If Netflix kids’ programming was going to be the diverse platform Melissa spoke of, I believed that we needed to aim high. I discussed with my own team that for all animated shows we purchased, no matter what country they came from, the animation quality should be high enough to be considered top-notch by the most discerning nations in the world. If, for example, an animated show comes out of Chile, it shouldn’t just be high enough quality for the most discerning Chilean viewer. It should be high quality enough to be a hit in anime-obsessed Japan.
It was with all of this context—from Reed, Ted, Melissa, and Dominique—that then manager of content acquisition, Aram Yacoubian, sitting in a small conference room in downtown Mumbai, considered the show he was being pitched: Mighty Little Bheem.
ARAM YACOUBIAN ON A SMALL BRANCH—MIGHTY LEARNINGS FROM LITTLE BHEEM
When Aram saw the original version of the adorable Indian animation series Mighty Little Bheem, he thought it would be a big hit in India:
The main character is this little child in a small Indian village, whose boundless curiosity and extraordinary strength leads to all sorts of adventures. He’s like a baby Indian Popeye. His character is based on Bheem, a mythical character in the Sanskrit epic Mahabharata, known across India. It seemed obvious to me, Indians would love this show.
But Aram had serious doubts about whether it was a good bet for Netflix. The first concern he had was with the animation quality.
Indian shows tend to be low budget. The quality of the animation was good enough to be popular on Indian TV. But I thought about what Dominique and I had agreed on. We wanted to make sure the quality was high enough to be successful not just in the country of origin but around the world. I knew that if we were going to purchase this show, we would have to invest two or three times what is normally spent on an Indian animation to get the quality we were looking for.
This led to Aram’s second concern:
That was a lot of money to invest in an Indian show. To recoup the investment we’d have to get a lot of children all around the world to watch it. But very few Indian programs had ever been hugely popular outside of India—in all the history of television and streaming. This was due to low budgets but also to a belief that the storytelling was too locally specific for global audiences. There was a widely held belief that Indian series didn’t travel well.
Aram’s third concern was the lack of historical data on preschool shows—even within India:
Mighty Little Bheem is for young children and until now there had been practically no preschool shows made in India either for streaming or television. That’s because Indian rating agencies don’t measure preschool shows, so they can’t be monetized. Was there even an audience in India for programming aimed at such young kids? History couldn’t provide an answer.
On the face of it, all this made things look pretty bad for Mighty Little Bheem. “All of history and all these business reasons were telling me not to make this show,” says Aram. But he also reflected on the context the Netflix leaders had set for him:
Reed made it clear that international expansion is our future and India is a key growth market. Mighty Little Bheem is a great show from a key Netflix growth market.
Ted made it clear that when it comes to countries like India, we have so much to learn that we should take big risks, as long as the learning potential is evident. With Mighty Little Bheem what we would learn from the bet was very clear. The context Ted had set was enough for me to say, “Okay, even if this show crashes and burns, I’m trying three different things, all of which are going to provide Netflix with really good information.”
Melissa made it clear that we wanted children’s shows from around the world that were deeply local in topic and texture to make up our programming slate. Mighty Little Bheem was deeply Indian and had the elements to appeal to children anywhere.
Dominique and I had agreed that we should prioritize animation for our big international bets and that this animation should be of high quality. Mighty Little Bheem was an animated show that could achieve the high quality we needed with a financial investment.
With this context in mind Aram made his decision. He purchased Mighty Little Bheem and gave money to the local creators to upgrade the animation. The show launched mid-April 2019 and within three weeks became one of Netflix’s most watched animated series from anywhere in the world. It has now been watched by more than twenty-seven million viewers.
When I interviewed him, Aram clarified the great advantage of dispersed decision-making when managers lead with context.
I’m one of the best people at Netflix to decide what children’s content to purchase in India, as I know the Indian animation market and Indian family-viewing patterns like the back of my hand. But it’s only with organizational transparency, a ton of context, and high alignment between me and the leadership that I can make the best decisions to benefit our organization and Netflix viewers around the world.
Aram’s decision to purchase Mighty Little Bheem provides a clear example of how leading with context works at Netflix. Each leader from myself at the roots of the tree up through Dominique at the middle-branch level sets context informing Aram’s decision. But Aram himself, as the informed captain, decides what shows to buy.
This case, you’ll have noticed, is by no means unique. Throughout this book we’ve told stories about lower-level employees making multimillion-dollar financial decisions without getting approval from the boss. Outsiders are often puzzled about how this can work in a financially responsible organization. The answer is simple: it’s because of the alignment.
Although Netflix gives employees a lot of financial freedom, the investment of money follows the same context tree that Melissa described. Ted and I are aligned on how much the content area will invest on purchasing films and shows over a specific quarter. Ted then cascades that down, providing context to Melissa on what amount her group should invest in kids and family programming. She then aligns with each of her directors about how much they should invest in each specific category. When Aram made the decision to bid for Mighty Little Bheem and also put a bunch of money into upgrading the animation, he wasn’t spending money randomly. He was applying the financial context that Melissa and Dominique had set for him.
ICARUS—THE FINAL SCENE
When we left Adam Del Deo, he was standing in the Washington School House Hotel trying to decide whether to bet big on a movie named after a man who flew so close to the sun that his wax wings melted.
Ted had set a clear context. If Icarus wasn’t going to be a massive hit, Adam shouldn’t bet massive money on it. He’d already bid $2.5 million and all the usual suspects, from Amazon to Hulu, were also sniffing around. If $2.5 million wasn’t enough and this movie wasn’t “the one,” he should let it go. But if Adam believed Icarus was going to be a huge hit, then he should swing big—bet whatever it would take to get that movie on Netflix.
Adam did believe Icarus was going to be a massive hit, so he took the bet. Netflix paid a historic $4.6 million to get it. In August 2017, Icarus was released on Netflix.
In the first few months Icarus struggled to get off the ground. No one was watching. Adam was crushed:
Ten days after the Icarus release, we had a team meeting where we went through the viewing data for new content and I was devastated by the poor numbers. My colleagues trust me to be able to predict the viewing of a movie, the public discussion that will result, and the yield at Oscars time. My reputation is built on that trust. I felt I had made a huge mistake that couldn’t help but damage my colleagues’ faith in me.
Then one event changed everything. In December 2017, the International Olympic Committee issued a report that Russia had been banned from the games. In that IOC report, Icarus was cited as the key piece of evidence. Rodchenkov went on 60 Minutes, where he stated his belief that at least twenty countries were doping in th
e same way. Then Lance Armstrong came out publicly voicing his appreciation of Icarus. Suddenly everyone was talking about this movie and viewing figures skyrocketed.
In March 2018 Icarus was nominated for best documentary at the Oscars. Adam remembers the ceremony like this:
I was sure we wouldn’t win. When actress Laura Dern was about to announce the winner, I whispered to my boss Lisa Nishamura, “We won’t get it. Faces Places will get it.” But then, like in slow motion, I heard actress Laura Dern say, “The winner is . . . Icarus!” Bryan Fogel was racing to the stage. Someone screamed out in delight from the balcony. I felt so overwhelmed that if I hadn’t been sitting I would have fallen over.
On the way to the after-party Adam bumped into Ted, who congratulated him:
I asked, “Do you remember that conversation we had at Sundance, Ted?” He gave me a big grin and said, “Yep . . . it was ‘THE ONE.’”
THE NINTH DOT
In a loosely coupled organization, where talent density is high and innovation is the primary goal, a traditional, control-oriented approach is not the most effective choice. Instead of seeking to minimize error through oversight or process, focus on setting clear context, building alignment of the North Star between boss and team, and giving the informed captain the freedom to decide.
▶ TAKEAWAYS FROM CHAPTER 9
In order to lead with context, you need to have high talent density, your goal needs to be innovation (not error prevention), and you need to be operating in a loosely coupled system.
Once these elements are in place, instead of telling people what to do, get in lockstep alignment by providing and debating all the context that will allow them to make good decisions.
When one of your people does something dumb, don’t blame that person. Instead, ask yourself what context you failed to set. Are you articulate and inspiring enough in expressing your goals and strategy? Have you clearly explained all the assumptions and risks that will help your team to make good decisions? Are you and your employees highly aligned on vision and objectives?
A loosely coupled organization should resemble a tree rather than a pyramid. The boss is at the roots, holding up the trunk of senior managers who support the outer branches where decisions are made.
You know you’re successfully leading with context when your people are moving the team in the desired direction by using the information they’ve received from you and those around you to make great decisions themselves.
This Is Freedom and Responsibility
We’ve now explored how to build up the foundational elements of talent density and candor, and then to begin removing policies and procedures to offer employees more freedom, while also creating an environment that’s increasingly fast and flexible. We’ve looked at over a dozen policies and processes that most companies have but that we don’t have at Netflix. These include:
Vacation Policies
Decision-Making Approvals
Expense Policies
Performance Improvement Plans
Approval Processes
Raise Pools
Key Performance Indicators
Management by Objective
Travel Policies
Decision Making by Committee
Contract Sign-Offs
Salary Bands
Pay Grades
Pay-Per-Performance Bonuses
These are all ways of controlling people rather than inspiring them. It’s not easy to avoid chaos and anarchy as you remove these controls, but if you develop every employee’s sense of self-discipline and responsibility, help them develop enough knowledge to make good decisions, and develop a feedback culture to stimulate learning, you’ll be amazed at how effective your organization can be.
This alone is enough reason to develop a culture of F&R. But these are not the only benefits. Beyond that:
Some of the items on the list above squash innovation. Vacation policies, travel policies, and expense policies can lead to the type of high-rule environment that discourages creative thinking and scare off the most innovative employees.
Other items on this list slow the business down. Approval policies, decision making by committee, and contract sign-offs all put hurdles in front of your employees so that they can’t move quickly.
Many of these items keep the organization from changing quickly when the environment shifts. Pay-per-performance bonuses, Management by Objective, and Key Performance Indicators motivate employees to stay on a preset path, making it difficult to quickly dump one project and pick up another. Whereas Performance Improvement Plans (along with any hiring and firing processes) make it difficult to swap out and in employees quickly as business needs change.
If your goal is to build a more inventive, fast, and flexible organization, develop a culture of freedom and responsibility by establishing the necessary conditions so you can remove these rules and processes too.
We began this book with a couple of questions: Why do so many companies such as Blockbuster, AOL, Kodak, and my own first company, Pure Software, fail to adapt and innovate quickly as the environment morphs around them? How can organizations become more inventive and nimble in order to reach their goals?
In 2001 we began our journey at Netflix to what by the end of 2015 had become a highly tuned F&R culture. We had successfully transitioned Netflix from a DVD-by-mail enterprise to a streaming company that created award-winning television shows like House of Cards and Orange Is the New Black. Our stock price had risen from approximately $8 in 2010 to $123 by the end of 2015, and our user base had grown from 20 million to 78 million in the same time period.
After this remarkable success in the US, we then began our next cultural challenge: international expansion. Between 2011 and 2015 we began moving into a few countries one at a time. In 2016, we took the big leap, moving into 130 countries all in one day. Our culture had led us to achieve great things. But now we wondered: Would our corporate culture work around the world? That’s what chapter 10 is about.
SECTION FOUR
GOING GLOBAL
10
BRING IT ALL TO THE WORLD!
When I moved to rural Swaziland in 1983 as a Peace Corps volunteer, it was not my first international experience, but it was the one that taught me the most. It took only a few weeks for me to recognize that I understood and approached life very differently from the people around me.
One example came in my first month of teaching math to sixteen-year-old high school students. The kids in my class had been selected because of their strong mathematical abilities and I was preparing them for upcoming public exams. On a weekly quiz I provided a problem that, from my understanding of their skill set, they should have been able to answer:
A room measures 2 meters by 3 meters. How many 50-centimeter tiles does it take to cover the floor?
Not one of my students gave the accurate response and most of them left the question blank.
The next day in class I put the question on the blackboard and asked for a volunteer to solve it. Students shuffled their feet and looked out the window. I felt my face becoming flushed with frustration. “No one? No one is able to answer?” I asked incredulously. Feeling deflated, I sat down at my desk and waited for a response. That’s when Thabo, a tall, earnest student raised his hand from the back of the class. “Yes, Thabo, please tell us how to solve this problem,” I said, jumping up hopefully. But instead of answering the question Thabo asked, “Mr. Hastings, sir, please, what is a tile?”
My students lived mostly in traditional round huts, and their floors were either made of mud or concrete. They couldn’t answer the question because they didn’t know what a tile was. They just couldn’t fathom what they were being asked to assess.
From this early experience—and many others that followed—I learned that I couldn�
�t directly transfer my own way of life to the culture of another place. In order to be effective, I had to think about what adaptations I would need to make in order to get the results I was hoping for.
So in 2010, when Netflix began expanding internationally, I thought a lot about whether the organizational culture would also need to adapt to be successful around the world. By that time our management methods had developed so fully and were producing such good results that I was reluctant to make a significant change. But I felt uncertain if our candid feedback, low-rule ethos, and Keeper Test techniques would be effective in other countries.
I considered another company, which was already international and had taken a clear approach. Like us, Google was proud of having a strong corporate culture, but instead of adapting its culture to the countries it moved into, it focused on hiring for fit. It sought to hire employees throughout the world who were “Googlers”: people with a personality that matched the corporate culture no matter what country they lived in or came from.
No Rules Rules Page 24