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Thursday, May 13, 2021

There’s really no return to normal after a crisis

Netflix CEO Reed Hastings writes that we may find the rules for growth and success rewritten again

Written by Reed Hastings |
Updated: September 9, 2020 7:46:50 pm
Netflix, Netflix CEO, Netflix CEO Reed Hastings, Netflix growth, netflix covid 19 pandemic, netflix lockdown effectThis is something we’ve been practicing over more than two decades of building Netflix as we’ve reinvented ourselves from DVDs by mail to streaming and most recently from licensing shows and films to creating them ourselves

COVID-19 forced the world to adapt in unexpected ways, including new rules for where to work or stand and what to wear. When the pandemic ends, we don’t know what the lasting effects will be. But with millions of people working from home, one shift that the crisis may have is toward a less controlled and bureaucratic approach to work that allows companies to adapt more quickly while giving their employees more autonomy and flexibility.

This is something we’ve been practicing over more than two decades of building Netflix as we’ve reinvented ourselves from DVDs by mail to streaming and most recently from licensing shows and films to creating them ourselves. Netflix’s ability to compete in an industry undergoing fundamental change against bigger and more entrenched competitors is linked to the unusual amount of independence we have given people at all levels of the company.

We call it “freedom and responsibility”. In other words, we encourage people who work at Netflix to think for themselves – versus do what their bosses assume is right. To make that happen, we’ve scrapped policies around expenses and travel, mandatory office hours and vacation time. When we started the company, we didn’t set out to specifically eliminate all these rules, but rather to push employees to take chances given they have an important stake in the business. It’s for the same reasons that we make all kinds of confidential information that many companies keep under lock and key available internally – like contracts or how our business is performing day to day.

So in March, when many countries went into lockdown, our teams moved thousands of employees and partners in areas such as customer service, animation, visual effects and dubbing to remote working – all without having to check in with me or our management team. It’s not that we weren’t available to give advice rather that these teams had the freedom to exercise their judgement. It hasn’t happened yet, but I believe the most successful quarter I could have as CEO is one where I don’t make a single decision.

Netflix, Netflix subscription, Netflix monthly active users, netflix MAU, netflix valuation, netflix subscriptions, netflix users, tech news, technology Reed Hastings, co-founder and CEO of Netflix (Source: Reuters)

More than 200 years ago, the Industrial Revolution led to a succession of astounding technological advances that made manufacturing at scale possible for the first time. The goal for most companies was mass production with as little variation and as few errors as possible in the finished product – whether it’s automobiles, apparel or airplanes. The model is dependent on top-down, hierarchical decision making reinforced by rules and processes to eliminate mistakes.

But in today’s creative economy, the priority is innovation, speed and agility. The biggest risk isn’t the mistakes; it’s the failure to invent new products or change direction when the environment shifts. But innovation is by nature a process of trial and error. You generally don’t make progress without failing. It’s why so many companies falter when technology shifts. Nokia didn’t see smartphones coming. AOL didn’t drive the move from dial-up Internet to broadband. And Blockbuster didn’t make it from dominating home video to streaming.

Our approach to business can seem radical. And you can’t take away controls and processes to spur innovation and risk-taking without first ensuring you have the right people. But once you do, why manage for the outliers who abuse their expense accounts or don’t operate in the company’s best interests, when the benefits to the vast majority of being treated like adults are huge? We have no dress code, but no one chooses to come to work naked.

Looking at what’s happened during the pandemic, it’s clear there is a shift happening already – with firms throwing out old rulebooks, figuring out how to be productive with their people not in the office, or how to quickly pivot their sales online.

Given the enormous resources being invested by governments and drug companies and the collaboration with researchers, the outlook for a COVID-19 vaccine is good. Recovery, hopefully, is on the horizon. How can we find some good from this tragedy to restore economies and drive innovation? Looking back in the last two decades, there’s really no return to normal after a crisis. History shows that new, often uncomfortable shifts, persist but lead to new opportunities and growth. For example, E-commerce exploded in Asia during the 2002 SARS epidemic when citizens were quarantining. The sharing economy, with startups like Uber and AirBnb, took off after the 2009 financial crisis when people were seeking much-needed new sources of income. As we look forward to a safer and less challenged future, we may find the rules for growth and success rewritten again – with fewer of them.

Hastings is CEO, Netflix

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