A Collection of thoughts and paras from ' That will Never Work'
The birth of Netflix and the Amazing Life of an Idea...
I have just finished reading “That will Never Work” by Marc Randolph, which is the story of the birth of Netflix & the amazing life of an idea. Marc Randolph is the co-founder and first CEO of Netflix. The book delves deeper into the real story behind the company and beyond what we hear over the internet about it !!
FYI, the popular story sold over the internet is when the idea came to Reed Hastings (Co-Founder) after he’d rung up a $ 40 late fee on Apollo 13 at Blockbuster. He thought, what if there were no late fees? and boom!! the idea of Netflix was born.
But, in reality, Netflix's idea was actually the work of years of sheer focus and commitment to search for a sustainable business model rather than just one incident.
We often hear about amazing startups and how their Founders made dazzling amounts of money through their public issues and raised millions in some funding rounds. Rarely do we care to know about the amount of sweat their team has put into making that idea scalable and successful.
In this short blog, I have tried to put in some of the interesting stories & insights I about Netflix I could find while wandering through its pages of survival and conquest of the world of media entertainment.
No matter how much you plan in life, things will always go out of the way
and you will end up dealing with unforeseen situations and you have to be ready to accept them. The Netflix team worked day & night to plan for day 0 of their launch anticipating all the possible circumstances they could imagine going wrong and planning solutions. But, things went in totally different way. “The day idea goes live, your work is no longer predictive & anticipatory rather it becomes reactive. None of the problems we thought of and solutions we have planned are just a drop in an infinite ocean of problems we have never thought about or planned.”-MarcStarting an internet-based company is way too easy today than it was 25+ years ago.
And we should be thanking the people who worked hard in those days to make technology accessible to us today. Take, for example, Cloud services which have made providing web-based services easy didn’t exist back in 1998. For running an e-commerce or any high traffic website we had to own means of serving web pages, storing data. Which meant loads of computers in their own office just to host the website. This was a big barrier to entry as it required significant investments at the start of the business.Without Cloud-based services, I can not even imagine how cities like Bengaluru which is called the silicon valley of India would have flourished !!
(FYI in the US, whenever someone lost his job due to automation, it is called bangalored as it might have been automated by a techie based out of Bangalore.)
Netflix at one point was about to be acquired by Amazon
(although it never materialized !)
Marc described Bezos in his first meeting which aptly describes how much Jeff Bezos was dedicated to his own cause. “A short man, Bezos was wearing pressed khaki pants and a crisp blue oxford shirt. He was already on his way to becoming complete bald, and the combination of the huge forehead peaked nose, a shirt that was a little too big for him, and a neck that was too small had an effect that made him look like a turtle that has just popped his head out of the shell. Behind him, hanging from an exposed pipe in the ceiling, four to five identical pressed blue oxford shirts fluttered in the breeze provided by the oscillating fan.” -Marc Another interesting thing to observe in his meeting was all the desks in his office were made out of doors by mounting on top of wooden legs. When checked, it is found that they were kept as a deliberate message to imply that we only spend money on things that affect our customers and not on things that don’t.Even today Amazon takes pride in calling itself the world’s most customer-centric company !! for a reason.
Focus is everything :
Marc talks about is the necessity of not only being creative or having the right people around but also the focus. “At a startup, it's hard enough to get a single thing right, much less a whole bunch of things. Especially if things you are trying to do are not only dissimilar but actively impede each other."-Marc Netflix survived all these years because of its sheer focus on core business and doing it best rather than venturing into non-core businesses.Motivation from Cartoons :
Marc finds motivation in cartoons as they never end in capture. “They're about evasion, disappointment, near misses. You get the feeling that if wile E. Coyote ever actually caught the road runner, he wouldn't know what to do. But that's not the point. The point is the pursuit of the impossible. And this is what gives their life meaning. A startup is also like this, it’s a chase of impossible that gives their life meaning.”-Marc Giving it some thought even tom & jerry cartoon is similar and there are many more like this !Netflix’s Culture of innovation :
Another reason Netflix survived all these years is due to its continuous culture of innovation. It started from selling DVDs to renting DVDs to launching monthly subscriptions rentals to even innovating its whole supply chain and after finding a sustainable version for their business model completely shifting to online streaming of content leaving all past innovations behind.Trial & Error :
Netflix struggled a lot before finally arriving on a structure that was scalably profitable, the subscription model. (Which btw is still what Netflix works on although it’s now a streaming subscription rather than renting) Marc describes this as a result of years of hard work, thousands of hrs of brainstorm, dire finances, and an impatient CEO.Focus…Focus…Focus :
“Focus. It's an entrepreneur's secret weapon. Again and again in the Netflix story - dropping DVD sales, dropping à la carte rentals, and eventually dropping many members of the Netflix team we had to be willing to abandon parts of the past in service of the future. Sometimes focus this intense looks like ruthlessness and it is. But it's more than that. It's something akin to courage.”- Marc Randolph, Founder & First CEO of NetflixNot getting what you want can be a wonderful stroke of luck :
Netflix had all set to go public in the fall of 2000. But at the same time dot com bubble had burst. It was a big blow as they had to pull out from IPO.But today when Marc thinks about it, it feels like one of the best things to happen. Because if they had gone public in fall of 2000. They would have been tied to the portal idea and too unrealistic financial expectations that they had built around IPO. It would not have alloy them to rigorously focus that set them apart and which ultimately provided them a business model to succeed afterward.
Getting better with experience:
Tom had applied to shipping a principal we all understood intuitively. When it came to movies, people were Lemmings. They wanted to watch what everyone else was watching.So they designed almost 60 hubs across the country to service 95% of the country with next-day delivery.
Here is how the method works:
Customer mail DVD to post office closest to region reflection point. A local employee then pick it up and then would use a slitter to open mailers, remove disks and scan each DVD into the Netflix inventory program.
Then employees would transmit all data to HQ in Los Gatos. While employees are on lunch break, servers would match up all DVDs that come in with all movies customers wanted next.
The process worked obscenely well. 90 of every 100 disks would go to the same region again and it gave Netflix a very sustainable business model after years of hard work.
Those who didn't have any takers would go to the mothership warehouse in San Jose.
Innovation is the key to survival:
In early 2000, Marc was spending most of his time in product development. But they were still looking for a day that didn't include DVDs. The growth of broadband DSL tech in early 2000 was making it feasible to stream without physical media and Netflix wanted to position itself. It was kind of funny, that Netflix was finally able to make the original idea of DVDs by mail work, looking ahead to a future without either DVDs or mail.Today, if I see, had Netflix not positioned itself in the world of streaming, it might have got vanished in just a span of few years. And we have real & famous examples of companies which failed due to lack of innovation Nokia, Kodak to name a few which had exceptional products but could not sustain.