Being Netflix: Magic potion of Netflix’s ‘No Rules Rules’

September 30, 2020 4:30 AM

No Rules Rules is a compelling read and makes one wonder: Do they make people like Reed Hastings and organisations like Netflix anymore?

What many other Silicon Valley behemoths hang on posters in their officers, Netflix actually walks that talk.

By Srivatsa Krishna

“Satyam bruyat priyam bruyat,
Na bruyat satyam apriyam,
Priyam cha nanrutham bruyat.”
“Speak the truth, speak that which is pleasant; Do not speak the truth that is unpleasant. And, do not speak untruth even if it is pleasant.”

Reed Hastings, the iconic founder of Netflix, gives a new meaning to this ancient Sanskrit verse by creating the modern equivalent of the British Empire expanding across the globe by fostering a culture of brutal candour even if unpleasant but if in the larger interests of Netflix. Pretty much like he is taking Hollywood out of business, he could take out Daniel Goleman out too by starting an EQ consulting firm, for this landmark book (No Rules Rules) is a doctrine on emotional intelligence and organisational culture for a truly hyper-performance organisation.

It is an anti-Bell Curve book, for it defines the success of Netflix through the lens of its own performance curve, which negates everything that the force-fit of the Bell Curve taught us. It is an exceptionally well-written book—for the two authors, one is a practitioner of leadership and the other, Erin Meyer, a teacher of it, weave in and out of chapters with their own distinctive lenses to look at the identical issues. It’s a fascinating read how the leader explains his logic and then the academic analyses it through the lens of rich theory. What many other Silicon Valley behemoths hang on posters in their officers, Netflix actually walks that talk.

Netflix is perhaps the only one who beat the pandemic, with 190 million subscribers in 190 countries! To give you an idea of how successful Netflix has been in raw commercial terms, by following a ‘No Rules Rules’ culture a $1 invested in it (in 2002) has become a $469 (2020) versus a $1 becoming less than $4 over the same period (on NASDAQ or S&P 500). So, it’s not a namby-pamby touchy-feely thing. Not too many people know that much of the invention inside the first iPhone actually came from Nokia!

They did the first touchscreen phone, the second camera phone, the first to do a browser, and they even had an app-store three years before the iPhone came along. But unlike Nokia, which was a superb product company, Apple was a platform ecosystem which leveraged the inventions of Nokia, and the rest is history. Likewise, Netflix has leveraged technology and people in a magic potion that has completely disrupted Silicon Valley’s technology culture and Hollywood’s business model.

And over a period of less than two decades, it has moved from being a DVD mail-order company to a streaming giant (in a duel with Amazon Prime); from being a purveyor of old content to streaming new content of studios; from licensing external content to building their own in-house studio content which is now globally acclaimed (taking Hollywood studios head-on); and lastly from entertaining America to entertaining the world by going global (thus taking on many entertainment companies around the world).

So, what is this magic potion of Netflix’s No Rules Rules (NNRR)? The book is peppered with extraordinary authentic anecdotes of employees solving for specific problems and how they did it (or did not do it) and how the NNRR culture is juxtaposed with it or evolved through it. It actually flips on its head many conventional wisdoms. For example, in most organisations—mine included, which is one of the complex ecosystems on the planet namely the Indian government—we always praise what is praiseworthy in public, but scold in private.

NNRR does the opposite—it encourages, non-personal, but intensely personalised, 360-degree feedback on a continuous basis, every single day, in front of everyone. This can only work in a kind of cauldron of super-high performers, who are always self-starters, with good self-esteem, without requiring much (any?) external stimulus. On giving feedback NNRR espouses ‘AAAA’ principles (‘Aim to Assist’, ‘Actionable’, ‘Appreciate’ and ‘Accept or Discard’). Netflix believes one star is better than two mediocre employees.

Likewise, through brutally honest examples from his own personal life, Hastings evocatively delineates how he lost sight of his own personal goals and then returned to face the truth, exhaust his karma and learn from it. Likewise, it pioneered a vacation policy which changed the game, by neither counting days or weeks or months, nor requiring approvals—leaving it to the maturity and judgement of individual employees to do whatever was in Netflix’s best interests.

Creativity cannot be born in the confines of a 9-to-5 workplace and this is now slowly being emulated by other companies. Some of the other pithy NNRR are as follows: Spend Company Money as If It Were Your Own, Don’t Seek to Please Your Boss, Seek To Do What Is Best For The Company, Farm for Dissent or Socialize the Idea, and If It Wins, Celebrate It; If It Fails, Sunshine It. The more deeply one thinks about these, the more it becomes amply clear that these are the mantras for the super-performing individuals and organisations, who while they leave their egos at home while going to work, yet keep pride in ‘Being Netflix’. Those who abuse the freedom (from the Netflix’s Freedom and Responsibility Act) are shown the door with a generous golden handshake. It’s a single strike game over, never two strikes.

Whether these can be replicated in another organisation, in another industry, in another ecosystem, is stuff for future research—but prima facie that sounds tough without the benefit of having an exceptional leader like Hastings who seems to have created many mini-Hastings to make the magic unfold!

In a Bell Curve organisation, especially in Confucian societies, public criticism will almost always be taken as ‘shaming’ which can lead to more, not less, dysfunctionalities in behaviour. (Surprisingly, the book does not mention China even once, perhaps because it is not present there). It is in countries like China and India (which is like 30 European countries inside a common border, where language, culture, nay ‘rules’ change every couple of hundred miles) that NNRR will face its greatest challenges. India has bits of Japan and America, Brazil and the Netherlands, Singapore and Saudi Arabia in it (to quote examples from the book).

One of my mentors, the late Clayton Christensen, the guru of innovation and disruption, in his seminal ‘Tools of Cooperation’, used to often talk of ‘surrounding oneself with the best’ so that the net vector of their forces could build high-performance companies by continually moving from power to management to leadership to culture tools. NNRR appear to the next evolution of the culture map of Meyer and the tools of Christensen.

No Rules Rules shows that where you stand depends on where you sit and what you walk has to be what you talk. The soul-stirring examples and stories in it sometimes do make one wonder if they have mixed up causation with co-relation or correlation with causation? But something about the book makes it authentic and unputdownable. It is a compelling read and makes one wonder do they really make people like Hastings (and his army of mini-Hastings) and organisations like Netflix anymore?


The author is an IAS officer. Views are personal

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Data drive: A little respite, but not out of danger
2Using corona vaccine as a poll promise a cynical attempt to play on pandemic fears
3Fighting Covid-19 pandemic: Show us the evidence that lockdowns work