Bernard Marr writes how Netflix uses data to fuel their business:
Netflix is said to account for one third of peak-time internet traffic in the US. Last year it announced that it had signed up 50 million subscribers around the world. Data from all of them is collected and monitored in an attempt to understand our viewing habits. But its data isn’t just “big” in the literal sense. It is the combination of this data with cutting edge analytical techniques that makes Netflix a true Big Data company.
Netflix is a fascinating company. They were able to build a business model that put a giant industry, retail movie rentals, out of business and then pivot to streaming before being out innovated by other companies. They are constantly ahead of the curve when it comes to recognizing the next new technology and digital strategy. They recognized early that original content was also a key to success, so they are pivoting into becoming greater than HBO at their own game.
More recently, Netflix has moved towards positioning itself as a content creator, not just a distribution method for movie studios and other networks. Its strategy here has also been firmly driven by its data – which showed that its subscribers had a voracious appetite for content directed by David Fincher and starring Kevin Spacey. After outbidding networks including HBO and ABC for the rights to House of Cards, it was so confident that it fitted its predictive model for the “perfect TV show” that is bucked convention of producing a pilot, and immediately commissioned two seasons comprising of 26 episodes.
This is how data-driven organizations behave. They look at their customers and use data to determine the optimal next move. All their strategy and tactics are based on using what they know about their customers and what they will do. So many times organizations are obsessed with what other companies are doing, regardless of what their data is telling them. They will copy their competitors for fear they are missing out on opportunities.
The question I always ask is, "how do you know what the other guys are doing is working?" What you see as a threat, may be a disaster because they haven't set up the correct means to measure the performance or are looking at the wrong KPI's. Worse yet, they may be attracting an entirely different customer than what you are trying to target.
A data-driven organization looks at their data and reacts. Netflix, I am assuming, saw that many of their users were binge watching TV series as soon as they came out. I'm sure this started with Breaking Bad, Mad Men, great content. They saw an opportunity to create this content on there own as the majority of the time spent on Netflix is binge watching TV. They looked at their own data and saw the opportunity to increase time on Netflix and add subscriptions by creating content. But not just any ole content. They had the data which showed what their customers loved watching and what resonated with them. They were able to see what shows were being dropped off of the binge halfway through. They saw what types of shows were most addictive.
The content creators gave their biggest competitor the keys to the kingdom, data. Now Netflix is poised to put a lot of the content creators out of business because they know way more about their customers behaviors than the content creators know. Because Netflix controls the entire experience, from creation, to delivery, to analyzing the behavior, they can create superior content. It is a model that is brilliant. Netflix will continue to dominate, especially in the age where people are looking to become "cord-cutters". I believe we will see even better content coming out of Netflix in the near future as they learn even more about what we like to watch.