Product Planning by Netflix: From Idea to Execution

Dimitry Lokshyn
Jun 24, 2019 · 5 min read

It seems like all-time great products appear from nowhere and become giants in their niche due to a good idea, creative and efficient business plan and millions of investments. I regret to disappoint you, but there are ups and downs, risks, and challenges behind every successful product. Also, there is a person who is usually titled a Product Manager or very often — a CEO. However, the titles are not important at all. What values, in reality, is the job they do and the decisions they make for their success stories to become role models — one of which I offer to your attention.

Back in 1999, Netflix was one of those DVD stores that you can rent or buy discs from. They had an office in Los Gatos with 20 employees and were about to go broke. At that time, Netflix got stuck with 300 000 customers who used their services just because there was no Blockbuster in the area.

The initial business idea of Netflix was to deliver DVDs via postal services. However, they missed one crucial thing — why would people order films online and wait for them when they can stop by the nearest DVD store and rent it? The answer was in those 300 000 customers: Netflix stopped growing because they had already been selling their services to all people who didn’t have access to the Blockbuster stores. Moreover, it was challenging to keep the quality of DVDs high while transporting, so the company was struggling to make ends meet.

Don’t Forget to Subscribe

The small team of 20 people was led by Kate Armold, a product manager at Netflix. They all knew they had to change something. Instead of changing their business model, they added a special offer to the existing service, which made Blockbuster budge up and give some space to a prospective challenger. The offer supposed moving from a pay-per-rental model to a monthly subscription. People got an opportunity to have unlimited access to DVDs for a fixed monthly fee.

Is it as good as it sounds? For customers — definitely. For Netflix — not really. Now that thousands of new clients purchased the subscription, they munched on newly released movies that were much more expensive to stock than the old ones. Netflix had to store so many copies of new DVDs that they would go broke before even getting on their feet.

The challenge sounded unsolvable: how to let the customers watch what they wanted, yet not bankrupting the company?

Nothing but making people want less expensive films could save Netflix, and they did it! The team came up with the queue and rating system, which also showed recommendations due to the customer’s preferences.

Kate Arnold and her team rolled their sleeves up and released a renovated website in three months. Back then, Netflix saved almost a decade for themselves, but a bigger issue was yet to come.

Do you still Download?

In 2007, the innovative technology developed a great deal since Netflix implemented its rating system and recommendation engine. Now, all in their iPhones, people didn’t want to wait for a DVD to come via postal service. They wanted it now, and they wanted it fast.

And again, the company had to either adopt new ideas or keep setting fire with stones.

I can’t call Netflix a pioneer in the streaming industry, but I can certainly call the company a creative and robust competitor, and here is why. Back in the days, Disney, NBCUniversal, FX, Apple, and even Wallmart started their shows and pulled their streaming platforms. And again, Netflix had come up with something exceptional to stay ahead.

They had nearly two minutes until a user gets bored with searching for the content that would get them interested and not leave to the competitor’s site. So Netflix had to figure out how to make the right content pop up in front of the right people and make them stay.

Reed Hastings, Netflix CEO, spent billions to make a bet on streaming and it paid off. The team developed an algorithm that predicts what a user will watch next, which not only made users stay on the website, it built customer loyalty and made Netflix №1 preferable TV series provider on the market.

What Went Right?

Netflix is by far not a case about luck, right place, or time. This is a case about hard work, risks, creativity, and planning. They have built a strategy that made them №1 at the streaming market. Let’s see why their approach was so successful.

Personalize

Personalization is the principle concept that Netflix follows in its product development and even company building. They make users feel like everything is done for them and fits perfectly like a tailored suit or dress. Netflix engages in customer science to make sure they deliver content that will satisfy users’ needs to make them come back.

Appreciate What You Have

The decision that became a success factor for the company was to develop a product for the existing users and consider their preferences. Not only this increased customer retention rates, but it also attracted new clients that wanted to get quality content.

Take on Bets

Even though innovative technologies that hit the market in the 2000s gave us YouTube and online streams, at the time, it was a considerable risk to adopt it. However, no fear of innovations is what made Netflix rocket. Of course, this wasn’t just betting, the company knew for sure what the customers wanted and gave it to them.

Create MVP

Product development is not an hour time road; it will take a little longer. But the important thing is that while driving, you have to stop and ask your early customers if you are driving the right way.

Create Your Ecosystem

Netflix became the first online streaming platform that launched its own branded series. The main reason why “The House of Cards” became so popular is the ability of the Netflix team to analyze. Ask yourself what your customers like and make it better!

This post has been published on www.productschool.com communities.

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Dimitry Lokshyn

Written by

An Entrepreneur, who helps startups develop valuable products. Visit neonpilots.co.uk to find out more.

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +800K followers.

Dimitry Lokshyn

Written by

An Entrepreneur, who helps startups develop valuable products. Visit neonpilots.co.uk to find out more.

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +800K followers.

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