I like reading business autobiographies because it gives insight into how people think. Looking from the outside is a very different view from being in the drivers seat. At the beginning of 2020 I bought a kindle and decided that I need to up my reading frequency which has been very dismal for the last few years. So I set myself the target of one book a month. That Will Never Work had just been released and I kept on noticing this book where ever I looked. The reviews looked good and were all 4-5 stars and so I bought it.
My book reviews are a little different, I will review the book and give my impressions but I will also pick out the major takeouts and learning for me. At the end of the day I read these books to learn something, expand my views and broaden understanding of our world.
Netflix seemed to come from nowhere. They received more Grammy nominations than any other studio this year, although they only won 2 Oscars. In 2019 they jumped straight into the #5 on the Fortune Top 10 fastest growing companies list. Truth is that this is a 23 year old company . Netflix has been molding and building itself to where it is today.
That Will Never Work takes you right back to when the idea of Netflix started back in 1997, actually even before the idea started. It is written by Marc Randolph one of the co founders of Netflix, the other being Reed Hastings who is currently the CEO.
My View on the Book
I found the book easy to read and identified with Marc as he takes you through the creation of Netflix all the way to the end where he leaves the business. He tells the story in a humorous but very enlightening way making it fun to read.
I found myself wanting to keep on reading as the book is written like a story. It is very engaging and I always wanted to keep on reading to see what was going to happen next. Large part of the success is that the character of Marc comes through, his energy and passion for startups is evident and you can feel it.
I also found it very honest if somewhat modest in that I felt that Marc told it as it was. He didn’t glamorise anything. Quite the opposite he seemed to go to great pains to show that he was just a normal guy trying to get a startup going.
He also explained how this was his journey and contribution to the creation of this business. It’s a combination of great business lessons mixed with personal emotions about how he dealt with the trials and tribulations, the emotions and celebrations.
The Idea Moment
The ideas and how companies start always fascinate me. This book dealt with that very well and it was a strong topic in the beginning. The start of the book is all about Marc trying to come up with a new startup idea, everything from customized baseball bats to personalised shampoo by mail.
He kept a little book with all these ideas, more than a hundred of them. For him it was never about clever ideas, but rather solving problems. Marc explained, “The truth is that for every good idea, there are a thousand bad ones. And sometimes it can be hard to tell the difference. The best ideas rarely come from on a mountaintop in a flash of lightening.”
You never really know if your idea will work or not until you actually try it. Reed Hastings, a friend and boss did help to focus all these ideas. They tried to find something that can scale, “You want to sell something where the effort it takes to sell a dozen is identical to the effort it takes to sell just one” was Reeds comment.”
Something you will read time and time again is that more powerful than ideas is action. As Marc puts it “Build something, make something, sell something. Learn for yourself if your idea is a good one.”
Where did the book name That Will Never Work come from
Interesting story from the book is where the title came from. A combination of Reed dismissing Marc’s hundreds of ideas with , that will never work and then Marcs wife. When he and Reed had kind of settled on a possibly feasible idea, Marc pitched it to his wife. The idea was to do mail order videotapes and the response from his wife was, “That will never work”, but he carried on anyway. Virtually no successful company ends up being successful with the original idea.
Thinking behind decisions and Business Principles Learned
Once you have the inspiration to start with something you have to keep on going
Marc was determined to start something big and kept a book of ideas that he discussed mainly with Reed and a few colleagues. He kept on going despite literally hundreds of them coming to nothing.
The mail order video tapes was one of them that stuck, but then the postage logistics ended it. At that time DVDs were just being released and so they tested mailing a CD in the postage system. It proved reliable and cost effective and that’s where they started, mailorder dvds in 1997.
This was even before they had even seen a DVD or DVDs were available. They kept going with a less than ideal model. Eventually they stumbled upon a dvd subscription model. Then finally they were in the right place at the right time to go into streaming online with a subscription model. But they kept going over many years and molded the idea until they got it to work.
Focus on the problems to find opportunities
The best ideas are those that solve customer problems. Marc was focussed on looking for problems to solve, typically customer problems. This is exactly how they stumbled on their original idea of mail order videos. Renting videos was painful, especially remembering to take them back as Reed commented one day in the car, “Don’t remind me,” he said, shaking his head. “I just got nicked forty bucks by Blockbuster on a movie I returned late.”
Hire good people and create an environment to perform
Handpick a dozen brilliant, creative people, give them a set of delicious problems to solve, then give them space to solve them. “What they want is freedom and responsibility. They want to be loosely coupled but tightly aligned.” Marc and Reed set the tone of the culture by their actions and interactions with each other by being honest and direct. Culture isn’t what you say. It’s what you do
Executing with strong decisive competent leadership
Marc had partnered with someone with vision, experience and clout in Reed Hastings. Reed had a track record of solving seemingly unsolvable problems.
Reed recognized the change required from the initial startup stage to the rapid growth stage that took an entirely different skill set. Marc had the insight and self awareness to recognise this and go with it.
Again after the Dotcom bubble they acted swiftly to trim and reorganise the Netflix team, a painful but necessary action. The reduced team brought renewed focus and energy. The speed and efficiency delivered faster and achieved their objectives quicker.
The business model will evolve and be refined to find a sweet spot
The Netflix business model wasn’t there from the start, it evolved and developed over time. Solving the customers problems and being a scalable and repeatable business was one of the first requirements that led to the video rentals.
Along the way they had discussions with both Amazon and Blockbuster to find a model that would work. Neither of these materialised and that kept forcing evolution.
Once again eliminating the late fees on returns drove them towards the unlikely subscription model which Marc thought wouldn’t work. From the start however they always thought of themselves as a content business.
Today it is the combination of content together with subscription service that has worked. Seeing the coming of the internet wave and “paddling in just at the right moment” as Marc puts it, made this model work.
“But now we had a new model, one we never could have brainstormed into existence. The most revolutionary structure in e-commerce was the result of years of work, thousands of hours of brainstorms, dire finances, and an impatient CEO.”
Agile test and learn quickly to test ideas and drive innovation
From the start Netflix was built on agility and test and learn principles over all else. Their very first test was posting a CD via the post office to confirm that it would arrive in time and within cost.
Netflix continually tested scenarios and offers through their website. They tested making their own DVD early on by distributing the infamous Bill Clinton speech the day after it was broadcast. They tested next day deliveries by offering it only in Sacramento and learned that referral and growth in new business was the bigger impact than the actual convenience.
The biggest test of all was the 3 way test of a home rental library, serialized delivery and subscription. They didn’t expect subscription to work but it did and it was the most popular,
Focus is the secret weapon of an Entrepeneur, keep it simple don’t be distracted
There were several junctions in the path of Netflix that could have gone either way. The reason they stayed on track was because they maintained focus on their core objective. They resisted distractions and avoided complexity.
They called it the Canada principle where they resisted expanding into Canada. It was a short-term move, with short-term benefits, diluting their focus.
In the early stages they made almost all their more money from DVD sales. Yet they decided to jettison sales and focus only on rentals as that was their niche. Doing both confused customers and they knew they couldn’t compete with Amazon.
At one point when they wanted to go public the VCs on their board said they need to make their site more like a portal with reviews guides etc, but they resisted.
The final message
This final message was my favorite and sums up the philosophy of That Will Never Work title and the essence of Marc’s approach in just a couple of sentences.
“The most powerful step that anyone can take to turn their dreams into reality is a simple one: you just need to start. The only real way to find out if your idea is a good one is to do it. You’ll learn more in one hour of doing something than in a lifetime of thinking about it.”From That Will Never Work by Marc Randolph