Peter Fisk

In an exclusive extract from my forthcoming book Business Recoded, meet one of the most inspiring business leaders, shaking up today’s world. He embraces the opportunities of relentless change, the power of disruptive technologies, and the courage to create a better future in his own vision. In the book, I explore the stories of many of the world’s most fascinating leaders right now, and develop 49 codes that help you redefine the future of your business, and yourself.

The Leadership Code of Reed Hastings

“If you want to build a ship, don’t drum up the people to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea.”

Reed Hastings likes to quote Antoine de Saint-Exupéry, author of The Little Prince.

Hastings revolutionised how the world watches movies. He cofounded Netflix in 1995, the same year he sold his first company, Pure Software. Having grown up in a world of VHS videos, usually rented from a local store, he got the idea for Netflix when he owed his local Blockbuster store $40 for a movie he had misplaced. A new format, DVD was emerging, and he started offering them to be delivered and returned by mail for a flat monthly subscription fee, challenging Blockbuster’s high costs and inconvenience.

He famously said “as an entrepreneur you have to feel like you can jump out of an airplane because you’re confident that you’ll catch a bird flying by. It’s an act of stupidity, and most entrepreneurs go splat because the bird doesn’t come by, but a few times it does.”

In 2011, he went further, introducing an online streaming service, at a higher subscription fee. Netflix’s stock price stumbled, and the Huff Post called him “monumentally stupid.” Today, Netflix has a market value almost identical to Disney, a model for engaging consumers through the power of big data and AI, to understand them more deeply, and to create content that is personal and compelling to them.

“Entertainment is a core human need”, says Hastings. “It changes how we feel and gives us common ground. The invention of motion pictures 120 years ago, and then of television 70 years ago, were the first two entertainment revolutions. The third revolution is streaming, personalising any-screen anytime anyplace video, which allows Netflix to provide better entertainment at lower cost and greater scale than the world has ever seen.”

While Netflix is admired across the world for its innovative business model, Hastings realised that it needed to innovate how it works inside too – how people engage in work and lead others – in order to deliver the external promise and sustain its market momentum.

Netflix’s “Culture Desk”, subtitled “Freedom and Responsibility” has been described by Sheryl Sandberg as “the most important document ever to come out of Silicon Valley.” It was developed by former chief talent officer Patty McCord. She and Hastings were unimpressed by most organisations, and didn’t want Netflix to be the same.

Download a PDF of Netflix’s Culture Deck: Freedom and Responsibility

The document describes “the unusual ways we work together so we can eventually entertain everyone”.  Instead of listing the company’s core values like every other company, they decided to write down the things the company valued, what mattered to them, what they expected of their people.

They started with “Like many great companies, we strive to hire the best and we value integrity, excellence, respect, and collaboration. What is unique and special, though, about Netflix is how much we encourage independent decision-making by employees; share information openly, broadly, and deliberately; are extraordinarily candid with each other; keep only our highly effective people; and we avoid rules”.

They agreed that there would be no vacation policy and no travel policy, and everyone is paid more than their market rate.  You can book your meeting in “The Matrix” or “Dr Strangelove” conference room. And if you need some noise-cancelling headphones, just swipe your ID on one of their “tech vending machines” and they’re yours at no cost. “If you look at an innovator’s mind, the innovator never says we should look around and see what everyone else is doing and do it a smidge better” says Hastings, “we just took risks with the people stuff, just like we took risks with the business.”

It’s not all fun and freedom, however. There is a hard edge. He admits that in reality much of Netflix’s approach has been about tolerating a level of chaos and error, to stimulate innovation. But that gets more difficult as you grow in size and locations.

Judgement is key, he says, although admitting that judgement is subjective. “Brilliant jerks” are sacked, and Hastings describes the company as “a team, not a family”. Employees are subject to the so-called “keeper test”, where adequate performance is rewarded with “a generous severance package”. He describes the culture as “jazz rather than orchestra”, managing through values and context, so that everyone is doing the right thing without central coordination.

Hastings has spent the last 18 months trying to capture the essence of Netflix’s culture in a new book, written with INSEAD’s Erin Meyer. Having worked with Meyer, who is best known for The Culture Map exploring how different cultures can work together, they seem like polar opposites. The digital entrepreneur comes across as rambling and folksy, while the Paris-based academic is smart and precise.

No Rules Rules is written separately by both, in alternating chapters. Indeed Meyer admits that her first reaction to Netflix’s culture was “hypermasculine, and downright aggressive”. However it’s an interesting, inspiring, read. And timely too, given that many of us have spent much of the last 6 months, sustained by multiple Netflix series.

Netflix’s culture started with The Culture Deck as a set of principles and aspirations, written by Hastings and his Chief Talent Officer at the time, Patty McCord, which still appears on its website:

Entertainment, like friendship, is a fundamental human need; it changes how we feel and gives us common ground. We want to entertain the world. If we succeed, there is more laughter, more empathy, and more joy.

To get there, we have an amazing and unusual employee culture. This document is about that culture.

Like all great companies, we strive to hire the best and we value integrity, excellence, respect, inclusion, and collaboration. What is special about Netflix, though, is how much we:

1. encourage independent decision-making by employees
2. share information openly, broadly, and deliberately
3. are extraordinarily candid with each other
4. keep only our highly effective people
5. avoid rules

Our core philosophy is people over process. More specifically, we have great people working together as a dream team. With this approach, we are a more flexible, fun, stimulating, creative, collaborative and successful organization.

Real Values

Many companies have value statements, but often these written values are vague and ignored. The real values of a firm are shown by who gets rewarded or let go. Below are our values, the specific behaviors and skills we care about most. The more these values sound like you, and describe people you want to work with, the more likely you will thrive at Netflix.

Judgment

• You make wise decisions despite ambiguity
• You identify root causes, and get beyond treating symptoms
• You think strategically, and can articulate what you are, and are not, trying to do
• You are good at using data to inform your intuition
• You make decisions based on the long term, not near term

Communication

• You are concise and articulate in speech and writing
• You listen well and seek to understand before reacting
• You maintain calm poise in stressful situations to draw out the clearest thinking
• You adapt your communication style to work well with people from around the world who may not share your native language
• You provide candid, helpful, timely feedback to colleagues

Curiosity

• You learn rapidly and eagerly
• You contribute effectively outside of your specialty
• You make connections that others miss
• You seek to understand our members around the world, and how we entertain them
• You seek alternate perspectives

Courage

• You say what you think, when it’s in the best interest of Netflix, even if it is uncomfortable
• You make tough decisions without agonizing
• You take smart risks and are open to possible failure
• You question actions inconsistent with our values
• You are able to be vulnerable, in search of truth

Passion

• You inspire others with your thirst for excellence
• You care intensely about our members and Netflix’s success
• You are tenacious and optimistic
• You are quietly confident and openly humble

Selflessness

• You seek what is best for Netflix, rather than what is best for yourself or your group
• You are open-minded in search of great ideas
• You make time to help colleagues
• You share information openly and proactively

Innovation

• You create new ideas that prove useful
• You re-conceptualize issues to discover solutions to hard problems
• You challenge prevailing assumptions, and suggest better approaches
• You keep us nimble by minimizing complexity and finding time to simplify
• You thrive on change

Inclusion

• You collaborate effectively with people of diverse backgrounds and cultures
• You nurture and embrace differing perspectives to make better decisions
• You are curious about how our different backgrounds affect us at work, rather than pretending they don’t affect us
• You recognize we all have biases, and work to grow past them
• You intervene if someone else is being marginalized

Integrity

• You are known for candor, authenticity, transparency, and being non-political
• You only say things about fellow employees that you say to their face
• You admit mistakes freely and openly
• You treat people with respect regardless of their status or disagreement with you

Impact

• You accomplish amazing amounts of important work
• You demonstrate consistently strong performance so colleagues can rely upon you
• You make your colleagues better
• You focus on results over process

It’s easy to write admirable values; it’s harder to live them. In describing courage we say, “You question actions inconsistent with our values.” We want everyone to help each other live the values and hold each other responsible for being role models. It is a continuous aspirational stretch.

In describing integrity we say, “You only say things about fellow employees you say to their face.” This attribute is one of the hardest for new people to believe — and to learn to practice. In most situations, both social and work, those who consistently say what they really think about people are quickly isolated and banished. We work hard to get people to give each other professional, constructive feedback – up, down and across the organization – on a continual basis. Leaders demonstrate that we are all fallible and open to feedback. People frequently ask others, “What could I be doing better?” and themselves, “What feedback have I not yet shared?”

We believe we will learn faster and be better if we can make giving and receiving feedback less stressful and a more normal part of work life. Feedback is a continuous part of how we communicate and work with one another versus an occasional formal exercise. We build trust by being selfless in giving feedback to our colleagues, even if it is uncomfortable to do so. Feedback helps us to avoid sustained misunderstandings and the need for rules. Feedback is more easily exchanged if there is a strong underlying relationship and trust between people, which is part of why we invest time in developing those professional relationships. We celebrate the people who are very candid, especially to those in more powerful positions. We know this level of candor and feedback can be difficult for new hires and people in different parts of the world where direct feedback is uncommon. We actively help people learn how to do this at Netflix through coaching and modeling the behaviors we want to see in every employee.

Dream Team

A dream team¹ is one in which all of your colleagues are extraordinary at what they do and are highly effective collaborators. The value and satisfaction of being on a dream team is tremendous. Our version of the great workplace is not sushi lunches, great gyms, fancy offices, or frequent parties. Our version of the great workplace is a dream team in pursuit of ambitious common goals, for which we spend heavily. It is on such a team that you learn the most, perform your best work, improve the fastest, and have the most fun.

To have an entire company comprise the dream team (rather than just a few small groups) is challenging. Unquestionably, we have to hire well. We also have to foster collaboration, embrace a diversity of viewpoints, support information sharing, and discourage politics. The unusual part is that we give adequate performers a generous² severance package so that we can find a star for that position. If you think of a professional sports team, it is up to the coach to ensure that every player on the field is amazing at their position, and plays very effectively with the others. We model ourselves on being a team, not a family. A family is about unconditional love, despite, say, your siblings’ bad behavior. A dream team is about pushing yourself to be the best teammate you can be, caring intensely about your teammates, and knowing that you may not be on the team forever.

We have no bell curves or rankings or quotas such as “cut the bottom 10% every year.” That would be detrimental to fostering collaboration, and is a simplistic, rules-based approach we would never support. We focus on managers’ judgment through the “keeper test” for each of their people: if one of the members of the team was thinking of leaving for another firm, would the manager try hard to keep them from leaving? Those who do not pass the keeper test (i.e. their manager would not fight to keep them) are promptly and respectfully given a generous severance package so we can find someone for that position that makes us an even better dream team. Getting cut from our team is very disappointing, but there is no shame. Being on a dream team can be the thrill of a professional lifetime.

Given our dream team orientation, it is very important that managers communicate frequently with each of their team members about where they stand so surprises are rare. Also, it is safe for any employee at any time to check in with their manager by asking, “How hard would you work to change my mind if I were thinking of leaving?” In the tension between honesty and kindness, we lean into honesty. No matter how honest, though, we treat people with respect.

One might assume that with dream team focus, people are afraid of making mistakes. In fact, it’s the opposite. We try all kinds of things and make plenty of mistakes as we search for improvement. The keeper test is applied as a judgment of someone’s overall expected contribution.

Within a dream team, collaboration and trust work well because your colleagues are both exceptionally skilled at what they do, and at working well with others. In describing selflessness we say “You make time to help colleagues. You share information openly and proactively.” We want new colleagues to feel very welcome and get all the support they need to be effective.

People like loyalty, and it is great as a stabilizer. Employees with a strong track record at Netflix get leeway if their performance takes a temporary dip. Similarly, we ask employees to stick with Netflix through any short term dips. But unconditional allegiance to a stagnant firm, or to a merely-adequately-performing employee, is not what we are about.

On a dream team, there are no “brilliant jerks.” The cost to teamwork is just too high. Our view is that brilliant people are also capable of decent human interactions, and we insist upon that. When highly capable people work together in a collaborative context, they inspire each other to be more creative, more productive and ultimately more successful as a team than they could be as a collection of individuals.

Succeeding on a dream team is about being effective, not about working hard. Sustained “B” performance, despite an “A” for effort, gets a respectful severance package. Sustained “A” performance, even with a modest level of effort, gets rewarded. Of course, to be great, most of us have to put in considerable effort, but hard work and long hours is not how we measure or talk about a person’s contribution.

Being on a dream team is not right for everyone, and that is OK. Many people value job security very highly, and would prefer to work at companies whose orientation is more about stability, seniority, and working around inconsistent employee effectiveness. Our model works best for people who highly value consistent excellence in their colleagues.

To help us attract and retain stunning colleagues, we pay employees at the top of their personal market. We make a good-faith estimate of the highest compensation each employee could make at peer firms, and pay them that maximum. Typically, we calibrate to market once a year. We do not think of these as “raises” and there is no raise pool to divide up. The market for talent is what it is. We avoid the model of “2% raise for adequate, 4% raise for great”. Some employees’ market value will rapidly rise (due both to their performance and to a shortage of talent in their areas) while other employees may be flat year-to-year, despite doing great work. At all times, we aim to pay all of our people at the top of their personal market.

Note that if our company experienced financial difficulty, we wouldn’t ask our employees to accept less pay. A sports team with a losing record still pays top of personal market for the players they hope will get them back into a winning position. On the other hand, if the company does well, our broadly distributed stock options become quite valuable.

Ultimately, your economic security is based on your skills and reputation, not on your seniority at one company. At Netflix, you learn a lot working on hard problems with amazing colleagues, and what you learn increases your market value. Knowing that other companies would quickly hire you if you left Netflix is comforting. We see occasional outside interviewing as healthy, and encourage employees to talk with their managers about what they learn in the process.

While our teammates are fantastic, and we work together very well, we know we can always do better. We strive to have calm confidence, and yet yearn to improve. We suck compared to how great we want to become.

Freedom and Responsibility

There are companies where people ignore trash on the floor in the office, leaving it for someone else to pick it up, and there are companies where people in the office lean down to pick up the trash they see, as they would at home. We try hard to be the latter, a company where everyone feels a sense of responsibility to do the right thing to help the company at every juncture. Picking up the trash is the metaphor for taking care of problems, small and large, and never thinking “that’s not my job.” We don’t have rules about picking up the real or metaphoric trash. We try to create a sense of ownership so that this behavior comes naturally.

Our goal is to inspire people more than manage them. We trust our teams to do what they think is best for Netflix — giving them lots of freedom, power, and information in support of their decisions. In turn, this generates a sense of responsibility and self-discipline that drives us to do great work that benefits the company.

We believe that people thrive on being trusted, on freedom, and on being able to make a difference. So we foster freedom and empowerment wherever we can.

In many organizations, there is an unhealthy emphasis on process and not much freedom. These organizations didn’t start that way, but the python of process squeezed harder every time something went wrong. Specifically, many organizations have freedom and responsibility when they are small. Everyone knows each other, and everyone picks up the trash. As they grow, however, the business gets more complex, and sometimes the average talent and passion level goes down. As the informal, smooth-running organization starts to break down, pockets of chaos emerge, and the general outcry is to “grow up” and add traditional management and process to reduce the chaos. As rules and procedures proliferate, the value system evolves into rule following (i.e. that is how you get rewarded). If this standard management approach is done well, then the company becomes very efficient at its business model — the system is dummy-proofed, and creative thinkers are told to stop questioning the status quo. This kind of organization is very specialized and well adapted to its business model. Eventually, however, over 10 to 100 years, the business model inevitably has to change, and most of these companies are unable to adapt.

To avoid the rigidity of over-specialization, and avoid the chaos of growth, while retaining freedom, we work to have as simple a business as we can given our growth ambitions, and to keep employee excellence rising. We work to have a company of self-disciplined people who discover and fix issues without being told to do so.

We are dedicated to increasing employee³ freedom to fight the python of process. Some examples of how we operate with unusual amounts of freedom are:

• We share documents internally broadly and systematically. Nearly every document is fully open for anyone to read and comment on, and everything is cross-linked. Memos on each title’s performance, on every strategy decision, on every competitor, and on every product feature test are open for all employees to read. There are some leaks, but the value of highly-informed employees is well worth it.
• There are virtually no spending controls and few contract signing controls. Each employee is expected to seek advice and perspective as appropriate. “Use good judgment” is our core precept.
• Our policy for travel, entertainment, gifts, and other expenses is 5 words long: “act in Netflix’s best interest.”
• Our vacation policy is “take vacation.” We don’t have any rules or forms around how many weeks per year. Frankly, we intermix work and personal time quite a bit, doing email at odd hours, taking off a weekday afternoon, etc. Our leaders make sure they set good examples by taking vacations, often coming back with fresh ideas, and encourage the rest of the team to do the same.
• Our parental leave policy is: “take care of your baby and yourself.” New parents generally take 4-8 months.
• Each employee chooses each year how much of their compensation they want in salary versus stock options. You can choose all cash, all options, or whatever combination suits you⁴. You choose how much risk and upside you want. These 10-year stock options are fully-vested and you keep them even if you leave Netflix.
• There are no compensation handcuffs (vesting) requiring you to stay in order to get your money. People are free to leave at any time, without loss of money, and yet they overwhelmingly choose to stay. We want managers to create conditions where people love being here, for the great work and great pay.

You might think that such freedom would lead to chaos. But we also don’t have a clothing policy, yet no one has come to work naked. The lesson is you don’t need policies for everything. Most people understand the benefits of wearing clothes at work.

There are a few important exceptions to our anti-rules pro-freedom philosophy. We are strict about ethical issues and safety issues. Harassment of employees or trading on insider information are zero tolerance issues, for example. Some information security issues, such as keeping our members’ payment information safe, have strict controls around access. Transferring large amounts of cash from our company bank accounts has strict controls. But these are edge cases.

In general, freedom and rapid recovery is better than trying to prevent error. We are in a creative business, not a safety-critical business. Our big threat over time is lack of innovation, so we should be relatively error tolerant. Rapid recovery is possible if people have great judgment. The seduction is that error prevention just sounds so good, even if it is often ineffective. We are always on guard if too much error prevention hinders inventive, creative work.

On rare occasion, freedom is abused. We had one senior employee who organized kickbacks on IT contracts for example. But those are the exceptions, and we avoid over-correcting. Just because a few people abuse freedom doesn’t mean that our employees are not worthy of great trust.

Some processes are about increased productivity, rather than error avoidance, and we like process that helps us get more done. One such process we do well is effective scheduled meetings. We have a regular cadence of many types of meetings; we start and end on time, and have well-prepared agendas. We use these meetings to learn from each other and get more done, rather than to prevent errors or approve decisions.

Informed Captains

For every significant decision there is a responsible captain of the ship who makes a judgment call after sharing and digesting others’ views. We avoid committees making decisions because that would slow us down, and diffuse responsibility and accountability. We farm for dissent; dissent is not natural or easy, which is why we make a concerted effort to stimulate it. Many times, groups will meet about topics and debate them, but then afterwards someone needs to make a decision and be that “captain”. Small decisions may be shared just by email, larger ones will merit a memo with discussion of the various positions, and why the captain made such a decision. The bigger a decision, the more extensive the dissent/assent gathering should be, usually in an open shared document. We are clear, however, that decisions are not made by a majority or committee vote. We don’t wait for consensus, nor do we drive to rapid, uninformed decision making. When the captain of any particular decision is reasonably confident of the right bet for us to take, they decide and we take that bet. Afterwards, as the impact becomes clearer, we reflect on the decision, and see if we could do even better in the future.

Disagree Openly

If you disagree on a material issue, it is your responsibility to explain why you disagree, ideally in both discussion and in writing. The back and forth of discussion can clarify the different views, and concise writing of the core issues helps people reflect on what is the wise course, as well as making it easy to share your views widely. The informed captain on that decision has the responsibility to welcome, understand, and consider your opinions, but may not agree. Once the captain makes a decision, we expect everyone to help make it as successful as possible. Later, if significant new information becomes available, it is fine to ask the captain to revisit the topic. Silent disagreement is unacceptable and unproductive.

Context not Control

We want employees to be great independent decision makers, and to only consult their manager when they are unsure of the right decision. The leader’s job at every level is to set clear context so that others have the right information to make generally great decisions.

We don’t buy into the lore of CEOs, or other senior leaders, who are so involved in the details that their product or service becomes amazing. The legend of Steve Jobs was that his micromanagement made the iPhone a great product. Others take it to new extremes, proudly calling themselves nano-managers. The heads of major networks and studios sometimes make many decisions in the creative process of their content. We do not emulate these top-down models because we believe we are most effective and innovative when employees throughout the company make and own decisions.

We strive to develop good decision-making muscles everywhere in our company. We pride ourselves on how few, not how many, decisions senior management makes. We don’t want hands-off management, though. Each leader’s role is to teach, to set context, and to be highly informed of what is actually happening. The only way to figure out how the context setting needs to improve is to explore a sample of the details. But unlike the micro-manager, the goal of knowing those details is not to change certain small decisions, but to learn how to adjust context so more decisions are made well.

There are some minor exceptions to “context not control,” such as an urgent situation in which there is no time to think about proper context and principles, or when a new team member hasn’t yet absorbed enough context to be confident, or when it’s recognized that the wrong person is in a decision-making role (temporarily, no doubt).

We tell people not to seek to please their boss. Instead, seek to serve the business. It’s OK to disagree with your manager. It’s never OK to hide anything. It’s OK to say to your manager, “I know you disagree, but I’m going to do X because I think it is a better solution. Let me know if you want to specifically override my decision.” What we don’t want is people guessing what their manager would do or want, and then executing on that guess.

Highly Aligned, Loosely Coupled

As companies grow, they often become highly centralized and inflexible. Symptoms include:

• Senior management is involved in many small decisions
• There are numerous cross-departmental buy-in meetings to socialize tactics
• Pleasing other internal groups takes precedence over pleasing customers
• The organization is highly coordinated and less prone to error, but slow and frustrating

We avoid this by being highly aligned and loosely coupled. We spend lots of time debating strategy together, and then trust each other to execute on tactics without prior approvals. Often, two groups working on the same goals won’t know of, or have approval over, their peer activities. If, later, the activities don’t seem right, we have a candid discussion. We may find that the strategy was too vague or the tactics were not aligned with the agreed strategy. And we discuss generally how we can do better in the future.

The success of a “Highly Aligned, Loosely Coupled” work environment is dependent upon the collaborative efforts of high performance individuals and effective context. Ultimately, the end goal is to grow the business for bigger impact while increasing flexibility and agility. We seek to be big, fast and nimble.

Seeking Excellence

New employees often comment in their first few months that they are surprised at how accurate this culture description is to the actual culture they experience. Around the world, we live and create our culture together. In fact, hundreds of our global employees contributed to this document.

We do not seek to preserve our culture — we seek to improve it. Every person who joins us helps to shape and evolve the culture further. We find new ways to accomplish more together. Every few years we can feel a real difference in how much more effectively we are operating than in the past. We are learning faster than ever because we have more dedicated people with diverse perspectives trying to find better ways for our talented team to work together more cohesively, nimbly and effectively.

Summary

As we wrote in the beginning, what is special about Netflix is how much we:

1. encourage independent decision-making by employees
2. share information openly, broadly, and deliberately
3. are extraordinarily candid with each other
4. keep only our highly effective people
5. avoid rules

Finally

Antoine de Saint-Exupéry, the author of The Little Prince, shows us the way:

If you want to build a ship,

don’t drum up the people

to gather wood, divide the

work, and give orders.

Instead, teach them to yearn

for the vast and endless sea.

Nike

Addressing racism in the US, Nike for once, says Don’t Do It

Big brewers like AB InBev have turned to tech. It has partnered with identity management startup Civic to test out a blockchain-enabled beer vending machine,  for instance. At the same time, Carlsberg is using artificial intelligence to develop new beer flavours faster. And startups are entering the game as well, offering self-pouring beer machines, at-home brewing devices, and delivery services.

Consider this mapping of a changing industry, also from CB Insights:

They describe the changing in these categories in more detail:

Craft Beers — These startups are independently owned and produce lower volumes of beer than big brands such as Heineken. Among them, UK-based Brewdog is the most well-funded with $297M in total funding.

Bar Tech — Companies in this category bring big data, online features, and discovery platforms to bars. SteadyServe Technologies ($22M in disclosed funding) provides connected scales to track beer levels in kegs, while SevenFifty Technologies ($8.5M in disclosed funding) offers a marketplace for bars to connect with alcohol distributors.

Alternative Beers — This category includes companies offering non-traditional beers. Province Brand, for one, is developing non-alcoholic beer brewed from the cannabis plant, while JoyBrau offers a non-alcoholic protein-infused beer targeted at people who work out.

At-Home Devices — Startups in this category are making at-home brewing and consumption easier. PicoBrew and Minibrew have both developed at-home brewing machines, allowing users to brew their own beer in small batches.

Delivery Platforms — These companies offer on-demand beer delivery. US-based Drizly is the most well-funded startup in this category, with $69M in total funding.

Experiences — While many craft beer brands opt for taprooms to offer a beer-centric experience, companies such as Hospters are allowing customers to brew their own beer. Another experience-focused startup, Ripples, has developed a machine that prints personalised messages on foamy drinks like beer.

Beer-Derived Products — This category is home to companies using byproducts of the brewing process to offer new types of products. It includes snack bars (Regrained, Anu Snacks), drinks (Canvas), and flour (Rise Products), all made from spent grains.

Self-Service — These startups are making it easier for customers to buy beer conveniently, from vending machines (Beer Box) to self-service pouring dispensers (PourMyBeer) that can be installed in bars, restaurants, clubs, and more.

Brewing Tech — The brewery is also getting its tech upgrade. This category includes companies that are making it faster, cheaper, and more convenient to brew and transport beer. IntelligentX Brewing Co., for example, is using artificial intelligence to reduce the number of iterations needed to create a new beer.

E-Commerce Platforms — Companies such as France-based Une Petite Mousse and Heineken-backed Beerwulf are offering online stores focused on beer.

Source: CB Insights, McKinsey, Mintel

Image: Unsplah

We are familiar with the differences between generations – from “baby boomers” to “millennials” – and how we define (stereotype) age groups most notably by attitudes that are shaped in their formative years. Their experiences while growing up have a huge influence on their enduring worldviews and values, their preferences for brands, and behaviours in the workplace.

The now retired “builder” generation of Jack Welch, who succeeded through “command and control” organisational structures, were not surprisingly most influenced by world wars. The “boomer” generation of Steve Jobs was more inspired by possibilities, like the moon landing. Most boardrooms today are largely populated by “Gen X”, more open and collaborative.

“Gen Y” (also known as millennials) were the first digital natives, unable to imagine life without a mobile phone and social media. As the entrepreneurs, and primary workforce of today, their attitudes are reshaping markets and organisations as we speak. They are now being followed by “Gen Z” who bring a fresh conscience to society. So what happens next?

Kids growing up in a pandemic-stricken world, locked-down and schooled online, will inevitably be shaped by their experiences, and go onto shape the future of markets and work. They are labelled “Generation Alpha” by an Australian research company, McCrindle (see the diagram below). They will soon outnumber the boomers, they will most likely live beyond 100 years old, and as a global population of over 2 billion, they will be the largest generation in history.

 

 

A new report by Canvas8 reminds us that “Gen Alpha” will see an isolationist world as normal, not just because of Covid-19, but because of the politics of Trump and Brexit too. Their values are shaped by incredible tech possibilities, health consciousness, political anxiety, and a call-out culture, driven by millennial parents who are actively conditioning their future views.

In reality these youngsters are already shaping markets – with social influence and purchasing power beyond their years. They will be the most materially endowed generation, born with iPads and iPhones as toys, they will have a gamified approach to learning and life. “Gen Alpha” are the real legacy of today’s pandemic, and will also be most influential in shaping our future.

Image: Unsplash

Warren Buffett turns 90 today.

Buffett was born in Omaha, Nebraska, the son of stockbroker who became a US Congressman. An early school teacher said he showed great potential in mathematics, and “could be a great stockbroker”.

He displayed an interest in business and investing from a young age. He was inspired by a book he borrowed from the Omaha public library at the age of seven, One Thousand Ways to Make $1000.

Much of his early childhood years were marked by  entrepreneurial ventures. In one of his first business ventures, Buffett sold chewing gum, Coca-Cola bottles, and weekly magazines door to door. He worked in his grandfather’s grocery store. While still in high school, he made money delivering newspapers, selling golf balls and stamps, and detailing cars, among other means.

On his first income tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper route. In 1945, while at high school, he and a friend spent $25 to purchase a used pinball machine, which they placed in the local barber shop. Within months, they owned several machines in three different barber shops across Omaha, selling the business a few months later for $1,200.

Buffett’s interest in the stock market and investing dated to schoolboy days he spent in the customers’ lounge of a regional stock brokerage near his father’s own brokerage office. On a trip to New York City at age ten, he made a point to visit the New York Stock Exchange. At 11, he bought three shares of Cities Service Preferred for himself, and three for his philanthropic sister Doris. At the age of 15, Warren made more than $175 monthly delivering Washington Post newspapers. In high school, he invested in a business owned by his father and bought a 40-acre farm worked by a tenant farmer. He bought the land when he was 14 years old with $1,200 of his savings. By the time he finished college, Buffett had accumulated $9,800 in savings (about $105,000 today).

He graduated from Wharton Business School as a 19 year old. He went on to study investment philosophy at Colombia around the concept of value investing that was pioneered by Benjamin Graham, which had a huge influence on him. He attended New York Institute of Finance to focus his economics background and soon after began various business partnerships, including one with Graham.

He created Buffett Partnership Ltd in 1956, and his firm eventually acquired a textile manufacturing firm called Berkshire Hathaway in 1965, assuming its name to create a diversified holding company. In 1978, Charlie Munger joined Buffett and became vice-chairman of the company.

https://www.youtube.com/watch?v=RYHPlLsdW0A

 

The legendary investor and Berkshire Hathaway boss is the oldest and longest-serving CEO of a S&P 500 company, and has plenty to celebrate:

• Over the last 55 years he has grown Berkshire Hathaway into a $500 billion conglomerate that owns a rich portfolio of businesses including See’s Candies, Geico, Dairy Queen, Duracell, NetJets, PacifiCorp, Precision Castparts, and the BNSF railroad.
• Berkshire’s stock portfolio includes a 5.7% stake in Apple worth $123 billion at the last count, a 12% stake in Bank of America valued at $27 billion, and billion-dollar positions in Coca-Cola, Kraft Heinz, JPMorgan, and other blue-chip companies.
• Buffett has taken part in dozens of high-profile deals such as bailing out Goldman Sachs, General Electric, and Harley-Davidson during the financial crisis, and helping to finance Mars’ takeover of Wrigley around the same time. He famously said he only invests in companies which he understands, so rarely in technology.
• Known as the “Oracle of Omaha” investors flock to his AGM usually held in the town of his birth. He likes to create theatre, for example riding onto stage dressed in leather jacket on a Harley Davidson, and turning his keynote speech into a little ditty which he sang while strumming along on a ukulele.
• He has gifted $37 billion to philanthropic organizations in the past 14 years. Through the Giving Pledge, which he launched with his great friends Bill and Melinda Gates in 2010, he has also secured commitments from dozens of the world’s wealthiest people to give at least half their fortunes to good causes.

His annual “Letter to Shareholders” is poured over by investors, commentators and business leaders around the world, looking for insights and ideas about strategy and investment. Here are some of the best quotes from over the years:

• ‘Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years’
• ‘Someone’s sitting in the shade today because someone planted a tree a long time ago’
• “I insist on a lot of time being spent, almost every day, to just sit and think,”
• ‘Risk comes from not knowing what you’re doing’
• ‘You only have to do a very few things right in your life so long as you don’t do too many things wrong’
• “I’ll give my children ‘enough money so that they would feel they could do anything, but not so much that they could do nothing’
• ‘The light can at any time go from green to red without pausing at yellow’
• ‘It takes 20 years to build a reputation and 5 minutes to ruin it’
• ‘You cannot make a good deal with a bad person’
• ‘Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down’
• ‘Rule No. 1: Never lose money. Rule No. 2: Don’t forget rule No. 1’
• ‘The difference between successful people and really successful people is that really successful people say no to almost everything’
• ‘In the business world, the rear-view mirror is always clearer than the windshield’
• ‘It’s better to hang out with people better than you’
• ‘Cryptocurrencies will come to bad endings. There’s nothing being produced in the way of value from the asset.’
• ‘Price is what you pay. Value is what you get’
• ‘Only when the tide goes out do you discover who is swimming naked’

Here are links to all of his letters to shareholders, published by Berkshire Hathaway Inc:

• 1977
• 1978
• 1979
• 1980
• 1981
• 1982
• 1983
• 1984
• 1985
• 1986
• 1987
• 1988
• 1989
• 1990
• 1991
• 1992
• 1993
• 1994
• 1995
• 1996
• 1997
• 1998
• 1999
• 2000
• 2001
• 2002
• 2003
• 2004
• 2005
• 2006
• 2007
• 2008
• 2009
• 2010
• 2011
• 2012
• 2013
• 2014
• 2015
• 2016
• 2017
• 2018
• 2019

And finally, a short birthday wish from his friend and chess partner, Bill Gates, today:

Around the world, there are over 5,500 companies operating for over 200 years since their foundation, excluding government, education or religious organisations. These companies are located across the world, most notably in Japan (3,146), Germany (837), the Netherlands (222), and France (196).

Here are the oldest:

Kongo Gumi

Kongo Gumi, established in 578 AD, is the oldest, continually operating company in the world. Its headquarters are located in Osaka, Japan. This construction company was founded by an immigrant, who was commissioned by Prince Shotoku to build the Shitennō-ji Buddhist temple. Kongo Gumi was a family-run company for around 1,400 years until 2006, when the company struggled financially and became a subsidiary of Takamatsu. Before the merger, it employed over 100 individuals and had an annual budget of around $70 million. It continues to specialize in Buddhist temples today.

Nishiyama Onsen Keiunkan

The second oldest company in the world is Nishiyama Onsen Keiunkan, a hot spring hotel in Hayakawa, Japan. It was founded in 705 AD. In 2011, it was recognized by the Guinness Book of Records as the world’s oldest hotel. This 37-room hotel has been managed for over 1,300 years by the same family. It is located near the Akaishi mountains and derives its hot water from the nearby Hakuho Springs.

Koman

Founded in 707 AD, the Koman Hotel is the third oldest company in the world. It is a ryokan or a traditional Japanese Hotel. It has communal baths and rooms with tatami mats. It was established by Gonnokami Hiuke, who was inspired to start the hotel after dreaming of four gods. In his dream, the gods told him he must live in that location to protect his family over the generations. He built a shrine dedicated to the Gods on the hotel’s premise. His descendants went on to open bathhouses In Kinosaki Onsen located nearby.

Hoshi

Hoshi Ryokan is another traditional Japanese hotel which was founded in 718 AD, making it the fourth oldest company in the world and the third oldest hotel. It is located in the Awazu Onse region of the Ishikawa prefecture in Japan. Management of this hotel has stayed in the same family for 46 generations.

Genda Shigyo

Genda Shigyo, a ceremonial paper goods company, was founded in 771 AD. In 794, it moved its headquarters to Kyoto when the city became the capital of Japan. Today, its offices can be found between the Kyoto Imperial Palace and Nijo Castle. This company specializes in mizuhiki, colorful paper twisted into cords. These cords are used at events such as funerals and weddings.

Stiftskeller St. Peter is the 6th oldest company in the world and the first on the list to be located outside of Japan. This restaurant can be found in the city of Salzburg in Austria. It is the oldest restaurant in the world and the oldest company in Europe. Stiftskeller St. Peter was founded in 803 AD within the monastery of St. Peter’s Archabbey. The restaurant claims to have served several famous individuals over the last few centuries, including Christopher Columbus and Wolfgang Amadeus Mozart.

CNBC’s 2020 Disruptor 50 list is a great source of companies whose breakthroughs are influencing business and market competition at an ever accelerated pace. In particular, this year, they are poised to emerge from the Covid-19 pandemic with tech platforms that have the power to dominate.

They are turning ideas in cybersecurity, education, health IT, logistics/delivery, fintech and agriculture into a new wave of billion-dollar businesses.

A majority of them, in fact, already are billion-dollar businesses: 36 disruptors this year are unicorns that have already reached or passed the $1 billion valuation mark. Maybe more important this year: 37 have hired new employees since the pandemic began, and 19 have pivoted their products or launched new ones to meet the challenges of the pandemic.

Technology is already a major part of our daily lives and the public markets, and that will only increase on the other side of Covid-19, from the future of food supply to health-care diagnostics and the way we shop, study, work and pay.

Here is CNBC’s top 50 ranking:

1	Stripe	Unlocking the lockdown’s biggest value
2	Coupang	Beating Bezos at his own online game?
3	Indigo Agriculture	The future of farming is carbon negative
4	Coursera	Online ed’s biggest test begins
5	Klarna	No online sale left behind
6	Tempus	Precision medicine for the Covid crisis
7	Zipline	Medicine takes flight autonomously
8	SoFi	The future of your financial future
9	Neteera	Contactless health
10	Gojek	Indonesia’s original ridehail, growing up
11	WeLab	Branchless banking
12	DoorDash	The most in-demand in on-demand
13	Heal	The next big thing in medicine: housecalls?
14	Movandi	A network key to the 5G future
15	Better.com	Closing the mortgage gap online
16	Grab	Southeast Asia’s super app
17	Lemonade	A.I.-ing the end of the insurance agent
18	Root Insurance	Replacing demographics with real driver data
19	Healthy.io	Home-based health testing
20	GoodRx	Technology tackling the high cost of health care
21	Eat JUST	Just the egg, no chicken
22	goPuff	The convenience store gets more convenient
23	Affirm	Building new credit history
24	Kabbage	A main street lending lifeline
25	Chime	No-fee banking
26	Dave	Taking down the overdraft Goliath
27	Trulioo	Verification for a more virtual world
28	Ripple	A crypto answer to money transfer
29	TALA	Making microloans add up to a billion
30	Didi Chuxing	Riding a post-Covid pickup in China
31	SentinelOne	Cybercrime is up; so are defenses
32	Butterfly Network	A smarter ultrasound
33	Marqeta	Paying with a full deck of cards
34	Apeel	Ridding the world of rotten produce
35	K Health	Primary (smartphone) care
36	Databricks	Data help for data nerds
37	C3.ai	The world’s biggest brains building an even bigger one
38	Attabotics	Amazon’s ant-size competition
39	CLEAR	Biometric screening for a new world of hidden dangers
40	Snowflake	A data warehouse in the cloud
41	Airbnb	Your delayed destination
42	Duolingo	The universal language
43	LanzaTech	A carbon-capture moonshot
44	Ginkgo Bioworks	The world’s most advanced manufacturing
45	Guild Education	Upskilling America
46	Robinhood	The new bull market-makers
47	Convoy	A monster trucking problem solved
48	Beautycounter	A makeover for the cosmetics industry
49	Impossible Foods	Doesn’t seem so impossible anymore, does it?
50	UiPath	The robots are coming for your boring, repetitive job

TikTok competes with Snapchat and Instagram as the social media platform of choice for most young people.

Since its launch three years ago it has grown rapidly to 1 billion users, and is in the news because of its Chinese origins. While it is definitely a hit with young people, the US President is less keen, using security concerns as an excuse to escalate trade wars.

TikTok’s infectious 15-60 second videos, most often in the form of choreographed dances, have spread rapidly in lockdown. In the UK, for example, 27% of 18-24 year olds now use the app, compared to 7% back in March.

TikTok was created by Bytedance, often described as the world’s largest “unicorn”, founded in 2012 by Zhang Yiming. The business was recently valued at around $100 billion following substantial investment by SoftBank (double the potential value of its TikTok subsidiary).

Like his compatriot Jack Ma, 37 year old Zhang had an inauspicious start to his career. Having studied software engineering in Tianjin, he joined Chinese travel start-up Kuxun in 2006, its fifth employee, later becoming its technical director.

In 2008 Zhang joined Microsoft, but felt stifled by the corporate environment and soon left to join another start-up, Fanfou (created by Wang Xing, who later founded Meituan Dianping). When Fanfou failed, he returned to Kuxun, which was acquired by Expedia, formerly part of Microsoft. He left to start his first business, in online real estate, 99Fang.

Zhang now had the entrepreneurial bug, and saw in the rapid growth of mobile phone usage, an opportunity far beyond making calls. In China, and other emerging markets, phones were many people’s first experience of the internet, yet phone apps and interfaces were poor. Chinese users had a new thirst for information, and he saw the opportunity of artificial intelligence to push relevant content to users in more personal and intuitive ways.

Bytedance initially launched Toutiao (meaning “Headlines”) which focused on using AI to aggregate and recommend news to individuals, both from established media and user generated content. Most investors turned Zhang down for funding, seeing a Chinese tech market already dominated by the likes of Alibaba, Baidu and Tencent.

However Zhang soon found a profitable niche in entertainment apps, sharing viral jokes, memes and videos, It’s first app Neihan Duanzi gained 200 million users in 2017, but was closed down by Chinese censors for being “incommensurate with socialist core values”.

Zhang soon returned in 2016 with Douyin, a Chinese social network that creates short music, lip-sync, dance, and comedy, mostly in the form of short videos. This functionality was significantly enhanced with the acquisition of the American app Musical.ly in 2018, which also led to the launch of an international version of the app, branded as TikTok, later that year.

Zhang remained acutely aware of China’s censors, the concerns of other nations, and the experience of Huawei. He sought to separate the TikTok business where possible, for example by storing all of its data in USA and Singapore. In June, Kevin Mayer, previously chairman of Walt Disney International joined TikTok as CEO, and as Bytedance’s COO. TikTok, with over 1 billion users, is now twice the size of the Chinese version, Douyin.

In the last month, the US government threatened to ban TikTok from the USA, unless it was sold to an American company. Zhang’s old friend Microsoft stepped forwards, and is now exploring a $50 billion acquisition of the social media business. Having already acquired LinkedIn, Microsoft recognises that networks and content are as important as software to its future growth.

As businesses emerge from the initial crisis of the Covid-19 pandemic, many of the impacts are becoming clearer. Brian Chesky, CEO of Airbnb which lost over $1 billion in direct revenues during the last 6 months, says that he now realises that his business will have to fundamentally change. “We got to big, we made some wrong decisions. We need to go back to what we are really about, connecting people. We will change dramatically” he said this month.

Some of the short-term Covid-19 survival measures, like Airbnb’s introduction of online home tuition classes – from cookery courses to salsa dancing – were a great success, and will continue. Some suspended business activities will resume, change, or never return. For many industries – from travel to healthcare – there will be lasting structural change.

Now is the moment, as we shift from survival to slow recovery, that businesses need to be decisive in what to do, and what not. Already, some companies – like Avon, Coursera, Door Dash and Stripe – have made decisive choices during the lockdown period, and are now thriving amidst the turbulence.

The “Survive and Thrive” Matrix

I created this “Survive and Thrive” Matrix as a simple four box framework for you to decide: what to continue, and what to change:

As you work through the “Survive and Thrive” matrix consider:

• What can we learn from our survival actions, both the temporary activities that we will not continue, and the new actions that we will continue?
• How can we embrace the new activities in ways that might lead to more lasting change, even change our view as to future possibilities and strategic goals?
• As we restart activities that were temporarily suspended, how can we ensure that we do not fall back into our old ways, and inefficiencies?
• How can we combine the new/enhanced and restarted/adapted activities, and accelerate them to create advantage, and shape the new emerging markets?

As Chesky made choices, both in crisis mode when the pandemic hit, but also now in recovery, he has stuck to a key principle … make decisions “future back”. By this he means don’t make decisions purely on the present, but start by thinking what is the future you still want to create, how are the conditions to get their changing, and what will be most important.

This takes both foresight, how you see the changed future, but also insight, how the attitudes and behaviours of consumers are changing, and will change. Obviously, a business with a strong clarity of purpose, will have a better starting point for decision making. Equally, as human and technology issues become more significant, and social and environmental issues become more urgent and popular in society, there are new factors to embrace in making the right choices, and developing innovative ways forward.

Helping you “Build Back Better”

“Build Back Better” is a new online program for business leaders, developed in partnership with GERBUS Academy, starting on 2 September, with 3 x 4 hour online workshops, in which I will work directly with you.

It is your opportunity to step back and reimagine your business, how it can most effectively recover in the short-term, in a way that also creates a better business for the long-term.

The pandemic and subsequent recession are moments of dramatic change in every market, for customers and business. It is challenging, but also a time of opportunity. In fact, 57% of the Fortune 500 companies were created during downturns, when attitudes and priorities shift.

The post-pandemic world is a unique chance to rebuild your business in a better way, one which is more sustainable, more agile and resilient, more future-proofed.

How will you “build back better” after Covid-19?

The program is accessed through GERBUS Academy and will have a global context, but at the same time, practically applied to the specific context of your own business.

The program is build on practical insights from around the world – how companies from Airbnb to Zespri and coming to terms with the consequences of chaos and uncertainty, change and transformation. For some it is a complete pivot in terms of products and services, for others it is a rush to become a truly digital business.

However at the same time, to seize the opportunity of this moment, not just to rebuild the way we were, to to build back better – for a better future – in a more agile and resilient, customer-driven and future-proofed way – but also to address some of the most pressing challenges – how to align business and society, technology and humanity, profits and a higher purpose.

Over these three intensive, practical yet stretching, half-day online sessions, I will guide you through a process for accelerating your business recovery as we move from crisis to downturn, and also shaping your business for a better future.

Sign up for the program here.

“The future of work” has become a hot topic in recent months – the end of the office, the shift to distributed working, careers to contracts, functions to projects, jobs displaced by machines. Yet the real challenge is not people, but the organisation structures that still limit them.

Consider these facts … Only 1 in 5 employees believe their opinions matter at work, only 1 in 10 have the freedom to experiment with new solutions, and 1 in 11 say they can influence important decisions.

“This is a waste of human capability. We must do better” says Gary Hamel, co-author of the new book “Humanocracy: Creating organisations as amazing as the people inside them.”

Humanocracy

“In a world of unrelenting change and unprecedented challenges, we need organisations that are resilient and daring”

“Resilient, creative, and passionate” are the qualities organisations now need, says Hamel and co-author Michele Zanini, yet many organisations are “inertial, incremental, and inhuman”. Organisations should be rebuilt “to free the human spirit”.

“Humans are adaptable, creative and passionate – but organisations are mostly not”. Even though openness, flexibility, and creativity are essential, our current bureaucratic organisations are not allowing us to pursue those qualities, he says.

The BMI Tool

Hamel suggests that most of the bureaucracy that stifles organisations is invisible, so leaders should calculate the “Bureaucratic Mass Index” (BMI) of their organization.

“People pay attention to things that can be measured. To dismantle bureaucracy, then, the first step is to be honest about how much it’s costing your organization” he says. These costs fall into seven categories:

• Bloat: too many managers, administrators, and management layers
• Friction: too much busywork that slows down decision making
• Insularity: too much time spent on internal issues
• Disempowerment: too many constraints on autonomy
• Risk Aversion: too many barriers to risk taking
• Inertia: too many impediments to proactive change
• Politics: too much energy devoted to gaining power and influence

Not all of these costs can be easily measured, but that shouldn’t deter you from working to calculate your organization’s bureaucratic burden. Hamel calls it the BMI, or bureaucracy mass index.

Here’s a link to the BMI self-assessment tool

Examples of organisations “as amazing as the people inside them”

Of course there are some great examples of amazing organisations that do release the power of humanity. The legends of Southwest Airlines and Zappos have been updated by new examples in recent times, who have gone beyond front line empowerment to reimagine their entire ways of working.

Just this week Siemens, the huge German engineering company said that it wants “a different leadership style, one that focuses on outcomes rather than on time spent at the office … trusting and empowering employees to shape their work themselves to achieve the best possible results.

In my forthcoming book “Business Recoded” I explore more of these companies. I talk to Jos de Blok, founder of Buurtzorg, Zhang Ruimin CEO of Haier, and many others. Some seek to reduce levels of hierarchies, to focus on outcomes not inputs, to create self-managing teams, to let employees choose their own bosses, and much more.

Here are a few of them:

Buurtzorg, the Dutch healthcare business … read more

 

Haier, the Chinese home appliances leader … watch more about the Rendanheyi model

 

Red Hat, the open sourced tech business

Supercell, the Finnish gaming business … read more

Valve, the US entertainment company … read more, including their internal handbook 

WL Gore, the American textile innovator … read more

Image: Unsplash