That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea

That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea
Category: Finance
Published: 9/24/2019
From having to pitch his own mother on being an early investor, to a motel business conference room that he decided would be their first office, to helping develop Netflix's now-famous company culture, Marc Randolph's improbable journey exemplifies how anyone with grit, gut instincts and determination can transform the world we live in.

Book Summary - That Will Never Work: The Birth of Netflix and the Amazing Life of An Idea by Marc Randolph

Key Insights

In the last years of the 1990s, Marc Randolph and Reed Hastings came up with an alternative to the traditional video rental store. After throwing ideas around for an endless number of start-ups, they hit on one that would completely alter the concept of home entertainment.

That Will Never Work is the story of how Netflix started and the lessons that can be learned from them. Netflix was able to create true innovation and continue to innovate, but it wasn’t always easy.

To get to a groundbreaking idea, you have to rigorously scrutinize ideas. Taking out the ones that have less potential allows you to focus on the one that can pay off. But an idea needs a good team and work culture for it to thrive. Use the Netflix model to apply to your own ideas.

What you’ll learn

  • Good ideas take a lot of work and vetting of bad ideas to appear
  • How to build a healthy work culture
  • What makes a good team
  • How to be honest in business

Who this is for

  • Venture capitalists
  • Early start entrepreneurs
  • Business owners
  • Company managers
  • Business executives

Key Points

Analyze your ideas thoroughly to allow you to identify the best one.

Coming up with that million-dollar idea usually doesn’t just happen overnight. It takes time and it takes work. Bounce ideas off someone you trust and don’t be afraid to use them as your sounding board. Even if the ideas are not your best, saying them out loud will help you to see the flaws and the potential.

Even after you have the idea you want to focus on, don’t assume it’s ready to launch. The best ideas need refining, too. Look to a trusted circle to help you build on your idea. This is how you thoroughly vet your ideas.

You might think your idea is foolproof or revolutionary, but to other people, it might not seem that way. Having other people be objective and help you to focus your ideas will enable you to find that one winning idea you’re looking for.

Find a way to innovate a trending industry.

Think of a trending industry and imagine you are in that industry. How do you make sure you are profitable and get enough repeat business to survive? The answer is to think of an angle or a feature that no one else is offering.

For example, Netflix entered an industry that was popular at the time. The DVD rental market had national chains, like Blockbuster, which were dominating. Netflix entered the DVD rental market and had to compete immediately with the giants. But, they offered home delivery, something no one else was doing.

Take a look at the industry of your potential business. What competition will you face? Are there companies or services already established? Think about what your business can provide that others can’t or have not. Maybe it's a unique personalized service or a membership with benefits.

In an emerging industry where everyone is scrambling to stand out, doing something slightly different will separate you from your competition.

If you create a solid customer base now, you can reap the rewards with future business projects.

Your future business is far more likely to be successful if you have an existing customer base already invested in what you are doing. If you want to evolve into something different, you will need people to already trust your company brand to survive the change.

That means that you need to generate revenue with your present-day business. You may have a vision for the future, but you can’t just hope that your customers will wait for that hypothetical future without offering them value in the present.

When Netflix first started, their customer base was built from the DVD movie rental market. They knew that in the future, DVDs would not be the only way people viewed movies or television shows, but the consumer market and the technology for a streaming service didn’t exist when they began. However, when they finally moved into streaming, they had already built a following which helped them to generate revenue almost immediately.

To get to that future state, you need enough cash to stay afloat and move towards those new ideas. But what do you do if you’re not bringing enough revenue in right away? You can turn to investors. However, it can be hard to convince people that giving you their money is a good idea.

This is where having established customers will help as it can persuade skeptics that you’re a serious business. Building the customer base is not only essential for revenue but will serve you in a multitude of ways from enticing investors to enabling the company to change direction later on.

The key to a successful business is to surround yourself with an excellent team and not take yourself too seriously.

If you have always dreamed of having your own company, no doubt you picture yourself as the reason for its success. It is important, however, to remember that a company is only successful if everyone works for the same goal. Even if it is your company, the team that you hire should be as invested in its success as you. To create such a team requires creating a work culture where everyone can thrive.

When it comes to building an invested team, you need to have the trust and the confidence that you picked the right people. Once they’re in, give them trust and work to bring out the best in your employees. This means you have to give them the room to grow and hone their skills. If you treat your employees like adults, they are more likely to care more about the success of the company.

Building a business is a serious endeavor, but that doesn’t mean you have to take yourself as seriously. Even if you are focused on success, you can still go to work with a good sense of humor. In fact, this can serve you well with your staff. You can build a rapport, increase accessibility, and establish a culture of collegiality. There will be times when you may have high-pressure situations at work and keeping your humor will be essential to ensure your success.

Once you build your company and start to employ people, your original vision now belongs to a team. Therefore, you need to make sure your ego does not impede sound business decisions. If someone else in the company performs a role better than you, be able to step back and let them take on the role. After all, the aim is to have a successful business.

Be willing to take risks and try something new.

Now you have an established business and a good team. The enterprise is running as it should and customers seem happy. So how do you continue to stand out from the rest and be innovative? By taking some calculated risks.

You have spent the time building your customer base and earning their trust. If you test out a new idea on them the best outcome is that they will be receptive to it and you can implement it into the company. The worst that can happen is that customers don’t like the idea and notify you.

Netflix evolved from a rental model to a subscription membership. This enabled them to get rid of late fees and build a business with a consistent return. The change was significant but they had earned enough trust to try it out. Although they could have lost everything if it wasn’t received well, they took the risk and revolutionized the DVD rental market.

And Netflix continued to evolve, moving into the streaming space. Going beyond DVD rentals and focusing on the trending technology, Netflix is now an existing giant in the space like Blockbuster was when Netflix first started. But Netflix started with loyal customers that went along for the ride.

If you believe a new idea will work, take the chance and test it out. It is important to test out new ideas when they come, because business is constantly evolving, no matter what the industry is. So keep testing ideas and analyzing customer feedback. Be willing to take the risks because that’s how you started in the first place.

The Main Take-away

Developing a winning idea takes a lot of time and vetting of bad ideas, but it pays off in the long run.

Work on your idea with people who you trust and be open to their suggestions. They will help filter the good ideas from the bad. Once you have positioned your company, find ways to innovate and stand out from the competition by doing something they aren’t. Finally, surround yourself with a good team and build your customer base. Once you have these things in place, you can continue to try out new ideas and grow the company in different directions with success.

About the Author

Marc Randolph is the co-founder and former CEO of Netflix. He has mentored hundreds of entrepreneurs and invested in several successful tech ventures. In recent years, Randolph co-founded the analytics company Looker Data Sciences where he serves as director. He also sits on the boards of several companies including the environmental advocacy group 1% For The Planet.

Randolph is in demand as a public speaker and travels all over the world to speak. When he is not traveling for speaking engagements and work, he lives in Santa Cruz, California.


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