NetFlix and Outmoded Corporate Organization

Some years back I networked into a group of people who were planning an IPO for a company with a software product that predicted consumer movie preferences, called MovieLens (now GroupLens) developed at the University of Minnesota. At that point, Amazon was getting off the ground primarily selling books with some music, and the group's idea was going to take the world by storm. Everybody was skeptical about Amazon's business model, but we know how that story developed.


I was struck by how the MovieLens techie people used business lingo but had no clue about a business model. Everybody was an Internet acolyte. It seemed ridiculous to build a big corporate scaffold around an interesting analytical functionality that had no value proposition for the consumer. I passed and there was no IPO, needless to say.

Now, I read the articles about the NetFlix Prize with interest. They have the same functionality in the back of the house. What are some of the ways a traditional corporation would address the issue of improving the predictive accuracy of consumer movie preferences by ten percent? First, hire a deluxe executive recruiter to lure an ultraluxe executive away from Sony Entertainment (they know movies, don't they?) and let them spend three to five years staffing up and spending lots of money before coming up with nothing and parachuting out. Second, hire McKinsey to spend a year and a couple of million to define the problem. Third, hire Andersen Consulting to take up residence and overrun the company with consultants like locusts, turning over every department before morphing the issue into a systems implementation. Sound familiar?

Instead, NexFlix's specification has produced collaboration and real team behavior, where international partnerships between established groups and unaffiliated specialists arose to put a winning group over the top. A traditional, isolated corporate model would not have struck these kinds of alliances. In fact, for so many years, even the simple notion of joint ventures between established corporations have not worked. The current form of the American corporation grew up after the Korean War, as they imitated the structures, language and hierarchy of the military organizations that had successfully prosecuted large scale, global military efforts. The world has changed dramatically, and whether it is hot and flat or not, we can learn something from the progress and perhaps the eventual demise of NetFlix. I think I'm going to start a subscription because I just like those folks!