How Subscriber Declines May Affect the Netflix Culture

Source: Variety.com

Recently, my students read No Rules Rules, the book about the Netflix culture by founder and CEO Reed Hastings and INSEAD Professor Erin Meyer. I asked students to analyze the question: Is the Netflix culture transferable to other organizations? If so, under what conditions? The students did a terrific job debating this question among themselves and with six other faculty I invited to class. Then, the news broke just a few days later about the loss of 200,000 subscribers last quarter, along with the expectation of more churn to come. Netflix faces pressure because of price hikes that may have finally dented demand, as well as intensifying pressure from other streaming services such as HBO Max and Disney+. The recent news sparked a new question for me: How will the new competitive circumstances and performance decline affect the Netflix culture? Will the unique culture be a crucial asset that enables Netflix to bounce back, as it has in the past when faced with challenges? Or, will the culture be tested by these new circumstances?

Let's consider a few attributes of the culture.  Hastings argues that talent density is the crucial foundation for the Netflix culture.  Will the strong talent enable Netflix to find innovative ways to reinvent themselves in the face of competitive pressure?  Or, will the firm find it much harder to attract top talent now that the go-go growth years may be behind them?  Culling the "adequate" employees, while retaining the stars, may become challenging as the firm seeks to cut costs.  Will "adequate" stretch to include some very talented people, and how will that affect the environment within the firm?  

Netflix also prides itself on an environment of radical candor.  However, challenging times can cause psychological safety to suffer.  A culture of candor can become a culture of fear if leaders are not careful about how the "postmortems" are conducted in the wake of recent stumbles.  

Finally, what about the vaunted autonomy that has made Netflix a welcoming place for highly creative individuals who enjoy taking initiative, experimenting, and taking calculated risks?   Will senior leaders find it necessary to curb autonomy as they seek to turn the ship around?   If so, employees accustomed to a great deal of freedom may find it quite frustrating. 

Bottom line:  Cultures are often tested in times of adversity. They can either be the glue that keeps a firm together and helps organizations overcome obstacles, or they can come unglued by decisions that seem to conflict wit the norms and values to which employees have become accustomed.  It will be interesting to watch how the Netflix culture evolves as the firm navigates these much more turbulent competitive times.