Masters of scale: Reed Hastings

Loved “Masters of Scale: Netflix’s Reed Hastings in Culture Shock“.  Definitively worth the listen.  In it, Reid Hoffman discusses company culture; what it is, its importance, how you use it, etc.  His main guest is Reed Hastings, the founder of Netflix.

Throughout the podcast, I felt that there was a lot of ideas that match what I read in the Peter Drucker book “The Effective Executive”.  Quite interesting.

Here are a few of my notes:

  • MOST of the times, innovation happens slowly.  SOME of the times, innovation happens fast. A corrolary of this is that MOST of the times, your strategy should be to improve what you have.  SOME of the time everything changes (which might mean imply throwing away your existing business model).  The trick is to recognize which one is which.
  • Reed Hastings started Pure Software in the early 90s.  The company grew quite fast, doubling every year.  Whenever Pure encountered a significant problem (bug or otherwise), Pure asked “What processes can we put in place so that this error won’t happen again?” Practically, this means more paperwork, more bureaucracy.  Pure dummy proofed the company… the side effect of which is that only dummies wanted to work there.  (His words, not mine… 🙂 ). The company became slow to adapt due to its processes and its employees’ mindset.  When the market changed, Pure Software was not able to adapt.
  • When Reed started Netflix, he felt he needed a different type of employee to deal with the oncoming changes in the video business (from DVD to streaming).  The company could not hire the same way it did at Pure.  In the case of Netflix, Reed wanted first principle thinkers (people who understand the big picture and act upon it).
  • To find these people, Netflix defined its culture deck.  You can find an old version of it on slideshare.  The latest can be found one the Netflix website directly.
  • Culture is paramount for a company.  It should:
    • be set up quickly (difficult to retrofit a company to a culture).
    • act as a filter (who to hire and who NOT to hire).
    • be a civilizing force (promotes teamwork over competition, diversity).
    • be internalized by employees.
    • evolve organically (reviewed on a permanent basis)
  • Netflix’s culture deck emphasizes honesty through the company.  The “Keeper Test” is an example of this. In it, the employee can asks his manager: “If I was leaving tomorrow, how hard would you fight to keep me?”  (This is very interesting, I’ve never seen this in a company, sounds harsh a bit but maybe radical honesty is a good thing?).
  • Culture does not override strategy.  You need to do both well.



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