Real-life resilience - Netflix

“That will never work” is the title of the book about the founding of Netflix. The author (Marc Randolph, the co-founder of Netflix) chose that specific title because it’s the line he heard most often when trying to get the business off the ground.

The idea for Netflix was initially rejected by almost everyone - investors, family members, friends, Sony, Panasonic, Silicon Valley CEOs and, perhaps most famously, Blockbuster Video.

You may have heard that Blockbuster had the opportunity to purchase Netflix for the small sum of $50m (they were worth $6B at the time). Blockbuster rejected the offer and filed for bankruptcy a few years later. Netflix is now worth over $300B.

Just like any brilliant movie, the story of Netflix took a lot of self-belief, courage, failure, luck and, of course, resilience.

Netflix was founded in 1997 (10 years before streaming technology arrived) by two Silicon Valley entrepreneurs - Marc Randolph and Reed Hastings. They were both interested in industries ripe for disruption.

In the 90s, the video rental industry was worth $8B and Blockbuster had the lion’s share of that market. With over 6000 stores globally, they dominated the space. However, it wasn’t necessarily a great customer experience - customers often had to compete for access to the latest video releases, they would have to physically get to the store, and above all, they were sick of late fees. In fact, Hastings himself had been hit with a $40 late fee.

Hastings and Randolph believed there were enough problems to be solved in the video rental industry.

Their initial idea was a video postal service - where videos arrived in a customer’s mailbox. The only problem was that video tapes were chunky and heavy. They would be too expensive to ship.

Enter the DVD (Digital Video Disc).

DVDs were first released in Japan in 1996, and made their way to America in 1997. They were significantly lighter and compact than the bulky video tapes. Hastings and Randolph saw their chance. The company started as a DVD-rental and purchase service where the DVDs would arrive in your mailbox and, most importantly, for any rentals, there were no late fees.

They officially launched on April 14 1998. The goal was to get 100 orders in the first month. They got 108 orders in the first day.

Over that summer, Netflix reached $100k in sales per month. By the year 2000, they hit $5m in sales annually. However, they were accumulating massive losses. This is when the co-founders flew to Dallas to meet with Blockbuster and see if they could strike a deal. They wanted $50m from the video rental giant. But they were rejected and Hastings and Randolph walked away dejected, but resolute. Randolph used the moment as a catalyst for resilience: “Oh man, now we’re going to have to beat them,” he said at the time.

And, as we all know, beat them they did!

Throughout the 2000s, a price war waged between Blockbuster and Netflix as the big blue giant launched blockbusteronline.com at a lower price point than Netflix and with support from spokesperson Jessica Simpson. But it didn’t matter - the Blockbuster model was flawed. They weren’t focused on the customer experience. They were focused on survival.

Throughout the 2000s, Blockbuster accumulated over $1B in losses and filed for bankruptcy in 2010.

Meanwhile, because Netflix had laid the groundwork with online delivery and fulfilment, they were poised for the moment streaming technology arrived in 2007.

In 2010, they expanded to launch access across all devices, and in 2013 they launched their original content with House of Cards.

And the rest, as they say, is history.

Three key lessons and applications for resilience in real-life:

1. Love the problem. When we truly love the problem, it’s easier to stay in the game. Even when failures happen, when we are committed to solving a problem, we can find a way to keep moving forward. When we focus on the client or customer’s problem, usually the right decision will arise. As soon as it becomes toxic (playing politics, losing focus of the customer etc), the edges start to fray. Providing our teams the opportunities to work on problems that they are passionate about offers the greatest chance to bring the best out of them.

2. Improvise and adapt. When teams perform like jazz, rather than a symphony, there tends to be a lot more freedom and flexibility to adjust accordingly. Also, there is riffing in jazz, collaboration that happens as the music flows and ideas can bounce off each other. When in a symphony, the conductor calls the shot and there is less agility. Resilience flourishes when there is room for adaptability, so how often do we support that freedom to riff?

3. Focus. In the early days, Netflix actually made 99% of it’s revenue from the sales of DVDs rather than the rentals. They knew Walmart or Amazon would eventually catch up on selling DVDs, so they pivoted to focus entirely on the rental market. By letting go of the 99%, they got hyper-focused on the new problem. Similarly, when we can let go of all of the distractions that won’t matter in the long run, we get so much more focused and maintain the right levels of energy where it matters.

There are so many lessons in this story, both about the resilience of Netflix and the rigidity of Blockbuster. To explore these ideas in greater detail, I teach workplaces and individuals the strategies we all need to improve our mindset and resilience. These are real-world ideas and practical tools, so that we can thrive when obstacles come our way. Book a free discovery call today.

Until next time friends, stay resilient!

Carre @ Resilient Marketing Minds