In Defense of Data: The Netflix Paradigm

They say that today, the average person is exposed to more data in a single day than their fifteenth-century counterpart was in their entire lifetime.  They also say that we are now creating over 2.5 quintillion bytes of data per day (however many zero’s that is) and that 90% of the data in the world has been created in just the last two years alone.  But “Data is no substitute for intimacy”, Roger Martin declared in his book The Design of Business claiming that companies cannot analyze their way to success or growth.  Or can’t they?  While this may have been the case back in 2009, is it still the case today?

In the last few years, the kind of data available to businesses has drastically changed.  It is no longer limited to specific transactions and traditional market segmentation information; it is interconnected, in real time and more personal than ever.  Our mobile devices broadcast where we are and where we are going.  A Fitbit knows how long its user slept last night, a Nest thermostat knows what time its users come home, and with the Internet of Things our connected devices will soon spin off even more personal information.

Of course data on its own is useless if it does not lead to customer insights.  Insights are not just information; they are an act of understanding gained from analysis of the data gathered.  Understanding how products and services are actually used means that businesses not only gain a better understanding the relationships that customers have with their brand, but also gain visibility into their social sphere to analyze the relationships that exist among different customers within larger communities.

Finding meaningful patterns and reflecting on the deeper implications behind those patterns is the key to leveraging customer data and uncovering valuable insights.  And while the term ‘data-driven’ may sound a bit passé, the implications are paramount for business leaders who need to make timely and well informed strategic decisions.  The ability to collect real contextual data from customers is a game changer, and no other company has demonstrated this better than Netflix.

Netflix has mind-boggling access to consumer sentiment in real time: 30 million ‘plays’ a day (including when someone pauses, rewinds, fast forwards or abandons a show), four million ratings by subscribers, three million searches as well as the time of day when shows are watched and on what devices.  Initially pioneering their smart personalization engine to perfect movie recommendations to each customer based on their personal preferences and consolidated ratings algorithms, they quickly realized the greater potential in their massive database and shifted their focus to creating original content.

As other film and television producers gamble on new pilots and hold screenings for a few focus groups to gather customer data and viewer feedback, Netflix gets to make informed decisions based on a meticulous analysis of the viewing habits of its 44 million subscribers worldwide.  So when they decided to sink $100m into House of Cards without even seeing a pilot, or pull off their first Oscar nod gambling on a documentary charting political unrest in Egypt, they weren’t making blind bets.

In fact, according to its corporate blog, Netflix uses their customer data stream on a continuous basis, not just occasionally.  Their philosophy is that data should be accessible, easy to discover, and easy to process for everyone.  To enable this, the company has invested in some hardcore data visualization tools that allow employees to routinely look to customer data, tweak algorithms, garner new insights, and solve pressing business issues.

For example, in envisioning their award winning show House of Cards, Netflix’s data indicated that the same subscribers who loved the original BBC production also gobbled down movies starring Kevin Spacey or directed by David Fincher. Thus the decision to remake of the BBC drama with Spacey and Fincher attached was a no-brainer.  But they did not stop there; even the design of the cover was not left up to chance.

Analyzing data based on different titles, colors, and cover preferences, allowed the company asked questions such as:

/ Is there an ideal color combination for the cover of an original series?

/ Do certain customers trend toward specific types of covers?

/ Which title fonts and colors appeal to which customers?

/ Should different colors be used for different audiences?

Last but not least, Netflix data showed that viewers like to binge watch their TV series, consuming them in back-to-back marathons. Recognizing this as a key staple of the Netflix customer experience, they incorporated it into their product strategy, releasing each new masterpiece to the masses in season bundles rather than single episodes at a time.

Admittedly, this design by data trend may seem quite alarming; especially to us creative types that value intuition and serendipity as much, if not more than facts and figures.  Not to mention that companies will soon be able figure out how to generate intelligence from their data to know more about us than we know ourselves, which is downright disturbing.  Still, there’s a massive change going on in business, driven by the ability to gather data – all kinds of data – that is growing more and more intimate each day.  And with it comes endless opportunity for businesses to innovate and create transformative customer experiences like never before.

the author

Azarakhsh Damood

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