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7.1.21   6:00 PM

For five years, Gibson Biddle led a product team at a growing DVDs by mail company that was trying to get into streaming. Netflix (NASDAQ:NFLX) already had over one million customers by the time Biddle joined in 2005, but in those five years, the company grew to over 20 million subscribers, and was well on its way to becoming a streaming empire.

Biddle was tasked with creating several products, some of which were runaway successes — like personalized recommendations for films and TV — and some that weren’t — like recommendations based off what users’ friends were watching. According to him, each one was a valuable lesson for the company, both in terms of product and humility.

Since leaving Netflix and Chegg, Biddle splits his time between giving talks, writing a Medium blog on product strategy, and writing a product newsletter called Ask Gib

Biddle spoke about the ill-fated development of Qwikster, lessons in leadership and humility from Reed Hastings, and how thanks to Netflix, Roku (NASDAQ:ROKU) was born.

  • How product strategy works at Netflix and Chegg


    The Business of Business: So right now you are no longer doing day to day product strategy, right. So you're mainly writing about these things and giving talks and webinars and things. What prompted you to leave the trenches?

    Gibson Biddle: So I was a product leader for about 30 years. And I always envisioned I would stop working when I was 52. And that I would have the time for skiing and backpacking and windsurfing and triathlons, etc. So I stopped working at like 53 — my pals described me as semi retired, which is an adequate way of describing how I spend my time.

    For the last five years, I did experiment with different ideas. I was a three-day-week product leader at NerdWallet. And then Metromile and Life360. And all those companies were very healthy. That was me experimenting and hacking. But now I largely focus on helping product leaders to become world class product leaders. I do that through writing, teaching, through product strategy, workshops, exact events, and lots of talks all over the world, which is great fun.

    What are some of the more surprising things you've learned from your own experiences reflecting back on all these years in product strategy and teaching?

    The main thing after you stop working full time, you have time to reflect, you have time to write, which I'd never done before. The way I think about the world now is I'm always working with product organizations, and getting to focus on three things. 

    First, helping them to develop a plan. And that's what product strategy looks like. But that's sort of a fuzzy vision of the future, because the second thing I focus on, I call it consumer science, and that's helping them to experiment with multiple hypotheses. Because now if you're lucky, a little bit more than half will work. And then the third thing that I focus on is culture. 

    “Culture is amazing. Because if the values, skills, and behaviors are understood, people can make great decisions without even talking to each other.”

    So all these companies need to create an environment where people are willing to take on risk, they're open for experimentation. And in the long term, you're hoping that these individuals will develop great judgment about making great decisions about people, product, and the business. And it turns out culture has a really helpful way of making that happen. Most companies, as they get big, they put in processes and roles, and bright and talented people don't like processes and roles. So culture is a way of describing your values, the skills and the behaviors you look for in individuals. 

    And then individuals can oftentimes make great decisions independently without mind numbing, suffocating processes, which is the trap that many companies fall into if they get big. So my short answer is I'm always working with companies to help them develop the product strategy to plan, to help engage in this consumer science, experimentation, and high cadence experimentation, and then getting them to be thoughtful about culture, and how it can help create a world class organization.

    I'd love to hear about your time with both Netflix and Chegg, and the changes that you made and what happened in those five years at each of those companies. 

    So I started at Netflix in 2005. And then in 2010, I went on to my next startup, which is Chegg. Chegg is a textbook rental and homework help company that went public at the tail end of 2013. 

    They don't sound the same, but they're pretty similar for me. For me, they're both examples of what I love to do. I look for startups, for the proof of concept that are ready to scale, and then I help scale them. I actually don't think of myself as a starter. I wasn't engaged in either of those companies at the very beginning. When I showed up, there was kind of a proof of concept. And at Netflix, it was a transition from that starter team into the builder team as you scale.What I helped to do is provide a level of discipline. So one of the things that I realized when I joined Netflix, the average tenure in my role before I showed up was like four or five months. So I'm like, “Well, this must be a tough job.” 

    It turned out that the starters weren't really on board with this notion of consumer science to better living through math and A/B testing. But if you ask Reed Hastings, the CEO, what he wanted his legacy to be, it wasn't to create a worldwide streaming empire, it was to perpetuate this idea of consumer science, as he would say. 

    I focus a lot on product strategy. I focused on some, probably eight high level hypotheses, and four or five of them were right, and three or four of them were wrong. And that's just the way it works. Stuff that worked — personalization, it's been a long and important journey for Netflix, that helped improve retention. In the old days, it was a DVD by mail company. And the key insight was, the faster you got a disc to the customer, their DVD in the mail, the happier they were, it really didn't have anything to do with the website. So we went from like 20 hubs delivering DVDs around the country in the United States, to the equivalent of 100 by 2009 or so. But that strategy was all about instant. And it certainly was helpful for DVDs. We launched streaming in January of 2007. They weren't very good. But that was enough for us to begin to learn about what would work and what would not work.

    Let's see, some failed experiments. So I just told you personalization worked, instant worked. If you were in Silicon Valley in 2005, because of the surge, that success of Facebook, everybody would want to know what your social strategy was. We had one, and our theory was, we would connect you with your friends on Netflix, and you would get great movie ideas from your friends. And then you wouldn't want to leave because your friends were still there.

    In my language, I'm always looking for ways to delight customers in these hard-to-copy margin enhancing ways — margin just means make money. But the social strategy of this “Friends” project — you can get great movie ideas from your friends — we're creating a hard-to-copy network effect. And then the margin, if you were delighted, you might stay with the service longer. 

    So in 2005, about 5% of our members quit every month. Today that number is like 2%. Anyways, turns out “Friends” didn't work. And you could not have predicted that, because actually social works pretty well for music as well. But the real key insight after pounding our heads against the wall for a few years: Your friends have sucky movie taste. That's a problem. We thought we could fix it with algorithms. And then the second problem is you don't really want your friends to know everything you’re watching. So you know, last night I was binge watching Cake Boss. Like, you don't really want your entire network to know that. 

    The discipline, it's really about embracing the A/B testing and consumer science, having these four sources of data. You’ve got qualitative focus groups, usability, surveys, you dig in the dirt of the existing data, and then you have the results of A/B testing. So that's what I mean when you bring discipline to an organization to help it scale.

    Chegg was pretty similar. It was a startup with a proof of concept that was ready to scale. It was the hardest startup I've ever seen. They flailed for like six or eight years before they even got around to VC funding. They started as a sort of Craigslist for students. Like if you wanted to buy a used couch from other students. It's not a good idea. But they arrived at this idea of textbook rental 2008, 2009. And when I joined them in 2010, I went to the San Jose State mailroom. It's 20 miles away from me in California. And it was just full of these big orange boxes. And so it was obvious that students were getting a lot of value renting textbooks instead of buying them when I joined there. 

    “My definition of leadership is inspired communication of a vision.”

    I mean, here's another tactic of my discipline, I always sort of outline a product vision. So the product vision at Chegg was we were going to get big on textbook rental, and that was happening. And then my fuzzy vision, three, four or five years out, we were going to lead the next chapter of Chegg, which I naturally thought was going to be e-textbooks, right? It's very analogous to red envelopes, the DVDs are going back and forth in the mail at Netflix, and then they transition to streaming. At Chegg, these orange boxes were going back and forth in the mail, and then we transitioned to e-textbooks. Except I was wrong. 

    So if you look at the industry today, for a variety of reasons, e-textbooks still haven't really started. So that left me scrambling. I recast the vision, “We're going to get big on textbook rental,” that happened. And then as a placeholder, I said, “We're going to lead high margin digital services,” which really doesn't mean anything, except we're going to get into digital. And we actually bought six companies in parallel. And one or two of them worked out and the thing that worked was this concept of homework help. So today Chegg has this thing called Chegg Study. Students are paying about $15 a month for a variety of homework help.

    For both Netflix and Chegg, COVID was good, right? You know, because in the case of Netflix, everybody's watching movies. And then in the case of Chegg, everybody was online, and it just exploded. If you think of me as having a little business, I did 150 talks, workshops, and events this past year, all virtual. I learned, and I'm confident that these virtual experiences were just as effective as in person, which was way cool. Anyways, I'm just trying to give you a sense of what is pretty common when you arrive as a product leader at a startup with proof of concept that's ready to scale. And then what happens with me is usually around after five years, the job is handed over to — I call them super scalers. For instance, at Netflix, I wouldn't have been the best person to run product circa 2010. I was lucky, I took statistics when I went to business school, like one course. But by that time, Netflix needed somebody in product who had a PhD in statistics right?

    The same thing at Chegg — super happy, helped take the company public. And by that point, I was like, “Huh, I better get my miles and backpacking and skiing before my knees give out.” So that's the last five years. It's been a very wonderfully flexible life for me, which I really enjoy.

    Do you ever wish that you had been there to see Netflix take off once it started doing original programming or Chegg take off a little more once e-learning had become more popular? 

    From my perspective, when I joined Netflix, they had between 1 and 2 million members. So I saw it take off to 20 million. And from my perspective at Chegg, gosh, we probably went from 200,000 customers, students to a neighborhood of 5 to 10 million. So, from my perspective, it really frickin’ took off. 

    Honestly, the experiment is the same. Like I had a red Netflix backpack. And when I went through security, when I was first there, nobody cared. And then after five years like, “So you're from Netflix.” So that feels good enough for me, both Netflix and Chegg. And then of course, you know, I have failed startup stories.

  • What to do when products fail


    What is it like to work on products and get something going only to see the startup floundering as a whole?

    I will tell you a story about my early career. And you can see some massive good in it. And you can also see some massive bad in it. So here's the story. I was the co-founder of a kid software startup called Creative Wonders. We built Sesame Street software, Madeline, a little French girl, Schoolhouse Rock. This is at the beginning of the DVD era. And we felt successful because we sold the company to Kevin O'Leary, Mr. Wonderful of Shark Tank. And we sold it for $50 million. We felt like, “This is great.” 

    And then we joined and helped The Learning Company to grow. Kevin was the CEO of The Learning Company, that's Peter Rabbit, the Oregon Trail, and helped it to grow. We grew through acquisition, we had more than half of the kid’s educational software market. And then we sold the company to Mattel for $4 billion. However, a year later, Mattel spit the company back out, and took a loss of $3.5 billion. To me that felt bad, and even worse, all of the products that I built haven't stood the test of time. 

    Now, the key thing is what I learned from that. So what I learned was how important it is to delight customers in these hard-to-copy margin enhancing ways. And the things that we had failed to do was to build a hard-to-copy advantage. What happened is a lot of copies. If a company copied our work pretty easily, it devalued our work. And that's what really caused the company to go to a value of $4 billion down to basically $500 million. That was an important learning. And if you can't tell, I applied that learning again and again afterwards. 

    “If you ask Reed Hastings what he wanted his legacy to be, it wasn't to create a worldwide streaming empire, it was to perpetuate this idea of consumer science.”

    At Netflix, personalization is a great example. It makes it easier to find movies you love. It's this huge, hard-to-copy advantage. Netflix knows the member tastes of now 200 million people worldwide? And how do they make the business better? One way is people don't quit the service because they're watching stuff they enjoy. But just as substantial, they have amazing insight about what kind of content to invest in or not. 

    So for instance, they guessed, via their data, that 100 million people would watch Stranger Things. So they invested $500 million in that. They guessed that 20 million people would watch Bojack Horseman. I'm a Bojack person, that means I'm a freak. And they would invest $100 million in that. And then they would guess that 5 million people would watch Everest climbing documentaries. And because of that they'd invest $50 million. And I call that “right sizing”. 

    So personalization gives them a lot of advantages in figuring out how to make the business work and budget products. Personalization as a strategy is a good example of that. And that was a key lesson from that massive failure. And I did the same check. I was much more thoughtful about how we delight customers in these hard-to-copy margin enhancing ways. And it worked out, we took the company public. Today, it's worth probably $11 billion.

    Well, here's something else I've learned after 30 years of reflection: It takes a really long time to build a successful company. So if you graph the market cap of Netflix, it looks like this. And then it just goes right. And my joke is it only takes 20 years to build a great company. 

    If you look at the graph of Chegg, after 15 years, it does this [gestures up and to the right]. The other thing is you asked the question, “How do I feel about leaving?” Like, no freakin’ way I'm going to work for the same company for 30 years, right? And plus, I'm the wrong person for that activity. And Netflix is an example, when they were going fully international, for instance. I love that early part. 

    That's where the real romance seems to be for founders, too. 

    So founders, by definition, are starters. I mean, that's amazing. They could start something out of nothing. By the way, I suck at that, too. I come along when there's this proof of concept, and then I help it scale. There are some like Reed Hastings, the CEO of Netflix, he's a starter. He's a builder. And he's a super scaler.

  • Leadership lessons from Reed Hastings


    Speaking of Reed Hastings, you obviously worked very closely with him. What lessons did you learn from him about product or leadership, through your time with him?

    First, most of the thinking about strategy I learned from him. This concept of consumer science and those four sources of data, whether it was qualitative focus groups, surveys, existing data, A/B test results, I learned from him.

    I don't know if you remember this, but the Bible at Netflix was The Innovator's Dilemma. And The Innovator's Dilemma says Blockbuster grew up, it had like 10,000 stores in the US very invested in DVDs in retail. And this punk startup, Netflix, came along and did DVDs by mail and then started streaming. In that case, Netflix was David, and Blockbuster was Goliath. And you know what the outcome was in The Innovator's Dilemma, it's really hard for a company like Blockbuster to let go of the stores. I mean, they were right for the pivot. So then Reed Hastings understands this.

    So now Netflix is transitioning from a DVD by mail company into a streaming company, and Reed's worry is that Netflix would overinvest in its DVDs by mail business. And because the game was all about streaming, who are the competitors in streaming? It's clear now, right? It's Disney, it's Amazon, it's Hulu, etc. And so he knew that he had to let go of the DVD business, the way that Blockbuster had failed to let go of its retail business.

    I'm giving you some business strategy, if you will, but I'll get to the leadership lesson in a minute. What happened was Reed said, “Okay, we're gonna jettison our DVDs by mail business, we're gonna throw everybody out of the business that's focused on that, out of the office, in a different building, we're going to create a new company called Qwikster. And so Qwikster will do its thing on DVDs so Netflix can be maniacally focused on streaming.”

    So we announced this plan to the world. And the market cap of Netflix went from $40 billion down to $10 billion, it was disastrous. And customers were pissed. They didn't even execute this idea. In a quarter, they lost 800,000 customers that cancelled. He was lambasted on Saturday Night Live, they were making fun of the Qwikster name. It's really hysterical. Anyways, here's the leadership lesson. It's a quarter after this happened. And Reed stands up to address the companies, now circa 2012. And everybody's curious what he's going to say.

    He said, “I screwed up, I failed to put the customer at the center of everything we do. I failed to understand how horrible it would be for a customer, demand is both a streaming relationship and a DVD relationship. I just failed to obsess over our customers.”

    So, on the other hand, this is just a mistake, right? Our culture is still intact, we still have the strategy that's working, we have the system of consumer science. And so he just looked at the company. And all he said was, “Just keep getting better.” That's all he said. And that was the way that he humbly move everybody forward. And you can see, you know what the outcome is. Netflix is now worth $220 billion. It's probably doing $25 billion in revenue, it's got north of 200 million customers. So anyways, that leadership lesson was simply his humility, owning his mistakes, and then helping understand that in the grand scheme.

    This probably wasn't going to be the worst thing in the company's life. And it wasn't, by the way. Uber was so hugely challenged and their challenge was cultural, right? That broken culture. That kind of issue takes years to fix. All Reed had to do was say, “Well, we're not doing that plan anymore. The people are going to be back in the building. We don't have to separate them. We're just not going to over invest in DVDs,” and that business has just naturally gone away. Today, there's probably 500,000 customers in the United States that are still getting DVDs, and they love the service. 

    Hard to believe that that service is still in existence. 

    It is hard to believe, but it truly exists. You could get any DVD you want. I don't know why you would want it. I mean, if I stereotype it, Genie Dawes is 81 years old, she lives in Palo Alto. I think she's still a DVD customer. But I think she's also a streaming customer. So I think she actually uses my account. She's sort of a grandmother to me on the west coast.

  • Biddle’s wicked hard product decisions


    It seems that was a tough one for Reed to swallow his pride and backtrack. What hard decisions have you had to make? I know you've written a little bit about frameworks for making those decisions, and I'd love to hear a story relating to that.

    So we got big on DVDs, and then we were going to lead streaming. And we launched in January 2007. With those 300 stinky titles, we got to 1,000. Within the year, we learned a lot. By the way, our proxy metric for streaming was the percentage of members that watched at least 15 minutes in a month, that was how we defined how well the streaming effort was going. We launched at 5%. By the end of the first year, we were at 20%.

    The biggest way to advance that metric was to let people watch movies and TV shows where they wanted, and they wanted to watch it on their TV screens. And so we would go knock on the door of the big game companies and the game companies were where people were connected to the television.

    So you know, “Hello.” “We’re sorry, you guys are too small, don't want to work with you.” “Hello, PlayStation.” “Sorry, you're too small. We don't want to work with you.” By the way, Xbox was number three. We were sort of hoping “Well, they're the smallest, they've got the most to lose or to gain with us.” “Sorry, Xbox, they don't want to work with you.” So I'm like, “Oh, crap.”

    So what we did was we built our own. I call it a magic box — it was called the Netflix Player. And it was magic. We actually did some, I called it a painted door test, on the site. And you put a button for the member saying, “Hey, for $80, we'll deliver this magic box, you can stream your TV,” and people would click on the button showing their purchase intent. We already have their credit card. And then we say, “Sorry, not available in your zip code.” That's consumer science at work. So we knew our customers wanted this. And we knew it moved that proxy metric from 20 to maybe 40% the next year.

    So we built the magic box, we had like 100 engineers engaged in it. And it's one month before launch. This is mid-2008. Barry McCarthy, the CFO, comes back from New York, we're on Wall Street, and the investors are saying this plan is not going to fly. Because everybody thinks we're getting into the hardware business. That wasn't our intent. By the way, we were just trying to prototype the future so we could prove to these other companies it would work. And then they also said because hardware businesses are low margin, they suck. And we had no expertise. Apple is just amazing at getting stuff across the Pacific Ocean, etc. And he just said the plan’s not going to fly.

    This is with one month to go, we canceled the launch. Okay, so imagine you’ve got 100 engineers, you're engaged in this for over a year, imagine how people feel right? Reed Hastings called me and said, “Hey, we're gonna cancel the launch.” Anyways, what happened was, we threw everybody out of the building. And that is the formation story for a company called Roku. So that's how the Roku box was born. 

    About eight or 10 months later, Xbox finally said yes to us. And the second part of our thinking in not launching the box, we were trying to create a device ecosystem, a platform. And we knew that once we launched the first device into it, everybody would think that we would have an inside track and they'd be less likely to play on our platform. And it turned out that you know, eight or 10 months later Xbox said yes to us and in their first month like a million of their customers were screaming to the TV. And now the PlayStation comes knocking on our door. “Hey, can we do that with you?” And this is how the device ecosystem began to build out.

    Anyways, back to the wicked hard decisions. My things are “Have a strategy,” we had a strategy. It was about the transition from DVD to streaming, and the idea of building out building out the device ecosystem. tactically, we got it wrong. But it worked out. Let's say, but we were following the strategy. We're following the vision.

    What else do I remember from that decision? I pointed out the two things that failed. And in our approach, one, we were a software company, and we didn't want to become a hardware company. And then the second, if you're trying to build a device ecosystem, you can't put your own device out there first. So those are two lessons.

    The other thing is just to be flexible. It's a little like Reed just admitting his mistakes. I had to do the frickin same thing, right? “Oops, I screwed up.” But everybody at Netflix had enough context via the strategy to understand why we had moved forward for so long, and why we decided to kill it. And people, they handled that transition amazingly well, for having that full context. It worked out in the long term. Anyways, if you want to learn more, you'll end up at an essay I wrote on Medium called “10 habits for making wicked hard decisions.”

  • Biddle’s leadership takeaways


    What leadership advice do you have for people in product strategy or just more broadly, aside from having humility?

    So my main thing is: Leaders lead. And I go back and forth. It's certainly trainable. But I think more people develop as leaders as they get more practice. So for instance, I was the captain of the ski team, I was part of the National Outdoor Leadership School, I got used to leading and leaning a little harder than following. You’ve got to frickin stick your neck out there and just see what happens. So it's a practice art, but look for as many opportunities as possible to lead. 

    If you are a leader, or you aspire to be a leader, I really have five or six characteristics that I focus on. I've talked about one of them a little bit. So first, my definition of leadership is inspired communication of a vision. So for Netflix, it was the get big on DVD, lead streaming, expand internationally and even go into original content. That was the vision. And the strategy is, how do you delight your customers and hard-to-copy margin enhancing ways? 

    Then the next, these are the skills that I look for in any leader, it's management. As a leader, it's not about managing day to day, it's actually about creating a system where people can deliver results. So it is a lot about hiring the right people, giving them the tools and systems to be effective. How do you run a quarterly product strategy meeting, for instance? That's a management thing.

    The next thing I get leaders to focus on is culture. Culture is amazing. Because if the values, skills, and behaviors are understood, people can make great decisions without even talking to each other, which is huge. I do look for leaders who are proactive and results oriented — you’ve got to lead, not follow. That's balanced against the soft issue of culture. 

    And then the last thing for a leader in product, they do need to have the product skills. And that's a different list. But you know, you got to understand Consumer Science, you got to understand the technology, you got to understand the consumer insight, you got to understand design, there's a lot of skills there. I'd have written essays about this.

    One of them is what your next head of product looks like. I wrote that on Medium. It was hysterical. I was addressing it to CEOs of companies, of course. But then I realized that all product leaders were reading it, which I loved. My other tip is my daughter, who’s been a product manager for two years at Rent the Runway in New York City. She loves the job, but I'm always like, “Start developing, practicing your leadership skills. There's always something you can lead.” I'm like, “Hey Brit, why don't you start up a meetup in New York so other people can get to know each other. That's an eminently doable thing for a 23-year-old in New York.” 

    So look for these opportunities to lead, have a strategy and be able to cogently describe it for your swim lane, or for your product or for whatever feature you're working on. Be able to talk about it through a strategic lense. “Here's my strategy. Here's my proxy metrics, here are the tactics or projects that help bring my strategy to life.” And this is how you begin to practice leadership.

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