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Freedom & Responsability at Netflix

Friday, August 7th, 2009

Here is an interesting internal Netflix presentation that ended up on Techcrunch.

I thought the explanations on why companies grow rigid and complacent was quite nice. And the tips on how to stay nimble, too.

Below are my (rough) notes.

———-

The “keeper test” managers use at Netflix: which of my guys would I fight hard to keep if he told me he was leaving?
The ones you wouldn’t fight for should be let go to open the position for a star
Only keep the stars
Great workplace is made by great colleagues

Why so important to have team of stars? –> Huge premium in creating teams of “best”

It’s about effectiveness (results) not effort
Don’t measure yourself by the amount of effort you put in
Effort doesn’t pay the bills

The rare responsible person is:
self motivating
self aware
self disciplined
self improving
acts like a leader
doesn’t wait to be told what to do
never feels ‘that’s not my job’
picks up the trash on the floor
behaves like an owner

Growth increases complexity and potential for errors; therefore most companies as they grow limit freedom to avoid errors, and the talent density shrinks (number of high performance employees drops)
Procedures emerge – nobody likes them but they feel good compared to the pain of chaos
But procedures-focus drives more talent out – the innovators-mavericks leave
Who remains? Process-oriented employees, who follow existing process.
This makes for an efficient business…for a while.
BUT rigidity, politics, mediocrity and complacency go up.
Then: market shift or disruption.
Innovators being gone, the company doesn’t respond.
Slides into irrelevance.

SO…you need a culture that supports rapid innovation AND excellent execution.
There is a tension between the two, between creativity and discipline.
The other (netflix) option: avoid chaos as you grow by getting even more stunning people on board
Use high perf people – not rules
If you can keep running the business informally and not too rigidly, you can retain and attract creativity, high perf people

What about mistakes? Rapid recovery, not avoidance, is the right model
High performers make few mistakes, and when they do, they recover fast
Therefore it is better to have less rules and a bit more mistakes than having less mistakes but lots of rules that strangle creativity and speed of decision-making

Processes tend to creep in – because preventing errors sounds so good.
Try to get rid of rules when you can just to reinforce the point
Example 1: no vacation policy or tracking. Just be responsible.
Example 2: most companies have complexe policies on what you can expense, refund etc. AND whole department to check that those policies are respected. Netflix’s policy is simply “Act in netflix’s best interest”.

High performance people will perform better if they understand the context
Be open internally about strategy and results

Pay the max you can pay for each person (remmebert they are all stars)

Develop people by surrounding them with stunning colleagues and giving them big challenges to work on.
Unchallenging work and bad colleagues kills progress.

Formalized development (courses, mentor assignement, rotation around the firm, multi year career paths etc) is rarely effective.

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Success Story: Coder Rakes In 600K In One Month

Monday, February 16th, 2009

The market for Iphone applications is hot right now. Here is a success story: a coder raking in 600,000 in one month.

Here are a few success principles I read between the lines:

1. Taking quick action

This Iphone application marketplace is barely a few months old. You needed to jump right into the action to make money.

2. Let the competition inspire you, not discourage you

At the same time, the coder wasn’t among the first guys to do it. In fact, he waited long enough (a few months) that there were already 20,000 apps competing for customers’ attention. Some would have thought themselves out of it – “I’m too late in the game”, “it’s too crowded”, etc. He just did it.

He was inspired by another app coder who made 250K in 30 days a few month ago, and instead of being envious, he set out to do the same thing. Not only did he succeed but he made about twice that amount.

3. Working hard, no excuses

It wasn’t easy for Nicholas, either. After getting off his shift as an engineer at Sun Microsystems, he worked on iShoot eight hours a day, cradling his 1-year-old son in one hand and coding with the other.

4. Don’t let anything stop you – just do it

He didn’t have the money to buy books to learn how to write an iPhone app, so he taught himself by reading websites.

5. Originality is overrated

He didn’t try to re-invent the wheel – his app is a basic shooting game like many others already out there. That didn’t stop it from being successful.

6. “Moving the free line” – giving something away for free to get customers’ attention

When iShoot launched in October, business was slow for a while. And then Nicholas found some spare time to code a free version of the app — iShoot Lite, which he released January. Here’s how that helped: Inside iShoot Lite he advertised the $3, full version of iShoot. Users downloaded the free version 2.4 million times. And that led 320,000 satisfied iShoot Lite players to pay for iShoot.

Posted in Business, Getting Rich, Marketing, Mavericks, Mindset | No Comments »

Being Original Is Overrated

Thursday, January 15th, 2009

Interesting story of a Kiwi entrepreneur who copy-pasted the eBay business model in his home country, and ended up selling it for 700 millions 7 years later.

Sam seems slightly miffed that we are all so aghast at the enormous amount of money Fairfax was willing to pay for his company.

“There have always been sceptics and this week has been no different from the last seven years,” he says.

“All of a sudden, people get it and they think ‘far out, maybe it’s something of value and something good’.

“That’s something I’ve dealt with since day one. People have looked at me and wondered what I have done with my time. The other day I overheard people in a cafe wondering how we made any money at all.”

He laughs. “People think I just run it from my bedroom or something. The main thing that’s shocked New Zealand is the fact that we are a successful business. Fundamentally, this is a very, very strong company and that’s what Fairfax has bought.”

“Some people are better decision-makers than others,” he says.

“Some people spend a lot of time sitting around talking about things they’re going to do and others get out and do them. I think there are plenty of people like that.”

So that’s the trick? To do rather than think?

“Yeah, I think so. Everyone says a lot of people will no doubt think, ‘oh, I wish I had that idea’ but what they should think about is ‘what ideas do I have?’ And get off your bum and go and do it.”

That’s something the famously forthright Gareth Morgan has been telling us for years. Sam, he says, pulled Trade Me off because he was confident and never afraid to take risks. But he qualifies that by saying the risks were excruciatingly well researched.

Instead of leaping head first into a business that he fancied the idea of, 22-year-old Sam sat back and asked himself what were the biggest internet businesses. They were auctions and dating, says Gareth. So that’s what he decided to set up.

“He always had the ability to drill down into what is the business case. If one doesn’t exist, then he doesn’t waste his time on it.”

[...]

You don’t try out all your ideas [...]. Eliminate through careful analysis and look internationally. Especially for online businesses.

“That’s where the corporates here are completely falling on their faces,” says Gareth. “Like Telecom putting millions into [online second-hand company] Ferret, or Whitcoulls putting millions into Flying Pig and ending up being one. They weren’t looking internationally at how thing were being done.”

Sam, however, worked out that only one online auction site like eBay thrived in any given market and the trick was to be the first one to start up somewhere.

The trick, Gareth says, is to figure out your competition and ask exactly how they make their dollars.

“Ask what is it the market values. Get to the essence of their business.”

[...]

“He had not only built the site and it was going and people loved it. But he also had the business case for the precedent for it offshore. He had his shit together, basically. It’s amazing. And incredibly inspiring for young people.

Tags: originality
Posted in Business, Getting Rich, Mavericks, Mindset | 1 Comment »

Behind The Scenes: Corporate Corruption At Siemens

Sunday, December 21st, 2008

Article in The New York Times on a corruption case against Siemens:

Mr. Siekaczek’s business unit was one of the most egregious offenders. Court documents show that the telecommunications unit paid more than $800 million of the $1.4 billion in illegal payments that Siemens made from 2001 to 2007.

[...]

MR. SIEKACZEK’S telecommunications unit was awash in easy money. It paid $5 million in bribes to win a mobile phone contract in Bangladesh, to the son of the prime minister at the time and other senior officials, according to court documents. Mr. Siekaczek’s group also made $12.7 million in payments to senior officials in Nigeria for government contracts.

In Argentina, a different Siemens subsidiary paid at least $40 million in bribes to win a $1 billion contract to produce national identity cards. In Israel, the company provided $20 million to senior government officials to build power plants. In Venezuela, it was $16 million for urban rail lines. In China, $14 million for medical equipment. And in Iraq, $1.7 million to Saddam Hussein and his cronies.

[...]

The most common method of bribery involved hiring an outside consultant to help “win” a contract. This was typically a local resident with ties to ruling leaders. Siemens paid a fee to the consultant, who in turn delivered the cash to the ultimate recipient.

Siemens has acknowledged having more than 2,700 business consultant agreements, so-called B.C.A.’s, worldwide. Those consultants were at the heart of the bribery scheme, sending millions to government officials.

MR. SIEKACZEK was painfully aware that he was acting illegally. To protect evidence that he didn’t act alone, he and a colleague began copying documents stored in a basement at Siemens’s headquarters in Munich that detailed the payments. He eventually stashed about three dozen folders in a secret hiding spot.

[...]

For his part, Mr. Siekaczek is uncertain about the impact of the Siemens case. After all, he said, bribery and corruption are still widespread.

“People will only say about Siemens that they were unlucky and that they broke the 11th Commandment,” he said. “The 11th Commandment is: ‘Don’t get caught.’ ”

Posted in Behind The Scenes, Business, Mavericks, Money | No Comments »

Behind The Scenes: Only The Little People Pay Taxes

Saturday, July 19th, 2008

Anecdote #1:

George Bush criticized Democrats for saying that they would focus on taxing the rich. That’s just not realistic, said the president who considers tax cuts one of his signature legacies: “Most people in America understand that the rich people hire good accountants and figure out how not to necessarily pay all the taxes and the middle class gets stuck.”

Anecdote #2:

Leona Helmsley once told a housekeeper at her Connecticut home that “only the little people pay taxes,” the housekeeper testified yesterday at Mrs. Helmsley’s tax-fraud and extortion trial.

Ms. Baum said she and Mrs. Helmsley were in a back hall of the $11 million home. “I said, ‘You must pay a lot of taxes,’” Ms. Baum said. “She said, ‘We don’t pay taxes. Only the little people pay taxes.‘”

(more…)

Posted in Behind The Scenes, Business, Getting Rich, Investing, Mavericks, Money | No Comments »

Success Case Study: The Grey Goose Story

Saturday, July 19th, 2008

I stumbled upon this interesting article on the success story of Grey Goose Vodka.

I suggest you read the whole thing, but for now, let’s break it down and see what we can learn from it.

First, let’s put it into perspective:

one of the most astonishing brands in the history of distilled spirits. Grey Goose vodka, invented from thin air that summer morning, had as yet no distillery, no bottle, and—perhaps the most pressing order of business—no vodka.

Yet this past June, almost exactly eight years after Sidney Frank gave name to this nonexistent liquor, Grey Goose was sold to Bacardi for more than $2 billion. Cash.

(To understand how much that is, consider that IBM’s personal-computer business, nurtured, honed, and advertised since 1981, recently sold for $1.75 billion.)

Building a brand out of thin air and scaling it up does produce tons of money.

(more…)

Posted in Business, Getting Rich, Marketing, Mavericks | No Comments »

Behind The Scenes: How Roman Abramovich Became Rich

Saturday, July 5th, 2008

Roman Abramovich, the owner of Chelsea Football Club, has admitted agreeing to pay billions of dollars for political favours and protection fees to get his hands on the former Soviet Union’s mineral wealth.

The puzzle of how the penniless street trader rose to amass an £11.4 billion fortune is explained for the first time in his own words in court papers seen by The Times.

Mr Abramovich paid older oligarchs so that he could obtain a big share of Russia’s oil and aluminium assets and to escape unscathed from the deadly post-communist carve-up.

He famously emerged triumphant after the “aluminium wars”, in which more than 100 people believed to have been killed in gangland feuds over control of the lucrative smelters. He avoided the fate of a rival oligarch who annoyed the Kremlin and ended up being transported to jail in Siberia for ten years. (more…)

Posted in Behind The Scenes, Getting Rich, Mavericks | No Comments »

Success Case Study: The Phone House

Tuesday, June 10th, 2008

Just read an article in Le Monde about Geoffroy Roux de Bézieux, a French entrepreneur. I’ve never heard of the guy before, but we can pick up a few “success elements” from his story.

In 1996 , at 34 years old, after 10 years working for L’Oreal, he created The Phone House, a chain of mobile phones retailers
He sold the company to a British group a couple of years later and made 30 to 40 millions Euros in personal income in the process

He had the 2 key components of a “get rich quick” plan:

1. Scalability – he opened shops everywhere back in the late 90s. Scalability of your business model is key to get really rich. A quick glance at the company history shows he grew it partly through massive acquisitions, which is classical of entrepreneurs on a “quick wealth creation” rampage.

December 96: First shop
October 97: acquisition of 22 shops
September 98: acquisition of 43 shops
Etc etc

(more…)

Posted in Business, Getting Rich, Mavericks, Money | No Comments »

Maverick Success: Joe Francis of “Girls Gone Wild” (Part 2)

Monday, June 9th, 2008

Random interesting bits from Joe Francis’ short auto-biography – available at meetjoefrancis.com. I recommend that you read the whole thing yourself.

On life:

I know any life is going to have its ups and downs. Only an idiot would buy a ticket to a roller coaster that didn’t have turns, climbs, loops and dives, and anyone who really wants his money’s worth is going to look for the highest, fastest ride he can find. For me, the same is true of life.

…

I can’t tell you why, but I have always loved work. I would always rather be working than not. I spent all day at school just staring at the clock, waiting until I could run to the bus stop and get back to my job. . I was thrilled to be making my own money. Not because I was anxious to buy anything, but because I wanted to eliminate any chance of ever being poor. I had watched my dad worry about money his whole life, and I was determined not to have my own life defined by constant financial insecurity. So I worked hard and saved.

(more…)

Posted in Business, Getting Rich, Lifestyle, Mavericks, Mindset | No Comments »

Maverick Success: Joe Francis of “Girls Gone Wild” (Part 1)

Monday, June 9th, 2008

Read this from the FAQ at meetjoefrancis.com…No matter what niche, it’s always the same entrepreneurial mindset.

Q: What is something that most people would be surprised to know about you?
A: Judging from the kind of comments I get, I think the main misconception about me is that I somehow “got lucky” by stumbling upon a clever idea. The fact is, what I’ve been able to achieve – that is, building a multimillion-dollar company out of nothing, and creating what others have called a cultural phenomenon – had nothing to do with luck. More to the point, I would submit that there is no such thing as luck. We all create our own luck.

The comment that drives me nuts is when people walk up and say to me, “All you do is film naked girls and make all this money,” usually followed by “I wish I’d thought of that idea.” To me, that’s like going up to Tiger Woods and saying, “All you do is hit a ball into a hole and you make all this money.” I should have taken golf lessons!

The point is, people don’t see the years and years of hard work that leads up to that kind of success. It’s common for people to look at a modern painting, for example, and say, “I could have done that; why is that worth $20 million?” My answer would be, “If you could have really done that, you would have!” “That” may mean painting the actual painting or “that” could mean you successfully marketed yourself as an artist whose paintings are worth millions.

I didn’t invent naked girls. I didn’t create the idea that men like to look at women’s breasts. In fact, it kind of bothers me when people call “Girls Gone Wild” an “idea.” Because it’s not the idea that became such a successful business, it’s the execution of that idea. And that takes sacrifice, risk and a lot of business acumen. So I think the thing that would surprise most people is how hard I’ve worked, and continue to work. I love to work.

And, by the way, it’s never been about the money. If you are just out to make money, most likely you never will. Money is only the scorecard. My passion is being creative, productive and successful.