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- Rules annoy us
Rules are developed to create boundaries and to dictate behavior.
As most companies grow in size and complexity, they try to eliminate error by creating more and more policies. This drives out the creative mavericks who invent the future. A rules-driven business can grow in its original market, but invariably the market shifts in some way and the company follows the rulebook off the cliff of irrelevance. Too many tech companies have grown big, and then failed to adapt.
With the belief that rules temper creativity and innovation, our modus operandi is based on anti-bureaucracy. Instead of adding rules as we grow, our solution is to increase talent density. Great people make great judgment calls, despite ambiguity. To provide employees context for great judgment, we are very open internally about our business, our customers, and our strategies.
We want to innovate faster as we get bigger. We provide employees great freedom, and we?ve found that when we do, employees demonstrate great responsibility and accomplish amazing things. By way of examples, our vacation policy for salaried employees is ?take some? - our expensing policy is ?expense what you need to buy to do your work well?.
We believe in freedom and responsibility, not rules.
Our only absolutes are integrity and legality.
- Our consistently outstanding people
We?re a high-performance team, not a family.
A strong family is together forever ? no matter what. A strong company, on the other hand, is more like a professional sports team which is built to win. It is our philosophy that it is the responsibility of management at every level, to assemble a team that will generate huge success.
To accomplish this, we seek to fill every position in our company with exceptional performers.
In many companies, adequate performance gets a modest raise. At Netflix, adequate performance gets a generous severance package.
For us, the cost of having ?adequate? in any position is simply too large, when we could have ?extraordinary?. Extraordinary performance means excellence in the nine values described above ? which converge on talent and teamwork. Putting extraordinary talent together makes for a highly functioning and successful company.
In our view, the benefit of a high-performance culture is that you work with consistently outstanding colleagues which is exhilarating. You do your best work, you learn the most, and you achieve a high level of professional satisfaction, when you?re surrounded by excellence.
With a small team and few layers, you will be able ? in fact, are expected ? to make a real contribution to the business. We hire people who are great at what they do and we give them the freedom to practice their expertise without ?second guessers? or ?PowerPoint approval meetings?. The results are that you can get things done quickly and you are able to see the business impact immediately. Netflix is small enough so you can make a difference (and nimbly so), yet big enough to change the way millions of people enjoy their movies.
- We love movies
Many of us are into movies; some of us are just developing the love. Each year a few hundred of us flock to the Sundance Film Festival to watch films obsessively (and subsequently talk about them all year long). In our theater in Los Gatos, we show films screenings at work, and best of all, employees get a free 8-out Netflix account to gorge themselves on movies to satisfy their cravings.
We live at the crossroads of technology and entertainment, and we?re passionate about both. - Our amazing future
Our goal is to expand to over 20 million subscribers in the near future and along the way provide our customers the additional option of Internet movie delivery.
For reasons both commercial and technological, we are convinced it will be a number of years before Internet movie delivery is even 10% of the DVD market. In the music business, eight years after Napster and five years after iPod, CDs continue to make up over 90% of music industry revenues. DVD will not be the dominant format in movies forever, but it will be for a very long time.
Accordingly, we are making big investments in improving our DVD service. Our web software, which creates a custom website for each customer, is still in its infancy. We are constantly improving our proprietary logistics system which handles millions of DVD shipments to and from customers daily. In 2006 alone, we will invest over $200 million to market the Netflix brand. Furthermore, our film acquisitions group is growing and will be showcasing more and more films from smaller production houses and independent film producers. In short, growing to 20 million customers is transforming every aspect of our business.
In addition to growing our business to 20 million DVD-rental subscribers, we are focused on leading the industry in movie downloading. Just as consumers watch movie previews from our website today, in the future they can choose to watch full-length movies delivered electronically by Netflix. We believe electronic downloading to be a relatively small near-term market as the movie studios continue to protect their vast DVD profits concurrent with the industry?s slow migration of bringing the Internet to the television. Over time, however, Internet delivery will become a huge opportunity for us.
Way back in 1997, we very consciously named the company ?Netflix?, and not ?DVD-by-Mail?. We intend to become the leading company in Internet movie delivery, and expand the movie market significantly. So while we have achieved great success over the past decade, the most exciting and radical years of our company are just beginning.
A final note about the connection between corporate success and respect. A great company earns, and is able to maintain, the respect of its customers, suppliers, investors and employees in large part to delivering on promises made. A great company, and a great brand, is essentially that ? a promise fulfilled. We promise our customers stellar service, our suppliers a valuable partner, our investors the prospects of sustained profitable growth, and our employees the allure of huge impact.
Delivering on these promises is our quest.
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