Netflix’s core mission, strategy, and vision are that of “improving its members’ experience by expanding the streaming content with a focus on a programming mix of content that delights members and attracts new members.”
|Aspect||How Netflix Achieves It||Analysis & Implications||Advantages|
|Mission & Strategy||– Focuses on expanding streaming content to enhance user experience.||– Prioritizes user satisfaction and attracting new members.||– Rapid growth and a large subscriber base.|
|– Invests in original content creation and binge-worthy releases.||– Pioneers binge-watching culture, driving subscriber engagement.||– Strong content library and market position.|
|Business Model||– Offers subscription-based plans with varying features.||– Generates substantial revenue and profit through subscriptions.||– Steady income stream and scalability.|
|Financial Performance||– Achieves profitability but has negative cash flows due to content investment.||– Balances content creation and profitability.||– Ability to invest in high-quality content.|
|Core Values||– Values include judgment, communication, curiosity, courage, passion, selflessness, innovation, inclusion, integrity, and impact.||– Promotes a culture of trust, autonomy, and accountability.||– Attracts talent and fosters innovation.|
|Highly Aligned, Loosely Coupled||– Emphasizes alignment on strategy and trusting employees for tactics.||– Encourages agility, innovation, and efficient decision-making.||– Maintains strategic focus while allowing flexibility.|
Netflix core strategy and mission
As Netflix highlighted in its 2019 annual report:
Our core strategy is to grow our streaming membership business globally within the parameters of our operating margin target. We are continuously improving our members’ experience by expanding our streaming content with a focus on a programming mix of content that delights our members and attracts new members. In addition, we are continuously enhancing our user interface and extending our streaming service to more internet-connected screens. Our members can download a selection of titles for offline viewing.
The volatility of content licensing and production used to be weaknesses, yet Netflix invested substantial resources in developing its own content:
The Netflix content, and the way it delivered it became so addicting to members that a new term would be made popular by how Netflix distributed the content all in batches, without pacing it: binge-watching.
Indeed, that is the practice of watching TV series all at once. In a speech at the Edinburgh Television Festival in 2013, Kevin Spacey said: “If they want to binge then we should let them binge.” This new content format would be popularized by Netflix, launching its TV series all at once.
Netflix makes money with three simple plans:
- And premium,
Those subscriptions give access to stream series, movies, and shows. The company is profitable, yet it runs on negative cash flows due to upfront cash paid for content licensing and original content production.
Netflix is a profitable company. It generated over $1.2 billion in 2018, a 116% increase compared to 2017, primarily driven by substantial growth in paid memberships.
However, Netflix has negative cash flows as it invests massively on content license agreements and original content.
As highlighted, on the Netflix career site its core values are:
This translates in five core actions:
- Encourage independent decision-making by employees
- Share information openly, broadly, and deliberately
- Are extraordinarily candid with each other
- Keep only our highly effective people
- Avoid rules
Highly Aligned, Loosely Coupled
We spend lots of time debating strategy together, and then trust each other to execute on tactics without prior approvals. Often, two groups working on the same goals won’t know of, or have approval over, their peer activities. If, later, the activities don’t seem right, we have a candid discussion. We may find that the strategy was too vague or the tactics were not aligned with the agreed strategy. And we discuss generally how we can do better in the future.
The motto “highly aligned, loosely coupled” is in line with Netflix way to keep a startup mindset even though the company has scaled at the size of a tech giant.
- Mission and Strategy: Netflix’s core mission and strategy are focused on “improving its members’ experience by expanding the streaming content with a focus on a programming mix of content that delights members and attracts new members.” This involves continuously enhancing the streaming content library, user interface, and extending the service to more internet-connected screens.
- Content Creation: Netflix has invested significantly in creating its own content, popularizing the concept of binge-watching by releasing entire seasons of TV series at once. This approach has led to the success of Netflix Originals, which represents a strategic asset for the company.
- Subscription-Based Model: Netflix operates on a subscription-based business model, offering three plans: Basic, Standard, and Premium, giving subscribers access to a wide range of series, movies, and shows.
- Financial Performance: Netflix generated over $29.6 billion in revenue in 2021, with an operating income of over $6 billion and a net income of over $5 billion. The company is profitable but has negative cash flows due to investments in content licensing and original content production.
- Core Values: Netflix’s core values include judgment, communication, curiosity, courage, passion, selflessness, innovation, inclusion, integrity, and impact. These values emphasize independent decision-making, open communication, and trust among employees.
- Highly Aligned, Loosely Coupled: Netflix follows a philosophy of being “highly aligned, loosely coupled.” This means that while the company spends time debating strategy collaboratively, it trusts its employees to execute tactics without prior approvals. This approach allows for agility and innovation while maintaining alignment with overarching goals.