An Organizational Culture of Innovation & Transformation

These views are my own, not those of my current employer Google, my previous employer Amazon, or any other groups I advise. I only share publicly available information about any businesses referred to as examples.

Adopting Cloud Computing and Generative AI (GenAI) requires significant corporate cultural enablement and transformation. Cloud and GenAI require an organization to adopt a more agile and collaborative workplace and an overwhelming desire for change.? In some cases, a burn-the-ships approach is justified, just as Cortés had to do when the mission was to conquer the Aztec empire. The target culture also needs firms to default to embracing change and celebrating experimentation. Additionally, both technologies require developing new skillsets, replacing existing skillsets, and deprecating some skillsets that are enhanced or replaced by automation. These three areas require significant organizational investment, change management, and focused leadership to prevail.? As we examine Netflix in this context, let’s dig into the critical topics of defining corporate culture, workforce evolution, and organizational bottlenecks.

Defining Organizational Culture

Let us first start with defining what organizational culture means in this context. These discussions' shared beliefs, values, attitudes, and behaviors represent an organization's culture. It makes an organization unique and determines how employees interact with each other, customers, and other stakeholders. It is also a significant ingredient in their long-term success and must be forward-looking and not operate based on retrospective ideals. Based on the rate of change happening in our collective businesses, what has worked before will likely not work in perpetuity. I am confident that stasis will equal death in a competitive environment. While the responsibility for organizational culture growth and evolution must be inclusive of everyone in the organization, it is paramount for leaders to instill the target corporate culture in their behaviors, communications, and decisions. Leaders are responsible for setting the tone for the culture by their words and actions. Leadership is where a creative, supportive, collaborative, and innovative culture starts and directly influences the innovative and transformational capacity.

1. Netflix has a flat organizational structure that fosters communication and collaboration. Known for office perks like gyms, a wide range of food selections, and unlimited time off. The thing we most value is working with talented people in highly creative and productive ways. That’s why our core philosophy is people over process, and why we try to bring great people together as a dream team. Of course, any growing business requires some process and structure. But with our people-first approach, we can be more flexible, creative and successful in everything we do.

According to Netflix:

What makes Netflix special is how much we:

1. Encourage decision-making by employees
2. Share information openly, broadly and deliberately
3. Communicate candidly and directly
4. Keep only our highly effective people
5. Avoid rules

Peter Drucker was right, Culture eats strategy for breakfast, and I have observed that even the best-planned strategies are led by a strong vision from a charismatic leader and a culture that allows for a growth mindset. Strategies through consensus rarely work at the enterprise scale as there are simply too many stakeholders, too many conflicting priorities, and no clear path for resolution, and these can stall a firm's efforts to move things forward. Worst yet, they may end up with a series of compromises that do not add value but consume the time and resources a successful plan would have used. Even the most technically sophisticated firms can make the mistake of not having clearly defined objectives. A culture of innovation, one where exploring new technologies, being creative, taking calculated risks, and access to innovation funds aligned around a business use case, will substantially improve the odds of a successful project. In other words, an evergreen approach to organizational culture progressions will ensure more discomfort with maintaining than growing. Growth in business objectives, career advancement, and pursuit of new market opportunities must be part of a continuous and prospective organizational culture.

Workforce Evolution

To get value from Cloud, GenAI, and other emerging transformational technologies, an organization must fully invest in understanding the impact on employees. The first step is to identify the skills gaps in an organization. Typically, a skills audit will assess the employee's current skills and identify the skills needed to achieve business goals. Once the skills gaps are identified, clear goals on the evolution of the technical skillset of your organization are required. These goals should be specific, measurable, achievable, relevant, and time-bound, including rewards for accelerated completion. I have seen this work well when employees receive a one-time bonus upon completing a technical certification or specific competency demonstrating their understanding.? Each employee should have a learning plan tailored to their target role in your modern workforce. The learning plan must include the following:?

The specific skills that need to be developed

The methods that will be used to develop these skills

The timeline for developing these skills

Guided learning is great, but then it is up to the organization to provide real-world learning opportunities to apply this knowledge. Some organizational flexibility is required to provide these opportunities for cross-functional work, stretch assignments, and role rotation so that employees can take a step back and see where they fit in. Focusing on cross-functional alignment and creating a center of excellence (CoE), shared best practices, guidance, prescriptive direction, consistency, scalability, and repeatability will yield the most robust results.?

There are a variety of ways to provide opportunities for learning, such as:

Providing online learning resources

Offering in-house training

Sending employees to industry conferences or workshops

Creating a growth mindset and culture of self-development in the organization is essential to make this learning investment durable and become a perpetual evolutionary process. This means encouraging employees and first-line and middle management to take ownership of their learning and to be open to new ideas. Measuring progress using a consolidated dashboard across the organization is essential to track success and emerging skill gaps and adjust learning plans as needed.?

Netflix had to significantly change the skillset of its workforce as it transitioned from a DVD mail-order rental business into a global digital streaming service and award-winning movie and episodic series across all genres. It switched from a logistics business to work class entertainment technology company with more than 230M subscribers as of Q2 2023. The direction was clear, focusing on customer experience and recognizing that they were in the home entertainment business rather than a mail-order one.?

Organizational Bottlenecks

Let's focus on the innovation bottlenecks when a firm’s culture is rooted in maintaining the status quo, stagnation, and keeping the lights on by asking probing questions. History provides numerous examples of firms that should have innovated but instead just maintained their products, services, and business practices that were key to their prior success but now looks more like stasis. Innovation through acquisition was a strategy that worked before, but without an integration strategy that learns from or gains synergies from the acquired company, a fractured and disjointed organizational culture is left behind. When a business is acquired to innovate or grow market share, how important is the integration of best practices and standards? Is there adequate funding to scale this value beyond??

Countless other authors have explored the importance of having a culture of innovation, and history provides many examples of the past, such as Xerox, IBM, Kodak, and Blockbuster. Do these firms offer insights into my hypothesis? Will this pattern be repeated or avoided by firms that have successfully leveraged Cloud for their business and have a cohesive GenAI strategy? Is there a viable path forward for companies that still have a data center-first strategy using legacy technologies??

Firms that have crossed the chasm and are running a significant portion of their business in the Cloud have already demonstrated an ability to change their corporate culture, unblock their IT departments, align business and technology, and incentivize employee innovation. Those that have moved significant applications to the cloud have no doubt fundamentally positioned how they think about the new business models for their products and services. They are on a path to avoid being irrelevant and a footnote in corporate history books. Cloud has enabled more scalable and distributed architectures that can take businesses to many new geographies to service new populations. Congratulations if your firm has successfully navigated the product, legal, regulatory challenges, funding, employee enablement, and technical blockers to overcome to get to the Cloud. If this describes your organization, take a double-down approach to GenAI and use the organizational leaders, cross-functional people, and process roadmap again. Use your Cloud success as the proof point of business value to your shareholders, promote your leaders that enabled this success, and use this as the north star for GenAI. While the path to Cloud is not identical to GenAI, the ingredients are similar, and the muscle memory should serve you well.

“We named our company Netflix in 1998 because we believed Internet-based movie rental represented the future, first as a means of improving service and selection, and then as a means of movie delivery.” – Reed Hastings. Netflix started its mail-order DVD rentals in 1997, and it was its primary business until 2007, giving them excellent growth and data collection capabilities that enabled them to focus on machine learning with movie recommendations instilling technology and innovation in its original business model.? Netflix grew the streaming business significantly, which helped them, not constrained them from recognizing that they also had to create original content and not be limited by a pure content licensing model.??

Conclusion

In short, organizational culture is a critical factor in an organization's success. It is essential to have a forward-looking, collaborative, and innovative culture. Leaders play a crucial role in setting the tone for the culture and instilling the desired values. Organizational culture is shared beliefs, values, attitudes, and behaviors. It is a significant ingredient in their long-term success and must be forward-looking and not operate based on retrospective ideals. A culture of innovation is one where exploring new technologies, being creative, taking calculated risks, and accessing innovation funds aligned around business models and use cases will substantially improve the odds of a successful project. Think like Netflix, not like Blockbuster.

Questions from the board:

Is your leadership team motivated by innovation and transformational speed?

Does the future of your business require a brand new innovation stack like Netflix did?

What is our current organizational culture like? Do we have a culture of innovation and collaboration, or are we more risk-averse?

What are the skills gaps in our workforce? How will we address these gaps to take advantage of Cloud and GenAI?

What are the organizational bottlenecks that are preventing us from innovating? How can we address these bottlenecks to create a more innovative culture?

What is our strategy for adopting Cloud and GenAI? How are we planning to integrate these technologies into our business?

How are we measuring the success of our Cloud and GenAI initiatives? How do we know if we are on track to achieve our goals?

Sources: ?https://jobs.netflix.com/culture

Link to Article 1: Cloud & GenAI Perspectives for the Board: An Introduction

Link to Article 2:?An Organizational Culture of Innovation & Transformation

Link to Article 3: Data, Cloud, and GenAI: Board-Level Imperatives