It was the year 2000. Reed Hastings, co-founder of Netflix, was in Dallas, Texas. He was shaking in his boots as he waited to meet with the CEO of Blockbuster, a giant company worth $6 billion, which boasted 9,000 stores all over the world. It was 1,000 times the size of Netflix, Hastings’s scrappy young start-up.
Hastings and his partner made a pitch to the CEO – buy Netflix for $50 million and let them run Blockbuster’s website as an online video rental service. The CEO flatly refused.
This proved to be a mistake. Ten years later, Blockbuster filed for bankruptcy because it couldn’t keep up with Netflix, which by then had 167 million worldwide subscribers and was producing its own award-winning films and TV shows.
How was Netflix able to nimbly pivot, succeeding where the behemoth Blockbuster failed? That’s easy.
The key message here is: Netflix has been successful because of its unique company culture.
The Netflix culture values people, prioritizes innovation, and has few control mechanisms.
With this as a foundation, Netflix has built immense value, growing 300 times faster than the NASDAQ stock index over 17 years. What’s more, a 2018 survey rated it the top place to work in Silicon Valley.
Perhaps most impressively, it’s responded nimbly to four seismic industry shifts. Netflix started out as a DVD-by-mail subscription service, then transitioned to streaming. From there, Netflix began licensing original content produced by other studios, and finally, it began producing its own in-house movies and TV shows.
Hastings believes that all this stems from the fact that at Netflix, his employees enjoy more freedom than any other company he knows of. That freedom inspires them to make better decisions. It also makes it easier to hold them accountable.
But you can’t just set your employees free and expect your business to automatically do as well as Netflix. True freedom comes from careful planning. Three things are necessary to unlock the potential of radical employee freedom and the responsibility that comes with it. First, high talent density. Next, high levels of candor between employees and managers. And finally, the courage to remove controls which waste everyone’s time – and company money.
In these blinks, you’ll learn more about each of these three mechanisms. On the way, you’ll also hear Netflix’s start-up fairy-tale story, and how one plucky company became one of the most recognized words in the world.