He wanted to create an entertainment company but in a way that it would not lose its entrepreneurial spirit along the way. Netflix grew rapidly and its new management techniques got a lot of attention. The employees were paid higher salaries than in the market. Hastings introduced many new policies that were previously not implemented anywhere else. These included a big severance package to average employees who were let go and ending sick and vacation times.
Hastings is a big believer in internet television. In Hastings made some decisions which led to customer reduction, cancellation of orders, less subscribers and decrease in stock prices. Hastings was asked to resign but he refused on the grounds that he had founded the company and it was the first time in 12 years that there it was facing problems. Fifteen years ago today, Netflix went public.
But how the co-founders came up with the idea for the revolutionary entertainment service is still unclear. Instead, Randolph claims the company was started when he and Hastings decided they wanted to create "the Amazon. They decided on shipping DVDs because customers were willing to buy them online and they were strong enough to mail. Since they couldn't get a DVD — which was new technology at the time — they mailed a CD a few blocks to see how it would hold up. So he introduced this to the market and eventually, Netflix became a DVD-by-mail rental service.
And as time passed, DVDs were being surpassed quite fast by the streaming market because the internet was becoming more readily accessible. There were fewer and fewer DVD rentals, and more online subscriptions for Netflix on-demand streaming service. This just shows how aware of the times Netflix was, and how asleep Blockbuster had been for so many years before their bankruptcy. As an entrepreneur, Reed was always watching to see where the market was headed and adjust to it; helping him stay ahead of Blockbuster with every passing day.
Innovation should never stop once you get customers or become big in a certain space. It is part of growth, and you should innovate even more as you grow.
In fact, they have employed marketing, advertising, and public relations to help them grow. Every other day there is news about Netflix in one media outlet or the other. YouTube is full of trailers from Netflix shows. On Facebook, their trailers and boost posts are all over the place.
They are staying ahead of the competition on all fronts. At the moment, Netflix is spending more advertising dollars than any other streaming service worldwide. Staying ahead of the competition for startups today involves the same mentality as that of Netflix. Utilizing several strategies to grow digitally should be a priority for startups and eCommerce companies.
The internet now presents several marketing strategies for companies to grow and stay ahead. Among them is engaging in PR campaigns to get your name in the news every other day.
Facebook ads and Google Adwords come into the picture to generate leads and customers while SEO is added in as a continuing effort towards getting higher rankings in search engines.
The company culture at Netflix is important. The CEO has maintained that there should be no excuse for culture distortion as the company grows big. He has found a way to maintain the culture at Netflix by allowing everyone to get involved in the thought process of how the culture can be shaped better to integrate everyone in a growing company.
Netflix is no small fish in employee numbers. In fact, it is one of the biggest employers in Silicon Valley with over 2, staff on its campus. However, the very culture that was there when they first started out has continued to evolve with the growing team.
Evolution of culture does not mean change of culture. He advises all entrepreneurs to read Beyond Entrepreneurship by Jim Collins and store the first 86 pages in their daily practice. Since you have more people thinking about the culture as you grow, you have more brains pulling together to make it better rather than abandon it.
Netflix has maintained employee freedom in its decision-making approach to running the company. This is a big part of the culture. They have maintained or bettered the working environment and conditions — from having an open vacation policy to allowing employees to bring their disciplined dogs to work. They have said no to hiring brilliant jerks since such people negatively affect team morale. Be a huge startup, not a corporate block.
An outstanding fact about Elon Musk is that he is the product genius in the companies he leads. For the late Steve Jobs as well, he was the product genius at Apple. Even so, he is not the be-all and end-all of innovation. Reed Hastings, the King of Binge. Netflix's first home offered room service. Since leaving Netflix in , Randolph has been an active investor and a booster of the Santa Cruz tech community. He's on the board of Looker, a business intelligence startup that is one of the hottest in a new class of startups that call the coastal city home and have no plans of moving over the hill to the greater Silicon Valley.
This transcript has been edited for clarity. Jon Xavier: First, how did you and Reed meet? Marc Randolph : I was doing a QA startup, an automated quality assurance company with two friends, and Pure Atria bought them.
There were only nine of us, we were still in alpha. The nine of us went to work at Pure Atria and those eight guys, the engineers and the CEO, they all became a little business unit inside Pure Atria. I became head of marketing for Pure Atria, so I got the chance to work very closely with Reed.
I got to meet him professionally but I think the way the whole friendship really was cemented was that both Reed and I lived in Santa Cruz and there was a little commuting group.
Every day we'd all meet at a car pool location somewhere in Santa Cruz, and we'd drive together over to work. Of course, just the way those car pools work, it's pretty mix-and-match who you end up with, and it turned out that I ended up riding with Reed quite a bit.
What were your thoughts about Reed when you first met him? Intense and obviously brilliant. Early on I kind of had this incredible shock because at our startup I was working with eight other people, two or three of whom were my very good friends who I'd known a long time. We probably didn't have any real customers yet. Then in an instant I was plunged into a large multinational company with employees on both coasts and in Europe, with lots of customers.
And not just that — I'm pretty much a consumer marketing guy and it was a stretch for me working for a quality assurance client server company. Now all of a sudden I'm in a company which is doing memory leak detection, like case management stuff, so there was a learning curve.
I'm giving you this intro because what I very distinctly remember is Reed goes, "All right, I have an idea to help you get up to speed here. Why don't you come with me, and we're going to fly out to Atria, who's in Boston, and we can talk on the trip.
What I didn't realize is that you sit down, you board the plane and basically before your seat belt's even on, Reed's leaning in. Then begins this intense discussion, and tutorial, and exploration of ideas that pretty much continued unrelentingly for five hours and forty minutes. And I'm going, "Holy shit, this guy has unbelievable capacity, and range of curiosity, and ways to create ideas and assimilate them in different ways.
So from the very minute I met him, I got this sense that he was this kind of guy. It was very evident and at the same time, I realized that he and I worked together really well. We had another interesting meeting at Pure Atria also, very early on. We were planning for a big sales meeting and we were trying to sketch out how we would be presenting the theme of this unified Pure Atria.
How you would present this — that's my power alley thing, and I remember kind of walking through it on the white board — how to integrate these things and make them simpler to understand and make them resonate with people. I can't remember what it was, but he got the sense that I had something that was of value as well. And I think a lot of that synergy between us is what went into making this early version of Netflix so successful.
So he's got the big ideas and is kind of the cerebral and you're kind of the guy who understands how to actually present those ideas? That's one way of framing it. But we both work very well together. We're both deeply analytical. I came from years and years in the direct marketing industry where everything is layered.
Everything is granular. It's totally metrics-driven. Reed, of course, is a mathematician, so I was able to introduce him to a lot of the power that the Internet was going to bring the e-commerce. He immediately got that and of course was able to deeply extend that because of how analytical he is to begin with. There's the traditional founding story of Netflix, which is more myth than truth. How really did this idea come about for you guys?
So the first thing I will say is, myth versus truth is kind of a harsh way to put it. These founding stories are just that — they're stories. They're constructs that we come up with to take what's a very messy process with input from many, many people, and condense it into a story which you can get across in a sentence or two.
Quite frankly, with apologies, most press, that's all they want. That's the very quick bit. We morph into a story that resonates. And it's a good story, and Netflix is a story, so I'm okay with that.
But you're correct if you're digging in and asking what really happened. It's a pretty far cry from what the story is.
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