The Fall and Rise of Netflix and its CEO
In 2011, Netflix’s CEO Reed Hastings’ approval ratings plummeted because of the introduction of a new pricing system and the halting of Qwikster, a spinoff of its DVD mail-order service. These changes damaged Netflix’s reputation to its customers by messing with the company’s main brand promise of simplicity. According to many insiders, it was because Hastings had stopped listening; to his employees and customers alike.
Fast forward two and a half years later, and Hastings was once again a star. Netflix’s stock price was up 50% from the previous year, and the CEO was riding a wave of global enthusiasm for the company’s hit series House of Cards, which was at the time the most streamed show in 41 countries.
How did he do it?
Hastings’ secret weapon to Netflix’s Success
Hastings’ secret weapon, then and even now, is data — and massive amounts of it. The analysis of this data has resulted in Netflix understanding exactly what their customers want, when they want it and on what device they will watch that content.
They are then able to deliver a better product and optimise their marketing. For example, through these analytics, Netflix may know how long users need to watch content in order to be less likely to cancel. For instance, maybe they know that If users can get to watch at least 10 hours of content each month, they are 70% less likely to cancel. Once they drop below 5 hours, there is a 95% chance they will cancel.
Analytics gives companies the quantitative data they need to make better, more informed decisions to help improve their services.
According to KISSmetrics, a leading blog about marketing, analytics and testing, Netflix tracks millions of “event” data from its over 200 million subscribers every single second, that includes:
- When you pause, rewind, or fast-forward.
- The time, days and dates you watch Netflix content — to which they have found that most people generally movies over the weekend and TV shows during weekdays)
- Your location when watching (by ZIP code) as well as the device used
- When you pause and abandon content (and whether you ever come back)
- The ratings you give the shows
- Your searches, browsing and scrolling behaviour; just to highlight a few.
It is this big data analysis that helped Hastings and Netflix predict that a series based on government corruption, that is directed by David Fincher and stars Kevin Spacey, would be a sure bet.
According to the late business consultant Edwards Deming, the most important job of a leader is prediction. This is the one of the three competencies of good leadership as discussed in an earlier article; the others being delegation and repetition.
At the heart of a leader’s ability to predict is data — and lots of it for that matter.
The analysis of Big data is now mainstream and accessible to companies of all sizes in most parts of the world. Yet this cannot work effectively without plain old human-gathered intelligence that gives a gut feeling of what is happening in the company as well the market, so as to guide them in making the right decisions.
To collect this data, it’s critical that leaders reach out weekly to their employees and customers to discuss what they have come up with during the executive huddle and engage all of their employees, led by middle management, to collect data and then spread out the work so as to give the most valuable insights to the senior team.
Gathering Employee Input.
Even though Wal-Mart Stores Inc. has access to vast amounts of big data, to- date, it still sends teams from their headquarters in Bentonville, Arkansas, out to various stores nationwide from Monday through Thursday for purposes of gathering insight. The teams then come back on Thursday night and the next morning, the executives comb through all the quantitative data from its computer systems, alongside the qualitative intelligence picked up from meeting with employees, talking to customers, and shopping at various competitors’ stores during the week.
According to David Glass, former CEO of Wal-Mart, this helps the team decide what corrective action they wanted to take (on Friday morning), and get it done by noon on Saturday. Meanwhile, their competitors are mostly getting their sales reports on Monday for the prior week and are now 10 days behind.
Wal-Mart has managed to create a cycle of ‘learning fast and acting fast’ that puts them ahead of the competition. From the beginning in 1962, the founder, Sam Walton, recognized the value of meeting with his employees weekly to seek their ideas on how to make the business better, which was quite progressive at the time.
If you do not have a formal routine to prompt your team members to share their perspectives, you risk having those ideas walk out the door at the end of every day. Even worse, your workers will miss an opportunity to contribute and feel good about it.
How do you ask for team input?
At a minimum, we recommend going about it in 3 simple ways.
Hold ‘Start/Stop/Keep’ conversations between the executives as well as middle managers and at least 1 employee every week.
This is not to be confused with the casual chat with one or two employees each week. Instead, we advocate for a focused 15- to 45-minute conversation with one team member or a group of employees to gather their ideas and feedback.
The employees who work directly with customers and those newest to the company are the best to start with. The recent hires, especially, tend to have fresher eyes that allow them to notice many things that the longer-term employees have accepted as normal.
You can use these 3 simple questions when holding these conversations. Ask:
- What do you think we should start doing?
- What do you feel we should stop doing?
- What should we keep doing?
As leaders, it’s more important to pay particular attention to the responses to “stop doing”. These may hint at what is likely destroying the motivation of the employees, as we discussed earlier in the “Keeping and Growing the dream team” article.
Collect ongoing weekly feedback about obstacles and opportunities.
To prevent this from turning into a collection of complaints, provide a few prompts that guide the employees. Their feedback should show how you the company can:
- Increase revenue,
- Reduce costs or
- Make something better/easier for the employees or customers.
Act decisively on the feedback and suggestions
Gathering employees’ ideas and feedback will result in backlash on the company if management doesn’t act on their ideas and suggestions.
- If an idea is not to be implemented, for whatever reason, you owe it to the employee who suggested it to know why.
- Time to implement the ideas may be constrained. For this reason we suggest giving the responsibility of responding to the feedback to a middle management team so as to free up more time for the executive team.
- Find a way to track the number of days or weeks it takes to implement the ideas and suggestions you’ve gathered from the employees. You could call it ‘Suggestion Ageing report’ or ‘Feedback/Ideas Implementation Report’
- Finally, ensure you are transparent with your employees. You could set up an internal portal listing all suggestions in their original format with constant updates on progress or write them on a visible whiteboard in the breakroom and only erase them once they have been implemented.
The best way to gathering customer feedback or input
There are many methods you can use to gather information about your customers’ needs, ranging from feedback surveys, customer contact forms and email, usability tests, On-site activity (eg. via analytics) and even instant feedback from your website.
The best way we have found for gathering customer feedback is by having direct conversation with them via a call or face to face. For this reason, we urge all executives and middle managers to carve time to hold a conversation around 4 important questions with at least one end user every week.
The four questions that we recommend that leaders ask their customers in person (not in a survey) are:
- How are you doing?
This question will give you a better understanding of their current situation: What are their priorities for the coming year? What are their pain points? What do they wish could be done differently in the world?
- What is going on in your industry/neighbourhood?
This provides insight into general trends in the industry: What are the most recent changes or technologies? Who is buying whom in the industry?
- What do you hear about our competitors?
This third question is probably the most important, because it can help you see through your own biases. It offers a mostly unbiased perspective on what you can do or are doing to be competitive in the market.
- How are we doing?
Only after these three questions should you ask about their reactions to your products or services, if they have not shared these already. Remember, this call should focus on them, not you!
How do you hold your team accountable to the process?
Have KPIs for everyone that align with the organisation’s main priority
It is crucial to have a clear plan for the organisation for the next quarter. To do so, each individual and team needs quarterly goals that align with the overall plan. This creates a clear line of sight that makes every employee feel connected to the direction and vision of the company.
Every member of the organisation, from the executive to the frontline worker, needs to be able to objectively answer this simple question, “Did I have a great day or week?”
The key to this: Every person must report on 1 or 2 KPIs weekly.
Some companies have dashboard systems that automatically generate live data of these KPIs in comparison to the overall company target. Others use a whiteboard that gets updated daily or weekly, and some print charts from spreadsheets and post them on the wall. Whatever method you use to track this, you will only succeed if all team members in your company look at the information and make decisions and adjustments based on their KPIs weekly.
Have a Peer Coach for everyone in the organization
All managers and executives should have a coach (or a peer coach) that holds them accountable for behavioural changes. We strongly encourage organizations to get an external coach (Ideally one from Azelea Coaching Advisory) to lead their quarterly or annual planning sessions, with monthly check-ins to monitor progress.
It’s also important that everyone in the company finds a peer coach internally, too. Based on the decisions you made on your own One-Page Personal Plan (discussed in “The Leaders that Shape the Business ” article), choose 5 actions or behaviours you need to start or stop, and then report your progress every day to your peer coach.
Put up a large, visible Scoreboard
If you borrow a page from the design of sport facilities, even when one is seated in the stadium’s nosebleed section and can barely see the action on the field, you can always see the score. This allows you to always know how your team is performing.
At the very least, we recommend that you have your goals, metrics and plans shown visibly in a place where you host the various weekly meetings.
Accountability Management Systems
When the organisation grows to have more than 50 employees or expands into multiple locations, keeping track of all the cascading metrics, priorities and data can become an Excel-spreadsheet nightmare. As the company continues to upgrade its CRM, accounting and even operational systems, it is crucial to also have a system in place to manage and track the cascading KPIs and Priorities.
This not only makes it more efficient to run your business, but also brings your team greater alignment and transparency to the company’s Main priority and objectives.
In the next article, we will look at setting meeting rhythms that give everyone a routine through which all the data, input and metrics can be debated and discussed to guide decision- making.