"Why I Say Your Learning of the Netflix Model Will Eventually Fail?"

This article is Lu Canwei's 107th original piece.

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Today, an old colleague sent me a piece of code, saying there was a problem with it. I looked at it and saw that although I submitted it, the author was another colleague, so I told him to go find that person.

Later, I thought about it and realized something was a bit off.

First of all, this code was submitted by me; secondly, I borrowed the relevant code from other projects, so essentially, this should be my responsibility, but I habitually passed the buck.

Breaking the Inertia of Thinking

We are always accustomed to doing things based on our instincts, which is logical from a human nature perspective. After all, if you encounter a wild beast in the wilderness, your instinctive first reaction is to run away, not to ponder whether you should run. Of course, if you have a Gatling gun in hand, your instinct should be to assess whether the other party should run.

Inertia of thinking exists for both individuals and companies.

Most companies rely on inertia of thinking to establish a set of process systems, such as linking bonuses and salaries to annual performance, building employee friendships through celebration activities, and implementing performance improvement plans for underperforming employees. They establish different levels, set different ranks, and ensure employees do not make mistakes through standardized processes and approvals.

In 2001, Netflix experienced a bankruptcy crisis, during which they had to lay off one-third of their employees. However, after laying off many middle managers, they found that not only did it not affect the company's business, but it also increased everyone's efficiency compared to before.

After experiencing this crisis, Netflix discovered that hiring high-performing employees and working with them was more attractive than providing employees with free snacks, reimbursement for overtime taxi rides, large signing bonuses, or stock options. Netflix found that even after canceling the annual leave system, the amount of time employees took off remained the same as before, so they realized the core issue was how to quickly recruit adults, as only then could they confidently and boldly let go of those "man-babies" from the company.

How to define adults? Netflix found that the reward adults crave the most is success. They cited an example where Netflix's VP of Innovation became the Chief Product Officer at an innovative online education service provider, Coursera (founded by Andrew Ng, which just went public recently). They set a goal to launch 50 new courses by September, and ultimately, their team completed this task, significantly increasing the company's revenue. The Chief Product Officer later recalled that he chose the challenge because of the "desire to climb mountains," and that what they were doing was meaningful, bringing something new to the world, which drove them forward.

I have also faced some challenges, and one that stands out was many years ago when, without resources, I was simultaneously managing an online version of an app that had been released for several years and redeveloping a new app that included hundreds of features from the past few years. While both sides were continuously adding new features, the team completed the replacement of the online version in just a few months. During that time, even though everyone was working on 10106, sometimes even 10107, I noticed that every team member was gaining a strong sense of satisfaction from their work.

So the question arises, how to recruit adults?

If we follow the inertia of thinking, HR colleagues would definitely post various job descriptions on recruitment websites and contact different headhunting companies to hire people. But Netflix did not do that; instead, they directly recruited people who had worked at headhunting companies and established a professional internal headhunting team that would only recruit for their own company.

Once the people are recruited, how do they know what to do?

If we follow the inertia of thinking, everyone would formulate annual plans and budgets. I believe everyone has made annual plans, but we all know they are not very useful. Because plans cannot keep up with changes, many annual plans end up being incorrect. Therefore, Netflix stopped making annual plans and instead spent more time on quarterly plans.

Understanding Company Business

From the perspective of inertia of thinking, grassroots employees do not participate in high-level company decisions. Netflix broke this inertia of thinking, realizing that rather than wasting a lot of time on various training programs to motivate employees and assess performance, the benefits were far less than helping employees understand how the business operates.

They found that in management reporting meetings for investors, attendees could learn a lot of new knowledge, so they adapted this format for employees and launched a New Employee University. This New Employee University teaches employees about all aspects of the company's operations, the metrics and results of each business department, and introduces the heads of different business areas to new employees.

At this point, you might wonder, don't many companies have similar training for new employees? What’s the difference?

At Netflix, new employees can ask questions of anyone, including all managers up to the CEO. There was an example where a senior executive was explaining what the "window period" for distributing films was, and an engineer asked the executive, "Why is the window period like this? It seems quite stupid."

In most companies, this might lead to a warning for dismissal for openly criticizing the boss, implying that the employee doesn't want to stay. This is the conventional practice in the industry, yet no one has ever questioned this approach. Just like before mobile payments emerged, everyone thought using cash was cumbersome, but they accepted it as normal. Before ride-hailing services appeared, everyone thought they had to stand by the roadside and hail a cab at random.

This reminds me of a fable.

At that time, the Netflix executive could not answer the question, so he candidly said, "I don't know." From then on, Netflix began to challenge industry rules. Traditionally, films would first be shown in theaters for a period before we could see them on other channels, such as DVDs or online. However, Netflix's original films were released simultaneously in theaters and on streaming platforms, breaking the industry's "window period" rule.

In China, there is a company that is also wildly challenging industry rules. After the copyright of "Lost on Journey" was bought by ByteDance, it was directly premiered online for free, adopting a "zero window period" strategy, which led to a joint boycott by major cinemas.

Of course, most of the time, blindly copying may lead to a problem of miscommunication. The most common scenario is that programmers are often unwilling to explain technical implementations to product managers because, in most programmers' eyes, product managers are just people who keep changing requirements. Conversely, product managers may feel that programmers are like monkeys who cannot speak human language.

As I wrote more articles for my public account, I realized the importance of speaking plainly. Many internet jargon, when explained to others, can make you seem foolish from their perspective.

For managers, sharing information about strategy, operations, and results with all employees allows them to discuss issues from the same dimension, which includes all managers, including the CEO.

This can enhance employees' decision-making abilities, and employees will know the five most important things for the company in the next six months. This communication will enable them to make the best decisions for the company, and managers need not worry about employees making decisions that could harm the company.

Is the Netflix model really good?

If you look closely, you will find that everything at Netflix is based on the uncontrollable resource of people. They invest a lot of energy in selecting, training, and establishing a unique corporate culture at Netflix.

First, Netflix's product is streaming media, and all content comes from creativity itself. A good idea can bring infinite value to a company; the value brought by one person's creativity can equal that of others. It's like investing: if you invest in ten high-potential stocks, the rise of one stock might offset the losses from the other nine and still yield high returns.

Once a high-quality idea is generated, the distribution cost for Netflix is very low. Theoretically, a movie or TV show can be watched by people worldwide, and the cost of replication is nearly zero.

Whether it’s high transparency, flat structure, high freedom, data-driven communication, high matching of positions and employees, paying salaries based on employee value, or a unique evaluation mechanism to eliminate employees, all these foundations are based on treating human resources as products to be managed.

However, Netflix's model may not necessarily be suitable for domestic companies. Most companies do not operate on high profit and low cost, but rather on low profit and high cost. So why can these companies survive and thrive? Because of the huge demographic dividend in the domestic market, even thin profits can yield good returns under exponential growth.

However, we see that many giants are operating at a loss. So why can they continue to operate? With a large user base, companies often adopt a diversified business strategy, which is why you see telecommunications companies venturing into gaming, e-commerce companies getting into telecommunications, short video platforms entering e-commerce, and everyone trying to build cars together.

When the demographic dividend still exists, everyone is a tool. Because the growth dividend can completely cover the demand for talent, at this time, time is more important than quality. Most products are business-intensive rather than creativity-intensive; even in streaming media, many creative ideas are directly purchased for adaptation. When the growth rate of a business slows down, the common choice is to start a new business to maintain the company's growth rate, which is often more cost-effective than improving the efficiency of the existing business.

Another point is that domestic policies can affect a company's strategy at any time, making it difficult for a bottom-up model to allow teams to quickly adapt to changes in corporate strategy. When I start a new business, if I continuously communicate according to Netflix's model, I may very well lose to competitors in terms of timing, as they may have already taken the lead in capturing the market, creating a winner-takes-all situation.

Therefore, domestic companies often adopt a strategy of "cultivating a variety of teams," where multiple teams work on the same business, and whoever succeeds first gets support. The most famous example of this is Tencent. It's not just about competing with competitors; it's also about competing with other teams.

However, as the demographic dividend disappears, talent will increasingly shift from being viewed as a tool to being seen as a resource. After all, even Pinduoduo is struggling to maintain its growth now. Companies will increasingly crave high-quality talent resources, and we can see that the 996 work culture is gradually fading. Even companies that implement a "big and small week" system are offering double pay, and more and more companies are beginning to promote their values and methodologies, placing greater emphasis on talent.

After all, we are in a period of unprecedented change in a century, and the future is promising.

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