Randolph explains Reed Hastings’s entrepreneurial chutzpah (and calls Hastings the “best entrepreneur on the planet”):
… even while the going was good, it was hard not to let the tail wag the dog. Despite knowing that the true future of the company was rental, it was hard not to spend time focusing on the area of the business where most of the money was coming from.
Most importantly, by trying to run a business that did two things well, we inevitably were forced to make an endless series of compromises that resulted in us doing neither of them well. Our landing page and sign up flow had to accommodate two different paths. Our checkout process needed to handle two types of transactions. Our shipping process had to accommodate two different types of products (one that had to come back and one that didn’t). Our content system had to accommodate titles we could only rent, ones we could only sell, and ones where we could do both.
In hindsight, it seems like such an obvious decision to stop selling and focus on renting. But wow – for a young CEO like myself — turning away from the source of 95% of our revenue was just about the hardest thing I had ever done.
Needless to say, it worked. Not only did walking away from 95% of our revenue have a way of focusing the mind on the remainder of our business, but the benefits began showing up everywhere – even in places we never suspected.
By freeing our designers from having to create a sign-up flow that accommodated two types of business, we were able to cut out steps, clarify instructions and simplify the process. Conversion went up.
By spotlighting a narrower benefit, we were able to clarify our positioning, resulting in more effective external marketing. Our acquisition costs went down.
By focusing on a narrower set of problems, it made engineering much more productive. It made QA testing simpler. It made metrics more intuitive. And it paved the way for us to implement a process of rapid iteration and testing that ultimately uncovered the big innovations that ultimately led to the Queue, Unlimited Rentals, and No-Due-Dates-No-Late-Fees.
The success emboldened us and we gained confidence in this approach, each time finding that narrowing our focus expanded our opportunities. I could probably come up with 150 examples, with each new success giving us renewed confidence in the benefits of folding partially successful hands in order to double down on more promising ones.
At every product meeting, in addition to figuring out what to do, we made sure to devote time toward deciding what not to do. We referred to it as “scraping the barnacles”, and, like boat owners, found that if we had the discipline to regularly remove all the small things that inevitably accreted to our hull over time, it would have a noticeable effect on how fast we could move through the water.
via Did Netflix screw up? I don’t think so. | Kibble.
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