I confess that I have a burning passion for movies.  I constantly seek out new movies to watch and I am always at least somewhat (and often very) distracted if a movie happens to be playing wherever I am.  My girlfriend knows this and, quite kindly, acts as a second set of eyes out there for me, helping me make sure that I don’t miss out on any great films.  A couple of months ago she texted me about a clip of Memento she had seen and told me she was sure that I’d like the movie.  Of course, she didn’t know that I had already seen and loved it, but that’s beside the point.  I asked her how she knew I would like it and she essentially told me that I talk so much about which movies I do and do not enjoy that she “just knows” if I’m going to like a film at this point.

I imagine if all of my friends knew my preferences as well as my girlfriend did, I would get tons of accurate recommendations streaming into my smartphone all the time.  I would never have to do any of my own research!  You know that friend you have who knows exactly how well you liked every movie you ever watched and also happens to have an encyclopedic knowledge of every movie ever made?  I don’t either, because that friend doesn’t actually exist. That’s where Netflix comes in.

My girlfriend was able to predict that I would enjoy Memento because she wielded the two keys to good analytics:

1. a learning computer with good algorithms (her brain) and
2. good data (the clip of Memento she saw and the hours of babbling about movies that I’ve done since I’ve known her). 

Netflix possesses those same crucial elements, except its data sets are much more robust and its computers work on recommendations for you around the clock.

Netflix is one of the most popular exemplars of the so-called “Analytics Revolution” that is currently underway, not only because it created the award-winning show House of Cards in a laboratory, but because it has forced analytics and data-driven decision making into every aspect of its business model: inventory management, marketing, product development, and even HR.

At Netflix, analytics ascended from capability to core competency and, for Netflix and other like-minded firms, is now simply a way of doing business.  Analytics’ transformative nature is especially apparent in the way it alters the role humans have to play in critical business activities. The human mind is great at a lot of things, as demonstrated by my girlfriend, but making minimally-biased, emotionless decisions is not one of them, as demonstrated by me on countless occasions.  Supplementing human intuition with computers’ ability to gather and analyze vast amounts of data enables Netflix to learn more than ever before about its:

• customers—their preferences and behaviors;
• competitors—their patterns of behavior and strategies;
• suppliers—their reliability and negotiating tactics;
• current and potential employees—their hireability, promotability, and level of engagement.

Were it not for the company’s soaring share prices, Netflix’s complete self-immersion in analytics and its ironclad marriage to data quite possibly might have taken the fun out of doing business.  Indeed, the firm’s decision making, almost unavoidably, has become less risky, thanks to its constantly-improving data sets and algorithms.  As a long-time subscriber, however, I can’t help but feel comforted knowing that my hard-earned dollars are being invested in a product that works tirelessly to improve itself as it adapts to my whimsical tastes. 

Netflix is part of a growing minority of companies that have fully embraced and integrated analytics into every facet of their operations and are changing business from an art to a science.  It may be boring, in a sense, to always know the probabilistically “right” answer, but it must be exciting not to have to worry so much about choosing the wrong one.

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