4 Key Growth Oriented Takeaways for Your Subscription Business from Netflix’s Culture Manifesto

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In the e-commerce world, company culture is often spearheaded by stories of ping pong tables, free snacks, nap rooms, and casual office attire to improve workplace productivity and job satisfaction.

Take Shopify, for example. The e-commerce platform’s headquarters features a slide, arcade games, napping spaces, a sauna-themed meeting room, beanbag chairs, fitness classes, and even free meals and beer on tap.

While 53% of working professionals say that such perks contribute to a better quality of work life, it’s important to understand that cultivating a strong and vibrant culture takes much more than tangible products to reduce stress.

Culture is defined by the practices that reflect a business’s core values, ethics, expectations, goals, and work environment. Solid company culture must be built, not bought.

Netflix raised the bar on the notion of company culture when CEO Reed Hastings released the company’s groundbreaking culture ‘manifesto’ back in 2009. The manifesto emphasizes the importance of strong company culture and outlines Netflix’s own core values.

Described by Facebook COO Sheryl Sandberg as the most important document to ever come out of Silicon Valley, the slide deck outlined how the business shaped its now-famous corporate culture through hiring strong talent and giving employees the freedom to make their own decisions when it comes to vacation time, expenses, and parental leave. 

The original document has since been viewed over 16 million times and was recently updated in 2017 to underscore the importance of inclusion and respect.

For any business, a well-communicated organizational culture has the power to influence the direction of a business and everyday decisions, making it one of the most crucial factors to help you scale. Companies with a strong workplace culture that attract star talent can even see up to 33% higher revenues.

Here are some important takeaways from Netflix’s company culture that you can apply to your own SaaS or subscription-based business to enable growth:

1. Freedom and responsibility

“Our goal is to inspire people more than manage them. We trust our teams to do what they think is best for Netflix — giving them lots of freedom, power, and information in support of their decisions. In turn, this generates a sense of responsibility and self-discipline that drives us to do great work that benefits the company.”

A lot of businesses place an unhealthy emphasis on rules and process when they should be focused on empowering their employees to make the right decisions. They typically don’t start out this way, but throughout various stages of growth, different aspects of the business become increasingly complex. When this happens, organization typically starts to break down, opening the door for chaos to emerge and errors to spike.

In a lot of cases, rigid processes are implemented as a way to create order and relieve the chaos. At first, there are several benefits to this approach. With such processes in place, minimal thinking is required when making decisions, there are fewer mistakes, and efficiency is maximized.

On the other hand, micromanagement also tends to drive out talent and ultimately cripples creativity and innovation. As the market shifts, companies are unable to adapt because employees are so set in their existing processes.

Instead of focusing on rules, Netflix gives employees the freedom to make their own decisions and trusts that they will act in the company’s best interests. Managers are encouraged to provide transparency regarding decision-making and insight to enable sound decisions.

That doesn’t mean you should eliminate rules and processes altogether. The original Netflix culture deck breaks down the differences between a good and bad process. A good process helps improve productivity, while bad processes are driven by protecting and limiting people’s behavior to prevent recoverable mistakes from occurring.

Examples of healthy processes are keeping others in the loop when updating a piece of code and scheduling regular meetings to discuss strategies and goals.

Conversely, processes that could be detrimental in the long run include multi-level approval for certain projects and having 10 employees involved when interviewing potential new hires. The saying, ‘Too many cooks in the kitchen’ explains how more hands than needed distracts from critical decision making on projects.

2. Highly aligned, loosely coupled

“As companies grow, they often become highly centralized and inflexible… We avoid this by being highly aligned and loosely coupled. We spend lots of time debating strategy together, and then trust each other to execute on tactics without prior approvals.”

Another symptom of rigid, inflexible processes following rapid growth is visible when departments are divided into silos. This prevents different teams from communicating and collaborating on important matters.

Netflix, instead, focuses on aligning different departments and encouraging deliberate and open information sharing.

The aim is to develop clear strategies and goals across the entire company, leave the tactical execution to teams and departments, and eliminate micromanagement.

In any SaaS or subscription-based business, sales, marketing, customer success, and even billing are separate teams whose work is highly interconnected, so it’s important to empower them with the tools and processes to collaborate. Flexible boundaries encourage different departments to engage in joint planning and training activities, share the same objectives, and pursue the same goals.

Here are some of the benefits of aligning different departments:

  • Customer success and product alignment. Many businesses don’t consider a partnership between customer success and product teams to be important. This kind of thinking is a missed opportunity for companies to better understand and improve their customer experience.

    When introducing new products or updates, it’s critical to put the customer first. Aligning your organization around the success of your existing and prospective customers makes it much easier to acquire and grow these customer accounts. Customer success initiatives will also be more successful when customer success and product teams work in tandem.
  • Marketing and Sales alignment. The idea that sales and marketing should function as two separate entities with separate goals is quickly becoming a thing of a past. Considering the fact that sales and marketing alignment can drive between five and 36 percent of an organization’s growth, creating a solid, long-lasting partnership between these two departments is an integral move for any business looking to scale.

    Proper alignment not only improves the communication flow and makes it easier to close deals, but can also result in better customer retention rates, higher sales win rates, and less wasted leads or customer acquisition costs (CaC).
  • Sales and Billing alignment. Bridging the gap between your sales and billing departments is critical to ensure a smooth transition from prospect to customer, reduce time to close, and help manage potential sales revenue opportunities.

    When these departments are using two separate systems to manage the sales and invoicing process, numerous problems are bound to occur. For example, when a prospect becomes a sale and is transferred to the billing team, that customer’s information has to be manually entered into the billing system, increasing the chances of errors.
    In the event that the customer misses a payment, the sales team remains unaware because their system does not link billing status with account status.

    Without a seamless flow of billing information being transferred to the sales team, sales reps don’t have much leverage with customers when it comes to renewals, upselling, and add-ons.

    Integrating an automated recurring billing system with a CRM like Salesforce eliminates these issues and provides a streamlined, automated catalog sync. This means any closed-won opportunities are automatically transferred to your billing system, and customer information like subscription status and invoice details are always available to the sales team from within your CRM.
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3. Real values

“It’s easy to write admirable values; it’s harder to live them… We want everyone to help each other live the values and hold each other responsible for being role models. It is a continuous aspirational process.”

Netflix’s culture is guided by 10 core values that dictate how the company operates and how its employees treat each other. These are: judgment, communication, curiosity, courage, passion, selflessness, innovation, inclusion, integrity, and impact.

Two of these values, in particular, are incredibly important for any business to have.

A. Communication

Among the 10 core values Netflix outlines in its cultural manifesto, communication is essential for any SaaS or subscription-based business.

The Netflix culture stresses the importance of providing candid, helpful, and timely feedback and adapting your communication style to complement your peer or customer’s communication style.

These principles should also be applied to your customer retention strategies.

The subscription business model, for example, is driven by solid, long-term customer relationships fueled by steady communication, mainly in the form of transactional emails. These emails are incredibly valuable to the business, as they are opened two times more often than any other type of email. Additionally, transactional emails boast a click-through rate that’s three times higher.

It’s crucial that a customer feels they are being valued every time they open such an email, which means communication must be personalized. Simply put, if you act like a bill collector, your customers will treat you like one.

When a business is in start-up mode, entrepreneurs often overlook the importance of communication and only make it a priority once the business starts growing. But as your business starts to scale, staying on top of customer communication and messaging can become difficult with a large number of customers. This is particularly true if it’s all being done manually. Automation tools can you help meet this challenge.

A modern subscription management platform allows you to customize email communication that is then sent out automatically throughout the customer lifecycle.

A subscription management platform also has the capability to identify upcoming expiring subscriptions, failed payments, and impending credit card expirations. When these are recognized, the system automatically sends out the appropriate email communication notifying the customer of the situation.

B. Innovation

Netflix co-founder Reed Hastings once said, “Don’t be afraid to change the model.” It’s no surprise that innovation is one of Netflix’s most important values.

The Netflix manifesto explains that the company seeks out employees who value innovation, re-conceptualize issues to discover new solutions to problems, and challenge prevailing assumptions to suggest better approaches.

Innovation is a major driver of growth for any business looking to scale. Customer needs are constantly changing, so it’s important to adapt and develop new ideas to maintain a competitive edge.

When streaming services like Amazon Prime and Hulu began popping up and created more competition for Netflix, the streaming service responded by producing its own exclusive in-house content. The decision propelled Netflix to become the most popular source of TV content in the United States.

Netflix is still focused on innovation, and is working with AWS (Amazon Web Services) to create new services based on developments in IoT (Internet of Things) and machine learning-powered security.

For businesses using the subscription model, IoT is creating lots of exciting opportunities for new products, services, and business models not previously thought possible. In fact, according to Forbes, IoT initiatives are helping 60% of enterprises expand or transform with new lines of business. Seven out of 10 executives even credited integrating IoT-driven data into all aspects of their operations for increases in revenue.

For example, the data capturing capabilities of IoT devices can enable businesses that previously focused solely on manufacturing products to start offering ongoing services to track their performance. This IoT data can then be shared among partners and customers, providing additional opportunities for innovation such as value-added services and ongoing engagement. Businesses can also personalize and optimize customer experiences using the IoT data gathered from customers and the products and services in use.

 

Culture is one of the most powerful tools a business can employ to facilitate growth. Like a fingerprint, your company culture is a unique identifier that sets your organization apart from any other.

What makes Netflix’s culture so unique is that it values people over processes. It’s driven by strong talent who are all aligned toward the same values and goals.

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Tags: SaaS SaaS Strategy

Fusebill Inc.

Fusebill simplifies subscription and billing management by automating many manual accounting and financial processes and workflows. Our cloud-based platform gives companies the freedom to grow their businesses, the flexibility to capitalize on new product opportunities, and the agility to maintain a competitive edge.

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