Vision and Strategy - Epiphanies of a Netflix leader
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- The document discusses lessons learned from Netflix's transformation from a DVD rental service to a global streaming leader under the visions of its leaders. It highlights how Netflix countered Blockbuster through a superior business model of online rental and subscription services. It also explains how Netflix formulated strategies around exclusive content licensing, ubiquitous infrastructure and language support to achieve massive scale in streaming globally.
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Vision and Strategy - Epiphanies of a Netflix leader
- 1. Josh Evans Senior Director of Platform Service Engineering @ GitHub November 13, 2017 Vision & Strategy Epiphanies of a Netflix Leader
- 2. 1998
- 3. What an incredibly stupid idea!
- 5. 17 Years Later Netflix (1999 – 2016) • Ecommerce (DVD Streaming) • Streaming - Playback Services • Operations Engineering
- 6. Netflix Graduate • Modern Architecture • Operational Excellence • Leadership • Organization • Culture • Vision & Strategy Leadership is a journey
- 7. Why is Netflix relevant? DVD
- 10. Why is Netflix relevant? DVD Streaming
- 11. Global leader in subscription internet TV Growing slate of global, original content 109 115 million members 190 countries, 10s of languages 1000s of device types Netflix Streaming
- 12. 2000% growth over 5 years!
- 13. This is no accident
- 14. Vision Strategy Netflix vs. Blockbuster Netflix Streaming GitHub Universe Today’s Journey
- 15. Vision Strategy Netflix vs. Blockbuster Netflix Streaming GitHub Universe Today’s Journey
- 16. Why does vision matter?
- 18. Hill Climbing find the highest adjacent node
- 19. Hill Climbing current = highest adjacent node
- 20. Hill Climbing highest node found
- 21. Mountain Climbing Start Local Maximum Global Maximum
- 22. Managers climb hills Leaders take mountains
- 23. Vision is the mountain
- 24. Vision Strategy Netflix vs. Blockbuster Netflix Streaming GitHub Universe Today’s Journey
- 26. Be Proactive
- 29. Envision what you want in the future so you can work and plan towards it. Begin with the End in Mind
- 30. Put First Things First 1. Urgent – Important Crises Pressing problems Deadline-driven projects Meetings, preparations 2. Not Urgent - Important Preparation, prevention Planning Innovation, creativity Values clarification Relationship building Empowerment Work-life balance 3. Urgent – Not Important Interruptions, some calls Some mail, reports, meetings Many popular activities 4. Not Urgent – Not Important Trivia, busywork Junk mail Some calls Time wasters
- 31. Put First Things First 1. Urgent – Important Crises Pressing problems Deadline-driven projects Meetings, preparations 2. Not Urgent - Important Preparation, prevention Planning Innovation, creativity Values clarification Relationship building Empowerment Work-life balance 3. Urgent – Not Important Interruptions, some calls Some mail, reports, meetings Many popular activities 4. Not Urgent – Not Important Trivia, busywork Junk mail Some calls Time wasters
- 32. Ok… but what is strategy?
- 33. a high level plan to achieve one or more goals under conditions of uncertainty - Wikipedia
- 34. Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat. - Sun Tzu, The Art of War
- 35. The essence of strategy is choosing what not to do. - Michael Porter, economist & business strategist
- 36. proactive goal oriented high level adaptive focused realized through tactics informed by vision Strategies are…
- 37. How is strategy formulated?
- 38. Strategy: a route to continuing Power in significant markets Power: the set of conditions creating the potential for persistent differential returns Business Strategy Hamilton Helmer
- 39. Scale economies Network economies Counter-positioning Switching costs Branding Cornered resource Process power Seven Powers
- 40. Some condition which yields material improvement in cash flow of the power wielder via reduced cost, enhanced pricing and/or decreased investment requirements. Benefit
- 41. Some obstacle which engenders in competitors an inability and/or unwillingness to engage in behaviors that might over time arbitrage out this benefit. Barrier
- 42. A business in which per unit cost declines as production volume increases. Benefit: lower costs Barrier: fear of retaliation 1. Scale Economies
- 43. The value of a product to a customer is increased by the use of the product by others 2. Network Economies
- 44. 3. Counter-positioning A newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing businesses
- 45. The value loss expected by a customer that would be incurred from switching to an alternate supplier for additional purchases 4. Switching Costs
- 46. The durable attribution of higher value to an objectively identical offering that arises from historical information about the seller. 5. Branding
- 47. Preferential access at attractive terms to a coveted asset that can independently enhance value. 6. Cornered Resource
- 48. Embedded company organization and activity sets which enable lower costs and/or superior product, and which can be matched only by an extended commitment. 7. Process Power
- 49. Vision Strategy Netflix vs. Blockbuster Netflix Streaming GitHub Universe Today’s Journey
- 51. Scale economies Network economies Counter-positioning Switching costs Branding Cornered resource Process power What power did Netflix have over Blockbuster?
- 53. A newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing businesses Counter-positioning
- 56. Process Power
- 57. Embedded company organization and activity sets which enable lower costs and/or superior product, and which can be matched only by an extended commitment. Process Power
- 60. DVDs opened & inspected for cracks
- 61. DVDs are cleaned & polished
- 62. NPI First Class Mail Sorter Multi-purpose • Return rental • Check for orders • Print addresses • Pre-sort 30,000 discs / hour
- 63. Barcode Scanner, Printer, Sorter
- 64. Envelop Stuffers - 4,200 Envelops / Hour
- 65. Conveyor - Stuff, Fold, Seal
- 66. Apply Sticker
- 67. Website – Address validation – Queue & rental history – Shipping status – Problem reporting Logistics – Rental returns – Inventory management – Shipping Deep Integration with
- 70. Vision Strategy Netflix vs. Blockbuster Netflix Streaming GitHub Universe Today’s Journey
- 71. A newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing businesses Netflix counter-positioned against itself Counter-positioning
- 73. Become a much loved, global internet TV service Create a highly valuable, durable business Lead a creative revolution Netflix Streaming Visions
- 74. Scale economies Network economies Counter-positioning Switching costs Branding Cornered resource Process power What power does Netflix Streaming have?
- 75. Global leader in subscription internet TV Growing slate of global, original content 109 115 million members 190 countries, 10s of languages 1000s of device types Netflix Streaming
- 76. A business in which per unit cost declines as production volume increases. 1. Scale Economies
- 77. Competitors license the same content at the same time Inception: Non-Exclusive Studio Contracts
- 78. • Netflix – has 50M members who will watch one title from deal – pays $50M for a non-exclusive deal – $50M / 50M = $1 per view • Amazon – has 5M members who will watch 1 title from deal – pays $5M for a non-exclusive deal – $5M / 5M = $1 per view Exercise
- 79. Competitors cannot license the same content at the same time Strategy: Exclusive Studio Contracts
- 80. • Netflix – has 50M members who will watch one title from deal – pays 60M for an exclusive deal – 60M / 50M = $1.20 per view • Amazon – has 5M members who will watch 1 title from deal – must pay 60M for an exclusive deal – 60M / 5M = $12 per view Exercise
- 83. How do we achieve scale?
- 84. 1. Ubiquity
- 85. 2007 • Jan – Windows 2008 • May – Roku • Oct – LG, Samsung Blu-ray • Oct – Apple Mac • Nov – XBox 360 2009 • Jun – LG DTV • Nov –Sony PS3 (disc) • Nov – Sony Bravia – DTV & Blu-ray Device Ubiquity
- 86. 2011 • May – Android • Nov – First e-readers – Kindle Fire, Nook Device Ubiquity 2010 • Mar – Nintendo Wii (disc) • Apr – Apple iPad • Aug – Apple iPhone • Sep – Apple TV • Oct – Sony PS3 (no disc) • Oct – Nintendo Wii (no disc) • Nov – Windows Phone 7
- 87. 2010 - Canada 2011 - Latin America 2012 - UK, Ireland, Nordics 2013 – Netherlands 2014 - Austria, Belgium, France, Germany, Luxembourg, Switzerland 2015 - Australia, New Zealand, Japan, Spain, Italy, Portugal Geographic Ubiquity
- 88. • English • Spanish (Latin American) • Portuguese (Brazilian) • Dutch • French • German • Japanese • Spanish (Castilian) • Italian • Portuguese (European) Language Ubiquity - Subs, Dubs, UI
- 92. Before Global • English • Spanish (Latin American) • Portuguese (Brazilian) • Dutch • French • German • Japanese • Spanish (Castilian) • Italian • Portuguese (European) Global • Chinese • Korean • Arabic Language Ubiquity – Sub, Dubs, UI
- 94. US-East-1US-West-2 EU-West-1 Reliably and efficiently serve any customer from any region
- 95. Eventually Consistent, Ubiquitous Data
- 97. EVCache Replication Repl Writer Kafka Application Client EVCache Replication Repl Writer 1. Set or delete 2. send metadata 3. poll msg 6. set or delete Application Client Kafka 7. read EVCache Cross-Region Replication Region BRegion A
- 99. US-East-1US-West-2 EU-West-1 Reliably and efficiently serve any customer from any region
- 102. How do we achieve scale?
- 103. 2. Strategic Focus
- 104. The essence of strategy is choosing what not to do. - Michael Porter
- 105. Hardware Pay per view Electronic sell-through Ad supported Sports News Netflix doesn’t do
- 106. 60% price hike No integration New brand Shedding Legacy
- 108. Was this bad strategy?
- 109. DVD
- 112. Vision Strategy Netflix vs. Blockbuster #NetflixEverywhere GitHub Universe Today’s Journey
- 113. Platform-enabled development ecosystem The destination for software engineers Jason Warner
- 115. From Monolith to Modern Architecture Reliable Scalable Secure Fast Layered Distributed Portable Multi-region Multi-cloud
- 116. Compute & Network – DC/Cloud Runtime Orchestration - Kubernetes Desktop GitHub.com Storage – file/object, MySQL, NoSQL, cache, Git, etc. BrowserGitHub Architecture 3rd Party Load Balancer/Routing Proxy Platform Services – data access, pipelines, transformation, workflow 3rd Party API Gateway – ecosystem public interface
- 118. Take-aways Be proactive Put first things first Be visionary Study strategy Drive alignment
- 119. Make an impact!
- 120. ? ? ? ?
- 121. Josh Evans Senior Director of Platform Service Engineering @ GitHub November 13, 2017 Vision & Strategy Epiphanies of a Netflix Leader
Editor's Notes
- Explicit, intentional work of leadership
- John Lasseter Steve Jobs Ed Catmul
- Netflix had a 5 year headstart while blockbuster clung to their existing business model Evidence of a counter positioning strategy
- In 2009 Hacking Netflix went on a tour of a Netflix DVD shipping center. They found this unmarked building and truck outside. 3a.m. The mail is picked up from the Postal Distribution Center and the workers start processing the DVDs.
- Each envelope is ripped open by hand, and the DVDs are inspected for cracks.
- The NPI sorter performs multiple tasks, and is even used to process employee time cards. The DVDs are run through the machine once to check them back into inventory, a second time to determine if they are being rented that day, and finally to be addressed and sorted for mailing when they are in the envelope. The Hartford shipping center has 3 of the NPI machines, and they are incredible fast and process 30,000 discs per hour.
- first barcode scanner, inkjet printer for addressing, and the final scanner for sorting
- The Stuffers load the envelope onto a conveyor, use suction to open the pocket, slide the DVD into he envelope, fold the cover over, seal the envelope, and apply the round sticker.
- Streaming became the disruptive startup within Netflix – funded by a profitable DVD business The vision remained the same – the only change was the delivery mechanism.