Gibson Biddle has worked in product at several entertainment companies, such as Netflix, Mattel, and EA, as well as educational companies such as Chegg and The Learning Company. In his presentation, he discusses “wicked hard” decision-making and how it is a practiced art, and can be very easy with practice. He discusses all of these experiences through the lens of Netflix, where he was the Vice President of Product.
A Brief History of Netflix
According to Gib, the first idea for Netflix was in 1997, when co-founder Marc Randolph mailed himself an audio CD and it wasn’t scratched when it arrived. Since that was the time that DVDs were starting to show up, he thought that maybe they could be mailed as well.
In 2002, Netflix went public. While they had around 600,000 subscribers at launch, they had a challenge to face. There was a major anthrax scare in 2002, making people afraid to open their mail.
Then in 2007, Netflix launched their streaming platform. They began with 500 movies that were less than admirable to say the least, but they were all they could obtain. By 2013, they made the $100 million investment to make House of Cards. Finally, this year, Netflix has officially reached 100 million subscribers. Netflix may be one of the biggest companies in the world today, but it took almost 20 years and a lot of decisions and challenges to get there.
Decision Making at Netflix
Gib explains that most decisions that were made throughout their journey were not difficult, as they were able to A/B test most things. They focused on consumer science, but rather than using their data to make decisions, they used it to get inside the consumer’s head.
For example, they used A/B testing to make the decision to implement the “thumbs up/thumbs down” rating system, replacing the “five star” rating system. After Netflix became an international company, and after Facebook familiarized everyone with the “thumbs up” symbol and usage, they found that people were more likely to use this new rating system over the old one.
In 2005, they sent a team to London to launch their service overseas. They were going to be the first international DVD rental service. After investing 18 months into this project, they were one month from launch in London when they heard a rumor that Amazon was launching a DVD-by-mail rental service in the US.
At the time, Netflix was a small startup. Amazon, however, was already a huge established company and household name. It was clear to the Netflix team that this move was going to change things for them, and so they had to make a decision. They needed to decide if they were going to launch internationally or not.
They ultimately decided not to launch, ignoring their sunk costs, and focusing on Netflix’s long-term goals. They knew that implementing a streaming service when they went international would make much more sense, because of how complex the mail systems outside of the US can be for US-based companies. They took the team of engineers that were originally going to work on the London-based DVD rental service, and had them work on streaming and personalization instead.
Partnering with Hardware Manufacturers
In 2007, Netflix started to look into partnering with hardware manufacturers to get Netflix content streaming on people’s televisions. There was high demand for such a device, but their investors on Wall Street were wary, as were their other potential hardware manufacturers such as Playstation, XBox, and Wii.
Wall Street was wary because hardware tends to be low-margin, whereas software is high-margin. Netflix’s potential partners (TV/video hardware manufacturers) were wary because they wanted the streaming content, and this kind of device at the time would have been difficult for them to compete with. Because of the situation in London (see “Expanding Internationally”), Netflix decided not to launch this hardware project, and the team that was supposed to be working on it later went on to develop the Roku.
Gib learned a lot from this experience. First, he learned to challenge plans. His CFO went against a team of a hundred people, one month from launch, and stopped the whole operation. It was a risky move but it eventually worked in their favor. Gib also learned to be patient, strategically. They knew they wanted to get Netflix streaming to people’s television but, in the long run, it didn’t really matter if that happened immediately or six months later. Contrastly, Gib also learned to be urgent, tactically. They had a number of experiments being conducted at any one time, and one of them worked – they were able to get their service on the XBox. From there, they convinced Playstation to partner with them, and then they eventually made it to the Wii. Within 18 months, about 20 percent of their customers were streaming Netflix on their televisions.
Frame the Stakes
Gib has learned that in making decisions, you want to frame the stakes. Is the decision you’re making a high or low-impact decision? Is it a decision that you’ll be able to back out of if need be? You also want to talk about the timeline in making decisions, and how the process will work out. Who will be making the decision and what data will you need?
You also can’t forget to have a strategy – be clear about your tactics and measure the effectiveness with metrics. Strategic patience, as well as tactical urgency, are critical. Don’t rush your long-term goals, but do push forward with your short-term operations.
Gib also urges you to obsess over your customers. If you’re constantly concerned with your customers’ needs, you will always succeed, because you will be constantly setting the bar higher for yourself. Throughout his time at Netflix, Gib has learned to care more about delivering customer value than shareholder value.
Stay Humble & Keep Your Humility
Gib notes that humility is very important in decision making, especially in technology. An example he uses is Amazon’s attempt to develop a mobile phone – It was an enormous failure. However, they simply shrugged off the setback and went on to develop the Amazon Echo, which is now the industry leader in voice technology.
The take home: be willing to make some big bets along your journey, be ready to shrug off big failures, and never forget to invent, act, learn, build, and repeat. Once you get that cycle down, making wicked hard decisions won’t be all that wicked hard anymore.