West, an American living in Singapore, would agree with his idea. Would he get management approval to move ahead?
Jerret was coming to Amsterdam. I’d spent weeks now on this proposal and, if he shot it down, it would all be a waste. Monday, Tuesday, Wednesday, I worked day and night writing the most convincing argument I could put to paper. Noon on Thursday I put it in an email addressed to Jerret. Before I sent the email, I whispered to my computer, “Please let Jerret say yes.”
The day of the meeting I was so nervous I had to put my hands in my pockets to stop them shaking. But Jerret spent most of the meeting talking about hiring challenges. I could barely listen I was so stressed. I took a big breath and jumped in. “‘Jerret, I want to make sure we have time to discuss my Narcos proposal.”
Paolo couldn’t believe Jerret’s response:
“Did you have elements you wanted to discuss? It’s your decision, Paolo. Is there something I can do to help?” It was one of those light bulb moments: I got it! At Netflix, if you share all the context of your decision, you’ve done the groundwork. You don’t need approval. It’s up to you. You decide.
People desire and thrive on jobs that give them control over their own decisions. Since the 1980s, management literature has been filled with instructions for how to delegate more and “empower employees to empower themselves.” The thinking is exactly what we’ve heard from Paolo. The more people are given control over their own projects, the more ownership they feel, and the more motivated they are to do their best work. Telling employees what to do is so old-fashioned, it leads to screams of “micromanager!” “dictator!” and “autocrat!”
But at most organizations, no matter how much autonomy is given to employees to set their own objectives and develop their own ideas, nearly everybody agrees that it’s the boss’s job to make sure his team doesn’t make stupid decisions that waste money and resources. And if you happen to be the boss, Reed’s mantra, “Don’t seek to please the boss,” can be not just odd but downright frightening.
YOU’VE GOT HIGH TALENT DENSITY AND CANDOR: ARE YOU READY TO REALLY RELEASE CONTROLS?
Imagine this scenario. You land a plum management position at a fast-paced, cutting-edge company. You’re paid well, and you’re handed a team of five highly experienced, hardworking direct reports. It’s all good . . . except for one small caveat. This company is known for hiring only the very best and for firing those who don’t do great work. You feel immense pressure to succeed.
Now, you are not a micromanager. You know how to get things done without leaning over your team members’ shoulders and telling them which pen to pick up and which phone call to make. In fact, you were celebrated for your empowering leadership style in your last job.
One morning a team member, Sheila, comes to you with a proposal. She’s got an innovative idea for how to move the business forward and she wants to abandon the project you’ve suggested for her. You’ve been impressed with Sheila, but this idea, you believe, is going to flop. If you allow her to spend four months working on a project you feel is likely to fail, how’s that going to make you look to your own boss?
You explain, with passion, all the reasons you’re against the idea. But you’ve been trying to empower your staff more, so you leave the decision in Sheila’s lap. She thanks you and says she will consider all your points. A week later Sheila sets up another meeting. This time she says, “I know you disagree, but I’m going to follow this new idea because I think it will lead to greater gains. Let me know if you want to specifically override my decision.” What are you going to do?
At this point, the plot of the imaginary scenario thickens. After a couple of days, another employee comes to you with an idea he wants to spend half of his time working on. You are certain that this too is going to bomb. And then, a few days later, a third person pops up with a similar request. You care about your own career and you care about the careers of your employees, so you can’t help but feel the very strong tug to tell them these are not the initiatives they are going to be working on.
* * *
• • •
Our mantra is that employees don’t need the boss’s approval to move forward (but they should let the boss know what’s going on). If Sheila comes to you with a proposal you think is going to fail, you need to remind yourself why Sheila is working for you and why you paid top of the market to get her. Ask yourself these four questions:
Is Sheila a stunning employee?
Do you believe she has good judgment?
Do you think she has the ability to make a positive impact?
Is she good enough to be on your team?
If you answer NO to any of these questions, you should get rid of her (see the next chapter where we’ll learn that “adequate performance gets a generous severance”). But if your answer is yes, step aside and let her decide for herself. When the boss steps out of the role of “decision approver,” the entire business speeds up and innovation increases. Remember all the time Paolo spent preparing to get Jerret’s approval to implement his new idea? If Jerret had nixed the initiative, Paolo would have had to kill a proposal he believed in and start exploring other paths. All the time he’d invested, not to mention a great idea, would have been wasted.
Of course, not all decisions your people make will succeed. And when the boss moves aside from vetting judgment calls, it’s likely they’ll fail more often. That’s precisely why it’s so hard to let Sheila go ahead with her idea, when you think it won’t work.
WHAT WE DRINK AT NETFLIX
A few years ago I was attending a conference in Geneva. Sitting at the bar, I overheard two CEOs chatting about the challenge of innovation. One was a Swiss guy who runs a sporting goods company. “One of my managers suggested putting a Rollerblade lane in our stores to pull young clients away from online competitors,” he said. “We need this type of fresh thinking in our company. But no sooner had she made the suggestion than she began to retract it. We wouldn’t have space! It would be too expensive! It might be dangerous! In two minutes, she’d completely dismissed the entire idea. She never brought it to her boss for input. Everyone in our company is so risk-averse! Innovation doesn’t have a chance.”
The other CEO, an American fashion retailer, nodded: “We have banners hanging in our cubicles that read Ten minutes to innovate. Our problem is that we’re all working too hard to have time to think up new ways to do things. So I’m trying to give everyone time to just think. We’re going to start ‘Innovation Fridays’ when, one day a month, all employees will do nothing but come up with great ideas. We work all day long in the world of Google, we buy stuff from Amazon, listen to music from Spotify, take Uber rides to Airbnb apartments, and spend our evenings watching Netflix. But we can’t figure out how these Silicon Valley companies move so fast and innovate so quickly.”
“Whatever they’re drinking at Netflix,” he concluded, “that’s what we need to be drinking.”
That was a funny thing to overhear. What are we drinking at Netflix? Our employees are good,
but when they enter the company they are just as concerned about minimizing failure as the woman with the roller-rink idea. We don’t have innovation Fridays, or innovation banners. And our employees are busy, just as busy as that guy from the fashion retail business.
The difference is the decision-making freedom we provide. If your employees are excellent and you give them freedom to implement the bright ideas they believe in, innovation will happen. Netflix does not operate in a safety-critical market, like medicine or nuclear power. In some industries, preventing error is essential. We are in a creative market. Our big threat in the long run is not making a mistake, it’s lack of innovation. Our risk is failing to come up with creative ideas for how to entertain our customers, and therefore becoming irrelevant.
If you hope for more innovation on your team, teach employees to seek ways to move the business forward, not ways to please their bosses. Coach your staff to challenge their managers exactly like Sheila did: “I know you disagree, but I’m going to follow this new idea because I think it will lead to greater gains. Let me know if you want to specifically override my decision.” At the same time, teach your leaders not to override decisions like Sheila’s, even in the face of their own skepticism and long experience of what has worked in the past. Sometimes the employee will fail, and the boss will feel like saying, “I told you so” (but, she won’t!). Sometimes the employee will succeed despite the boss’s reservations.
A great example comes from Kari Perez, a director in our communications department responsible for building Netflix brand awareness across Latin America. Kari is from Mexico but lives in Hollywood:
It was late 2014 and Netflix was still pretty unknown in Mexico. I had a vision for how to change that. I wanted to present Netflix as the champion of local Mexican content, even though we didn’t have any original Mexican shows yet.
The idea was to nominate ten big Mexican movies from that year—with famous Mexican directors and starring local celebrities. We would also select a ten-person, all-Mexican jury of celebrities like Ana de la Reguera (the telenovela star turned Narcos actress) and Manolo Caro (the superstar director who had recently appeared on the cover of Vanity Fair in a wrinkled tuxedo, lying between two beautiful actresses) with the goal of making our brand more relevant to the audiences that these celebrities influenced.
The celebrities from the movies and jury panel would lobby on social media for their favorite movies, encouraging everyone to vote on Twitter, Facebook, and LinkedIn. The two films with the most votes would win a one-year international distribution contract with Netflix. We would finish up with a big party inviting all the who’s who of Mexico.
But my boss Jack hated the idea. Why spend all that time and money on movies that Netflix hadn’t even made? Worse, we’d tried something similar in Brazil, partnering with film festivals, and that hadn’t gotten any real traction. Jack kept stating publicly, in meetings, that if the buck stopped with him, we would do it over his dead body.
But I believed in it. I was ready to make that bet and, if it failed, I’d be responsible. I listened carefully to Jack’s concerns and decided to work with local influencers and vendors instead of film festivals, to avoid a repeat of the Brazil fiasco. Of course it’s scary to move forward when you know your boss thinks you’re making a bad decision.
I needn’t have worried. The press conference for the launch and closing events of the contest were packed with press and Twitter exploded with the competition in the weeks leading up to the event. The celebrity jury panel pushed the message like crazy via Facebook and Twitter. Producers, directors, and actors also launched their own campaigns, which positioned Prêmio Netflix as a critical platform for the independent Mexican film industry.
Thousands of people voted. It was a pivotal moment for us. Suddenly everyone knew the Netflix brand. I knew it had been a success at the awards party when high-profile influencers arrived, including the Mexican president Enrique Peña Nieto’s daughter, and then one of the most famous Mexican actresses alive, Kate Del Castillo, showed up on the red carpet—brought in on a private plane hired by none other than my (no longer reticent) manager!
Jack stood up in front of everyone at the next team meeting and announced that he’d been absolutely wrong: that had been one great campaign.
In order to encourage our employees like Kari and their managers like Jack to shift their mind-set in the direction of experimentation, we use the image of placing bets. This motivates employees to think of themselves as entrepreneurs—who typically don’t succeed without some failures. The examples of Kari and (from a few pages back) Paolo reflect everyday life at Netflix. We want all employees taking bets they believe in and trying new things, even when the boss or others think the ideas are dumb. When some of those bets don’t pay off, we just fix the problems that arise as quickly as possible and discuss what we’ve learned. In our creative business, rapid recovery is the best model.
STEPS TO TAKE BEFORE (AND AFTER) YOU PLACE YOUR BET
Bet-taking has been linked to entrepreneurship for decades. In 1962, Frederick Smith wrote a paper for his economics class at Yale outlining the idea for an overnight delivery service. The idea was that you could put a package in the mail in Missouri on Tuesday and, if you paid enough, it would arrive in California on Wednesday. According to legend, Smith received a C on the paper and his professor told him that in order to get a better grade, the idea had to be feasible. If Smith’s professor had been Smith’s boss, he would certainly have put the kibosh on the whole innovation.
Smith, however, was an entrepreneur, and that Yale paper became the basis for FedEx, which he founded in 1971. He was also a betting man: once, in the early days of FedEx, after a bank had refused to extend a crucial loan, he took the company’s last $5,000 to Las Vegas and won $27,000 playing blackjack to cover the company’s $24,000 fuel bill. Of course, Netflix doesn’t encourage its staff to go to casinos, but it does seek to instill some of Fredrick Smith’s spirit into the workforce. As Kari remembers:
When I started at Netflix, Jack explained to me that I should consider I’d been handed a stack of chips. I could place them on whatever bets I believed in. I’d need to work hard and think carefully to ensure I made the best bets I could, and he’d show me how. Some bets would fail, and some would succeed. My performance would ultimately be judged, not on whether any individual bet failed, but on my overall ability to use those chips to move the business forward. Jack made it clear that at Netflix you don’t lose your job because you make a bet that doesn’t work out. Instead you lose your job for not using your chips to make big things happen or for showing consistently poor judgment over time.
Jack explained to Kari, “We don’t expect employees to get approval from their boss before they make decisions. But we do know that good decisions require a solid grasp of the context, feedback from people with different perspectives, and awareness of all the options.” If someone uses the freedom Netflix gives them to make important decisions without soliciting others’ viewpoints, Netflix considers that a demonstration of poor judgment.
Then Jack introduced Kari to the Netflix Innovation Cycle, a framework she could follow in order to make the bets most likely to succeed. The principle of “don’t seek to please your boss” works best if employees follow this simple four-step model.
The Netflix Innovation Cycle
If you have an idea you’re passionate about, do the following:
“Farm for dissent,” or “socialize” the idea.
For a big idea, test it out.
As the informed captain, make your bet.
If it succeeds, celebrate. If it fails, sunshine it.
INNOVATION CYCLE STEP 1: FARM FOR DISSENT . . .
The premise of farming for dissent came out of the Qwikster debacle, the biggest mistake in Netflix history.
In early 2007, we offered one service for ten dollars that was a comb
ination of mailing DVDs and streaming. But it was clear that streaming video would become of increasing importance while people would watch fewer and fewer DVDs.
We wanted to be able to focus on streaming, without DVDs distracting us, so I had the idea to separate the two operations: Netflix would stream, while we created a new company, Qwikster, to handle the DVD market. With two separate companies, we would charge eight dollars for each service separately. For customers who wanted both DVDs and streaming, it meant a price hike to sixteen dollars. The new arrangement would allow Netflix to focus on building the company of the future without being weighed down by the logistics of DVD mailing, which was our past.
The announcement provoked a customer revolt. Not only was our new model way more expensive, but it also meant customers had to manage two websites and two subscriptions instead of one. Over the next few quarters, we lost millions of subscribers and our stock dropped more than 75 percent in value. Everything we’d built was crashing down because of my bad decision. It was the lowest point in my career—definitely not an experience I want to repeat. When I apologized on a YouTube video, I looked so stressed that Saturday Night Live made fun of me.
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