Netflix is undoubtedly one of the premier brands today. The Los Gatos, California company is so culturally revolutionary it’s even made the action of abusing television something cool. The phenomenon of “binge watching” has become a clarion call for Millennials and often a mating call for Hipsters. The vast wasteland that was television is now a vast paradise of streaming on mobile devices.
Netflix has changed many perceptions as well as overcome many societal and economic shifts—remaining at the top of the brand food chain.
Much of the success of Netflix can be attributed to founder and CEO, Reed Hastings. The essence of this former vacuum cleaner salesperson and Peace Corps volunteer can be found in Scott Smith’s book, Extraordinary People. The work uses primary and secondary interviews to mine the synergetic history of Netflix and Hastings. It showcases Hastings as a complex visionary, yet at his core with a practical approach to improving the lives and experiences of those around him.
A Common Sense Visionary
In his book, Smith reveals that the conception of Netflix didn’t begin so much with market research but a mixture of common sense and anger—the kind many of us perhaps felt decades ago when being wallet-raped by video companies like Blockbuster. A Smith writes:
The genesis of Netflix came in 1997, when Hastings misplaced a rented videotape, Apollo 13, and was hit with a late fine of $40. Afterwards, on his way to the gym, he wondered why a rental service couldn’t work like the gym: a flat fee for members to use it as much as they wanted with no late fees.
This thought-process led to the creation of Netflix. In May 1998, Hastings offered a free trial to initial adopters of DVDs for $4 rental and $2 postage. Few signed up to pay. However, a year later, he experimented with a flat monthly subscription with no late fees. The tweak worked. By the end of 2000, Netflix boasted 239,000 customers.
The company exploded, but still needed to overcome many hurdles in those early years such as:
– The dot-com bubble bust.
– 9/11 and the ensuing soft economy.
– Fierce competition from giants like Amazon, Blockbuster, and Walmart.
Nevertheless, in 2002 Netflix started setting up regional warehouses to speed up DVD distribution and went public after reaching 857,000 members by the end of the year. By 2004, membership ballooned to 2.6 million.
Eventually and not too long ago, Blockbuster went out of business. In retrospect, that Apollo 13 video Hastings rented might be the most expensive video in history.
A Daring Visionary
In 2007, inspired by the rise of YouTube videos, Hastings made a concerted effort to make Netflix into a streaming service. He saw the writing on the proverbial wall, but unfortunately missed a step when it came to execution, and the fall was hard. To this day, many Millennials and Hipsters must shudder when thinking of the disaster, which happened as follows:
Soon after being hailed the 2010 Company of the Year, being the U.S. Postal Service’s biggest customer, and being the largest source of Internet traffic in the evening—Netflix announced it was going to restructure its DVD business as a subsidiary called Qwikster. Customers who had been receiving disks and streaming movies under the same subscription would be forced to buy the services separately with higher prices. This business shift was done to accelerate the transition of Netflix from a company renting DVDs to a streaming service.
The reaction was vastly negative. The company’s stock dropped from its all-time high of $305 the day before to $64 in November of 2011. Close to a million customers cancelled subscriptions.
“I screwed up,” Hastings admitted soon after in a blog post. “If our business is about making people happy, then I made a big mistake. I slid into arrogance based on past success.”
He also called off the plan.
We all know how the story ends, of course (binge-watching reigns supreme). Fast Company called the turnaround “the biggest comeback in entertainment history.” And here we are, with Netflix being one of the most innovating, expanding and successful companies in the world.
A Company Culture Visionary
Beyond good ideas and reputation management, Hastings’ other achievement is creating a “culture of entrepreneurship” in his company. Netflix is notorious for paying and treating its employees well.
As Smith writes in his book, Netflix emphasizes the qualities it seeks in employees upfront in the hiring process:
1. Judgment—You identify root causes and get beyond treating symptoms.
2. Innovation—You keep us nimble by keeping things simple.
3. Impact—You focus on great results, rather than the process.
4. Curiosity—You contribute effectively outside of your specialty.
5. Communication—You listen well so that you understand before reacting.
6. Courage—You make tough decisions without excessive agonizing.
7. Honesty—You only say things about fellow employees you would say to their face.
8. Selflessness—You share information proactively.
9. Passion—You inspire others with your thirst for excellence.
Lastly, Extraordinary People presents real life lessons for all us lesser mortals who never swore revenge on a video store:
– Imagine your industry in 10 years and work towards that vision.
– Deliver a high-quality customer experience no matter what. For most companies, that’s a slogan on a wall trumped by political infighting and treating front line workers as the least important.
– Screen recruits for personality and values, not resume and technical skills. The specifics of a business can be learned by smart outsiders.
– Don’t be afraid to admit mistakes quickly and learn lessons to prevent future errors.
– Have a passion for whatever you do—making money is not a sufficient motive to get you through tough times.
Not everyone can be Hastings, and not everyone will work for a company like Netflix. However, everyone can use common sense marketing to find the needs of customers; and every company should understand that treating employees exceptionally more often than not fosters exceptional employees.
Stream that, Blockbuster.