Question was asked on:

When Marc Randolph realized the company he worked for was going to be acquired, he began to toy with ideas for a new e-commerce startup. These ideas ranged from personalized surfboards to custom-made baseball bats. But they were all shot down by Reed Hastings as infeasible. Randolph and Hastings agreed on the idea of DVD rentals by mail. Hastings invested $1.9 million while Randolph committed his time to build the company. Hastings would own 70% and Randolph 30% of the company. Randolph rented and furnished a small office on a tight budget. But this also happened to be when he purchased a hillside house for a million dollars. This created massive anxiety about the family's financial state and consequently made him even more determined to make Netflix happen. For Randolph, the best part about startups was the number of problems he could choose from to work on. An early-stage company is small enough to allow people to wear multiple hats, yet large enough so they aren't forced to do unsuitable work. The goal of Netflix was to have the most complete DVD collection in the world with multiple copies of every popular title. This was not expensive inventory; it was inexpensive advertising. Employees want to be treated like adults and collaborate with colleagues they respect. Randolph's approach to culture boiled down to this: hire great talent, give them tough problems, and the freedom to solve them. Years later, Netflix codified this as "Freedom and Responsibility". The task of the leader is to tell employees what the destination is, not to micromanage how to get there. Each employee will find out their own way to reach the goal. Netflix calls this "loosely coupled but tightly aligned". Though the work week was hectic, there was also flexibility. Randolph would work from 7 a.m. to 6 p.m., then tend to family duties and head back for a few more hours. Every Tuesday, he left the office at 5 p.m. sharp to spend the evening with his wife. He did not want to be a successful entrepreneur with a failed marriage. When Netflix went live in April 1998, orders flooded in and servers crashed within a matter of hours. There were thousands of issues to solve, but they were good problems to have. It is imperative to concentrate on a single idea in a startup. After two months, revenues crossed $94,000, but only $1,000 came from rental while the rest was DVD sales. This posed a problem as Netflix's core competency was rentals. Randolph and Hastings therefore decided to stop sales and focus entirely on rentals. When President Clinton's testimony was released, Netflix cashed in with an offer of next-day delivery of that video for 2 cents. However, some customers were shipped pornography instead of the testimonial. It was a big bet and a big miss, for which Netflix came clean and apologized for. Hastings expressed concern about Randolph's strategic judgment and financial instincts and proposed to take over as CEO while Randolph becomes the President. Randolph agreed that he had to let Hastings take the reins to do what's best for the company. This partnership would significantly improve the chances for Netflix's success. Patty McCord, Netflix's Head of HR, designed processes that encouraged freedom and fostered Netflix's unique culture. She pioneered concepts – such as unlimited vacation days – that redefined the field of HR. Netflix cracked the rental problem with a monthly subscription model that allowed customers to rent discs for as long as they wanted. In a single stroke, this made Netflix a more accessible way to watch movies and site traffic went up 300%. Focus is the key weapon of an entrepreneur. Netflix shut down à la carte rental to focus on subscription. There must be unflinching willingness to abandon parts of the past to make way for the future. By September 2000, Netflix was worth $100 million and shipped over 800,000 discs a month. Then the Dot Com bubble burst. The company had a rapid burn rate in an environment where funds were difficult to come by, so it had to survive on its own strength. For many startups, the focus and creativity of the initial team get it off the ground, and growth brings more hiring. Then the team size contracts and skilled generalists are replaced by specialists. Netflix dropped nearly 40% of its workforce. Though painful, it retained top-notch employees to create competitive excellence. Randolph wanted to sell some of his Netflix stock when the company went public. To not create panic, he downgraded his role to Executive Producer and Hastings became the face of the company. When Netflix listed on the NASDAQ in May 2002, the share price was $16.19. The dream had come true, and Randolph's life was changed forever. The Netflix that Randolph loved to lead was a small startup with people who tackled a grand challenge. Randolph was able to identify core issues, inspire employees, and make his idea a reality. As the company grew and was no longer that same startup, Randolph knew it was time to leave. Today, he mentors startups as a CEO coach. The only way to know if an idea is good is to build it, test it, and sell it. As Nolan Bushnell, Co-founder of Atari, said, "Everyone who has taken a shower has had an idea. But it's the people who get out of the shower, towel off, and do something about it that makes the difference".

Asked on the following book summary:

book summary Preview