Vision and Strategy - Epiphanies of a Netflix leader

1. Josh Evans Senior Director of Platform Service Engineering @ GitHub November 13, 2017 Vision & Strategy Epiphanies of a Netflix Leader

2. 1998

3. What an incredibly stupid idea!

4. 1999 Home rental library Subscription Neil Hunt

5. 17 Years Later Netflix (1999 – 2016) • Ecommerce (DVD  Streaming) • Streaming - Playback Services • Operations Engineering

6. Netflix Graduate • Modern Architecture • Operational Excellence • Leadership • Organization • Culture • Vision & Strategy Leadership is a journey

7. Why is Netflix relevant? DVD

8. Why is Netflix relevant? DVD Streaming

9. Global leader in subscription internet TV Growing slate of global, original content 109  115 million members 190 countries, 10s of languages 1000s of device types Netflix Streaming

10. 2000% growth over 5 years!

11. This is no accident

12. Vision Strategy Netflix vs. Blockbuster Netflix Streaming GitHub Universe Today’s Journey

14. Why does vision matter?

15. Hill Climbing Maximum Start

16. Hill Climbing find the highest adjacent node

17. Hill Climbing current = highest adjacent node

18. Hill Climbing highest node found

19. Mountain Climbing Start Local Maximum Global Maximum

20. Managers climb hills Leaders take mountains

21. Vision is the mountain

23. What is Strategy?

24. Be Proactive

25. Reactive Influence Concern

26. Proactive Influence Concern

27. Envision what you want in the future so you can work and plan towards it. Begin with the End in Mind

28. Put First Things First 1. Urgent – Important Crises Pressing problems Deadline-driven projects Meetings, preparations 2. Not Urgent - Important Preparation, prevention Planning Innovation, creativity Values clarification Relationship building Empowerment Work-life balance 3. Urgent – Not Important Interruptions, some calls Some mail, reports, meetings Many popular activities 4. Not Urgent – Not Important Trivia, busywork Junk mail Some calls Time wasters

29. Put First Things First 1. Urgent – Important Crises Pressing problems Deadline-driven projects Meetings, preparations 2. Not Urgent - Important Preparation, prevention Planning Innovation, creativity Values clarification Relationship building Empowerment Work-life balance 3. Urgent – Not Important Interruptions, some calls Some mail, reports, meetings Many popular activities 4. Not Urgent – Not Important Trivia, busywork Junk mail Some calls Time wasters

30. Ok… but what is strategy?

31. a high level plan to achieve one or more goals under conditions of uncertainty - Wikipedia

32. Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat. - Sun Tzu, The Art of War

33. The essence of strategy is choosing what not to do. - Michael Porter, economist & business strategist

34. proactive goal oriented high level adaptive focused realized through tactics informed by vision Strategies are…

35. How is strategy formulated?

36. Strategy: a route to continuing Power in significant markets Power: the set of conditions creating the potential for persistent differential returns Business Strategy Hamilton Helmer

37. Scale economies Network economies Counter-positioning Switching costs Branding Cornered resource Process power Seven Powers

38. Some condition which yields material improvement in cash flow of the power wielder via reduced cost, enhanced pricing and/or decreased investment requirements. Benefit

39. Some obstacle which engenders in competitors an inability and/or unwillingness to engage in behaviors that might over time arbitrage out this benefit. Barrier

40. A business in which per unit cost declines as production volume increases. Benefit: lower costs Barrier: fear of retaliation 1. Scale Economies

41. The value of a product to a customer is increased by the use of the product by others 2. Network Economies

42. 3. Counter-positioning A newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing businesses

43. The value loss expected by a customer that would be incurred from switching to an alternate supplier for additional purchases 4. Switching Costs

44. The durable attribution of higher value to an objectively identical offering that arises from historical information about the seller. 5. Branding

45. Preferential access at attractive terms to a coveted asset that can independently enhance value. 6. Cornered Resource

46. Embedded company organization and activity sets which enable lower costs and/or superior product, and which can be matched only by an extended commitment. 7. Process Power

48. Vision Home rental library Subscription

49. Scale economies Network economies Counter-positioning Switching costs Branding Cornered resource Process power What power did Netflix have over Blockbuster?

50. Counter Positioning

51. A newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing businesses Counter-positioning

52. Counter-positioning

53. Five-year head start

54. Process Power

55. Embedded company organization and activity sets which enable lower costs and/or superior product, and which can be matched only by an extended commitment. Process Power

56. DVDs opened & inspected for cracks

57. DVDs are cleaned & polished

58. NPI First Class Mail Sorter Multi-purpose • Return rental • Check for orders • Print addresses • Pre-sort 30,000 discs / hour

59. Barcode Scanner, Printer, Sorter

60. Envelop Stuffers - 4,200 Envelops / Hour

61. Conveyor - Stuff, Fold, Seal

62. Apply Sticker

63. Website – Address validation – Queue & rental history – Shipping status – Problem reporting Logistics – Rental returns – Inventory management – Shipping Deep Integration with

65. A newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing businesses Netflix counter-positioned against itself Counter-positioning

66. 2007 Streaming Subscription

67. Become a much loved, global internet TV service Create a highly valuable, durable business Lead a creative revolution Netflix Streaming Visions

68. Scale economies Network economies Counter-positioning Switching costs Branding Cornered resource Process power What power does Netflix Streaming have?

69. Global leader in subscription internet TV Growing slate of global, original content 109  115 million members 190 countries, 10s of languages 1000s of device types Netflix Streaming

70. A business in which per unit cost declines as production volume increases. 1. Scale Economies

71. Competitors license the same content at the same time Inception: Non-Exclusive Studio Contracts

72. • Netflix – has 50M members who will watch one title from deal – pays $50M for a non-exclusive deal – $50M / 50M = $1 per view • Amazon – has 5M members who will watch 1 title from deal – pays $5M for a non-exclusive deal – $5M / 5M = $1 per view Exercise

73. Competitors cannot license the same content at the same time Strategy: Exclusive Studio Contracts

74. • Netflix – has 50M members who will watch one title from deal – pays 60M for an exclusive deal – 60M / 50M = $1.20 per view • Amazon – has 5M members who will watch 1 title from deal – must pay 60M for an exclusive deal – 60M / 5M = $12 per view Exercise

75. Efficient, Global Exclusives

76. How do we achieve scale?

77. 1. Ubiquity

78. 2007 • Jan – Windows 2008 • May – Roku • Oct – LG, Samsung Blu-ray • Oct – Apple Mac • Nov – XBox 360 2009 • Jun – LG DTV • Nov –Sony PS3 (disc) • Nov – Sony Bravia – DTV & Blu-ray Device Ubiquity

79. 2011 • May – Android • Nov – First e-readers – Kindle Fire, Nook Device Ubiquity 2010 • Mar – Nintendo Wii (disc) • Apr – Apple iPad • Aug – Apple iPhone • Sep – Apple TV • Oct – Sony PS3 (no disc) • Oct – Nintendo Wii (no disc) • Nov – Windows Phone 7

80. 2010 - Canada 2011 - Latin America 2012 - UK, Ireland, Nordics 2013 – Netherlands 2014 - Austria, Belgium, France, Germany, Luxembourg, Switzerland 2015 - Australia, New Zealand, Japan, Spain, Italy, Portugal Geographic Ubiquity

81. • English • Spanish (Latin American) • Portuguese (Brazilian) • Dutch • French • German • Japanese • Spanish (Castilian) • Italian • Portuguese (European) Language Ubiquity - Subs, Dubs, UI

82. January 6th, 2016

83. Geographic Ubiquity

84. Before Global • English • Spanish (Latin American) • Portuguese (Brazilian) • Dutch • French • German • Japanese • Spanish (Castilian) • Italian • Portuguese (European) Global • Chinese • Korean • Arabic Language Ubiquity – Sub, Dubs, UI

85. Ubiquitous Infrastructure

86. US-East-1US-West-2 EU-West-1 Reliably and efficiently serve any customer from any region

87. Eventually Consistent, Ubiquitous Data

88. EU-West-1US-West-2 Global Ring Global Ring US-East-1 Global Ring

89. EVCache Replication Repl Writer Kafka Application Client EVCache Replication Repl Writer 1. Set or delete 2. send metadata 3. poll msg 6. set or delete Application Client Kafka 7. read EVCache Cross-Region Replication Region BRegion A

90. Ubiquitous Traffic Management

91. US-East-1US-West-2 EU-West-1 Reliably and efficiently serve any customer from any region

92. US-East-1US-West-2 EU-West-1

93. US-East-1US-West-2 EU-West-1

94. How do we achieve scale?

95. 2. Strategic Focus

96. The essence of strategy is choosing what not to do. - Michael Porter

97. Hardware Pay per view Electronic sell-through Ad supported Sports News Netflix doesn’t do

98. 60% price hike No integration New brand Shedding Legacy

99. Was this bad strategy?

100. DVD

101. Unencumbered Expansion

102. Vision Strategy Netflix vs. Blockbuster #NetflixEverywhere GitHub Universe Today’s Journey

103. Platform-enabled development ecosystem The destination for software engineers Jason Warner

104. Network Economies? Cornered Resource?

105. From Monolith to Modern Architecture Reliable Scalable Secure Fast Layered Distributed Portable Multi-region Multi-cloud

106. Compute & Network – DC/Cloud Runtime Orchestration - Kubernetes Desktop GitHub.com Storage – file/object, MySQL, NoSQL, cache, Git, etc. BrowserGitHub Architecture 3rd Party Load Balancer/Routing Proxy Platform Services – data access, pipelines, transformation, workflow 3rd Party API Gateway – ecosystem public interface

107. Take-aways Be proactive Put first things first Be visionary Study strategy Drive alignment

108. Make an impact!

109. ? ? ? ?

110. Josh Evans Senior Director of Platform Service Engineering @ GitHub November 13, 2017 Vision & Strategy Epiphanies of a Netflix Leader