#2 From DHM to Product Strategy: The Evolution of Netflix

2 From DHM to Product Strategy: The Evolution of Netflix

In today's fast-paced and ever-changing digital landscape, companies are constantly seeking new ways to stay ahead of the competition and deliver value to their customers. One company that has successfully navigated this challenge is Netflix. From its humble beginnings as a DVD-by-mail service to its current status as a global streaming powerhouse, Netflix has consistently evolved its product strategy to meet the changing needs and desires of its customers.

At the heart of Netflix's product strategy is the concept of combining delight, hard-to-copy advantage, and margin. By achieving two or three of these objectives with a single strategy, Netflix has been able to create a product that not only delights its customers but also provides a competitive advantage and generates profit.

One of the key elements of Netflix's product strategy is personalization. This concept has been ingrained in the company's DNA since its early days. While Netflix wasn't initially simple at launch, it gradually became simpler over time. A surprising example of this is the decision to remove movie reviews in 2018. With the ability to quickly hit "play" or "quit" at any time, Netflix realized that its members no longer needed reviews to make decisions. This change not only simplified the user experience but also freed up valuable screen real estate for other content.

Another aspect of Netflix's product strategy is its focus on social interaction. The company experimented with integrating the popular TV show "Friends" into its platform for six years. This move allowed Netflix to tap into the social aspect of entertainment and create a sense of community among its users. By leveraging unique movie-finding tools, Netflix aimed to deliver both delight and margin. The vision in 2005 was to have personalized previews play on each member's homepage, providing a tailored and engaging experience.

Price and plans have also played a crucial role in Netflix's product strategy. The company has explored various revenue streams, including ads, used DVD sales, next-day DVD delivery, and ultimately, streaming. Today, Netflix has a hard-to-copy advantage in the technology it employs to encrypt and deliver video, ensuring a seamless and high-quality streaming experience for its users.

Entertainment has always been at the core of Netflix's product strategy. The company has embraced open APIs, allowing partners to innovate on its platform. By doing so, Netflix has fostered a vibrant ecosystem of third-party apps and services that further enhance the entertainment experience for its users. Additionally, Netflix has ventured into exclusive DVD content, original programming, interactive stories, and high-quality video and sound to differentiate itself from competitors and maintain its position as a market leader.

Throughout its journey, Netflix has learned the importance of staying focused on making its core product better. This focus has allowed the company to continuously adapt to changing market dynamics and customer preferences. By evolving its product strategy over time, Netflix has managed to stay ahead of the curve and deliver value to its customers.

The concept of evolving product strategies is not unique to Netflix. In fact, it is a trend that is prevalent in the digital world. The emergence of blockchain technology has brought about a paradigm shift in how value is distributed in the digital realm. The traditional internet stack consists of "thin" protocols and "fat" applications, where value primarily resides in the applications layer. However, in the blockchain application stack, the relationship between protocols and applications is reversed.

According to the concept of "Fat Protocols" by Union Square Ventures, value now concentrates at the shared protocol layer, with only a fraction of that value distributed along the applications layer. This shift is due to the combination of shared open data with an incentive system, usually in the form of tokens. By replicating and storing user data across an open and decentralized network, barriers to entry for new players are reduced, creating a more vibrant and competitive ecosystem of products and services.

However, an open network and shared data layer alone are not enough to promote adoption. The second component, the protocol token, serves as the incentive to access the services provided by the network. This token fills the gap by providing a means of transaction, computing power, file storage, or other functionalities. Early adopters of these protocols often recognize the potential for future value appreciation and build products and services around them.

One interesting aspect of this feedback loop is the role of speculation in driving initial growth. Speculation often fuels the adoption of new technologies, attracting both new users and financial investors. The boom in interest can lead to bubble-style appreciation, but even the subsequent bust can support long-term adoption as stakeholders look to create value and promote the technology. This dynamic is evident in the market cap of protocols, which tends to grow faster than the combined value of the applications built on top.

In conclusion, both Netflix's product strategy evolution and the concept of "Fat Protocols" highlight the importance of adaptability and innovation in the digital landscape. Companies must continuously reassess their strategies and leverage emerging technologies to stay ahead of the curve. With that in mind, here are three actionable pieces of advice for companies looking to succeed in the digital realm:

• 1. Embrace personalization: Invest in technologies and strategies that allow for a personalized user experience. By tailoring your product or service to individual preferences, you can create a deeper connection with your customers and differentiate yourself from competitors.

• 2. Foster a vibrant ecosystem: Open up your platform to third-party developers and partners. By providing open APIs and encouraging innovation, you can tap into the collective creativity of others and create a more diverse and compelling offering for your users.

• 3. Stay focused on core product improvement: While it's important to explore new opportunities and technologies, don't lose sight of your core product. Continuously invest in making it better and addressing customer needs and desires. This focus will ensure that you maintain a strong position in the market and continue to deliver value to your customers.

By following these actionable advice, companies can navigate the ever-changing digital landscape and position themselves for long-term success. Just as Netflix has evolved its product strategy and embraced new technologies, businesses must be willing to adapt and innovate to stay relevant in today's digital world.