“Now the company appears to have screwed up badly, and they’ve done it in pretty much exactly the way you would expect a company to screw up when it doesn’t drill down into the data.”

Palko tells a good story:

One of the accepted truths of the Netflix narrative is that CEO Reed Hastings is obsessed with data and everything the company does is data driven . . .

Of course, all 21st century corporations are relatively data-driven. The fact that Netflix has large data sets on customer behavior does not set it apart, nor does the fact that it has occasionally made use of that data. Furthermore, we have extensive evidence that the company often makes less use of certain data then do most other competitors. . . .

I can’t vouch for the details here but the general point, about what it means to be “data-driven,” is important.

6 thoughts on ““Now the company appears to have screwed up badly, and they’ve done it in pretty much exactly the way you would expect a company to screw up when it doesn’t drill down into the data.”

  1. I don’t like the “data-driven” lingo. Data, even lots of data, can lead to very bad decisions. Think selection bias, observer effects, etc…

    I would prefer something that conjures a healthy mixture of skepticism and empiricism. “Research-driven” perhaps?

    Even then, readers of this blog may question the premise that modern day research is about skepticism and empiricism…

  2. That Palko criticism itself didn’t seem very data-driven. e.g. What’s his “extensive evidence”? Can we see the data?

    Also, not revealing a certain metric publicly doesn’t in any way mean that a firm isn’t measuring it or even using it. Lots of corporate decisions are game-theoretic & usually you don’t want to tell your competitors what metrics you are using.

    Besides, Netflix does have a business model that actually encourages churn. If you have zero exit penalties of course it lowers the barriers for people to jump ship. I’m sure my cellphone company has less churn than Netflix simply because they’d charge me $200 to get out of my plan commitment early. Point is, low churn does not necessarily imply good business.

    • Rahul:

      The backstory is that Palko’s been blogging about Netflix for awhile and he’s had lots of examples of journalists believing hype-y Netflix claims. As I wrote, I’m not really in a position to evaluate Palko’s arguments, but there is some background here.

  3. It’s a lot easier to be data-driven if you are in a situation where you have more relevant data.

    That seems pretty obvious, but think about it in terms of Netflix — the company, and the industry it is in, is rapidly evolving. This means that most older data is not that relevant.

    Contrast that with, say, the carbonated soft drink industry, where there is an abundance of data and relatively few big technological changes in our lifetime.

    • Yeah, stuff like “Should we move away from the DVD business and move into streaming”, “How much should we invest in original programming”, and “What will happen to us if HBO sells subscriptions directly to customers” are all key questions where the available data would be of very limited use.

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