Meeting Demands of Global Growth, Netflix Migrates to Integrated ERP Netflix, as a pioneering DVD rental and video streaming company, enjoys tremendous success around the world. Available in almost every country, the company benefits from some of the most advanced big data analytics to continually improve each viewer’s experience on its platforms, customizing for local and individual tastes. For example, instead of emphasizing demographics as a means to segment the market, Netflix takes a step further by drawing on big data to create “taste clusters.” These support niche programming far more effectively. Reed Hastings, Netflix cofounder and CEO, explains that the company aims “to transform selection so that consumers can find a steady stream of [entertainment] they love.” Founded in 1997 by Hastings and Marc Randolph, the company introduced the monthly subscription model with flat fees and unlimited DVD rentals without due dates, and no late fees or shipping charges. The model became wildly popular and eventually drove the brick-and-mortar video rental companies out of business. Netflix began expanding internationally, and now operates in close to 200 countries. The company draws on its outstanding artificial intelligence and big data analytics to please customers in each country as well, offering dubbed and subtitled content and locally produced programming. Netflix enjoys customer relationship and supply chain management systems that are world-class and highly customized to its unique business needs. But its back-end financials and human capital management were a complicated mix of 11 different applications with rickety interfaces. Netflix needed a modern ERP with these two modules, especially because the company takes some unusual approaches to talent management. Winning the war for talent in Silicon Valley and on a global scale is no easy feat, given the tremendous shortage of candidates with the right skill sets. Some companies offer perks such as free gourmet food, foosball, or roller rinks, but Netflix takes a different tack. Employees are offered freedom and power to make their own decisions about everything from their problem-solving strategies to vacation days. For expenses, for instance, Netflix’s only policy is “act in Netflix’s best interests.” For parental leave, the policy is “take care of your baby and yourself,” and leave days aren’t tracked. Careful recruitment and hiring are essential, and employees that don’t work out receive generous severance packages. To meet the need for flexible human capital management, along with an integrated financial management system that easily masters the complexities of a global operation, Netflix turned to Workday, a cloud-based ERP company. The effort consolidated the 11 separate systems, and Netflix was able to deploy the financial module in just six months. Back-office tasks such as payroll processing, which once took several days—or longer if changes were needed—were drastically improved. The integration with financials meant that journal entries became automated rather than manual, greatly reducing errors. Many of Workday’s capabilities partner well with Netflix’s talent management approach and its global reach into so many countries with different currencies and diverse laws about taxation, employee benefits, and workplace policies. And the partnership worked well for Workday, as well, as Reed Hastings and others at Netflix suggested valuable new features to improve the software. Workday added over 25 new features based on such recommendations, all of which makes the products more competitive. Discussion Questions 5-19. How did Netflix gain such a large customer base so quickly? What impact did the model have on the DVD rental business? 5-20. How would you describe Netflix’s approach to talent management? 5-21. Why did Netflix not choose an ERP that included all four of the major modules? 5-22. How is Netflix benefiting from the Workday implementation? How does Workday benefit from the partnership with Netflix?
Meeting Demands of Global Growth, Netflix Migrates to Integrated ERP
Netflix, as a pioneering DVD rental and video streaming company, enjoys tremendous success around the world. Available in almost every country, the company benefits from some of the most advanced big data analytics to continually improve each viewer’s experience on its platforms, customizing for local and individual tastes. For example, instead of emphasizing demographics as a means to segment the market, Netflix takes a step further by drawing on big data to create “taste clusters.” These support niche programming far more effectively. Reed Hastings, Netflix cofounder and CEO, explains that the company aims “to transform selection so that consumers can find a steady stream of [entertainment] they love.”
Founded in 1997 by Hastings and Marc Randolph, the company introduced the monthly subscription model with flat fees and unlimited DVD rentals without due dates, and no late fees or shipping charges. The model became wildly popular and eventually drove the brick-and-mortar video rental companies out of business. Netflix began expanding internationally, and now operates in close to 200 countries. The company draws on its outstanding
Netflix enjoys customer relationship and supply chain management systems that are world-class and highly customized to its unique business needs. But its back-end financials and human capital management were a complicated mix of 11 different applications with rickety interfaces. Netflix needed a modern ERP with these two modules, especially because the company takes some unusual approaches to talent management. Winning the war for talent in Silicon Valley and on a global scale is no easy feat, given the tremendous shortage of candidates with the right skill sets. Some companies offer perks such as free gourmet food, foosball, or roller rinks, but Netflix takes a different tack. Employees are offered freedom and power to make their own decisions about everything from their problem-solving strategies to vacation days. For expenses, for instance, Netflix’s only policy is “act in Netflix’s best interests.” For parental leave, the policy is “take care of your baby and yourself,” and leave days aren’t tracked. Careful recruitment and hiring are essential, and employees that don’t work out receive generous severance packages.
To meet the need for flexible human capital management, along with an integrated financial management system that easily masters the complexities of a global operation, Netflix turned to Workday, a cloud-based ERP company. The effort consolidated the 11 separate systems, and Netflix was able to deploy the financial module in just six months. Back-office tasks such as payroll processing, which once took several days—or longer if changes were needed—were drastically improved. The integration with financials meant that journal entries became automated rather than manual, greatly reducing errors.
Many of Workday’s capabilities partner well with Netflix’s talent management approach and its global reach into so many countries with different currencies and diverse laws about taxation, employee benefits, and workplace policies. And the partnership worked well for Workday, as well, as Reed Hastings and others at Netflix suggested valuable new features to improve the software. Workday added over 25 new features based on such recommendations, all of which makes the products more competitive.
Discussion Questions
5-19. How did Netflix gain such a large customer base so quickly? What impact did the model have on the DVD rental business?
5-20. How would you describe Netflix’s approach to talent management?
5-21. Why did Netflix not choose an ERP that included all four of the major modules?
5-22. How is Netflix benefiting from the Workday implementation? How does Workday benefit from the partnership with Netflix?
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