That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea

by Marc Randolph

The manager felt empowered, free to make a choice about his own lifestyle, and the company ended up benefiting from his renewed focus.

If you fill your company with people who lack good judgment, then you have to build all kinds of guardrails to keep them in line. You have to define everything for them: how much they can spend on office supplies, how many vacation days they take, when they are expected to be at their desk.

we were trusting them to make decisions on the company’s behalf that could make or lose millions of dollars, we could certainly trust them to make decisions about what type of plane tickets they should book for themselves.

If you need to take a day off, just take it. I don’t need to know about your root canal, or your kid’s school schedule. Just get your work done, and cover for yourself when you’re gone.

What if we just trusted our employees to get things done?

dismantled all the systems we had in place that limited the amount of freedom we granted our employees, and designed systems that were almost totally on the side of employee freedom.

This is one of the facts of startup life: change.

Often the person who was right for the job at the beginning is not right for the middle.

I noticed that we had thousands—no, tens of thousands—of discs just sitting unused and unwatched on the warehouse shelves.

Why were we storing all those DVDs in a warehouse? Maybe we could figure out a way to let our customers store the discs. At their houses. On their shelves. Just keep the DVDs as long as they wanted.

What if we did away with late fees?

Most people made the decision what to rent about ten seconds after they spotted it on the new-release rack.

Now they could let that disc sit on top of the TV as long as needed. And when the mood struck that it was time to watch a movie, it would be instantaneous.

after weeks of debate and about a hundred miles of running, we’d come up with three ideas that we didn’t think were total trash. They were:

Our plan was to test each of these initiatives separately, to see what worked and what didn’t.

If people want what you have, they will break down your door, leap over broken links, and beg you for more.

even quickly, each test would take about two weeks.

“Exactly. That’s why you should just test everything at once,” Reed said, cutting me off.

faster, more frequent testing.

Overplanning and overdesigning is often just overthinking—or just plain old procrastination. When it comes to ideas, it’s more efficient to test ten bad ones than spend days trying to come up with something perfect.

I told Christina and Eric to combine all three tests into one offer.

This probably won’t work,” I told Christina. “But, hey, at least we’ll know.”

Nobody. Knows. Anything.

“Nobody Knows Anything” isn’t an indictment. It’s a reminder. An encouragement.

If Nobody Knows Anything, then you have to trust yourself. You have to test yourself. And you have to be willing to fail.

There are bad ideas. But you don’t know an idea is bad until you’ve tried it.

We’d all known that the idea could work, but in the end nobody knew anything about how—until it did.

It took a lot of hard work, a lot of hard thought. It also took a lot of cards falling just right.

just as almost exactly twelve months earlier we had been confronted with the complexity of doing rentals and sales at the same time—and realized that our best chances of success were to focus on one—we now had to make a similar decision.

Should we focus all our effort and resources on the program that might save us, or try to offer both models simultaneously?

The question we had to ask ourselves was: Was it worth trying to offer both models? Or did it make more sense to focus on subscription, jettisoning some of our earliest users?

I called the Canada Principle.

we thought frequently about expanding into Canada.

we saw that we could probably get an instant revenue bump of about 10 percent.

But we didn’t do it. Why? Two reasons.

First, we knew that it was inevitably going to be more complic...

the bigger reason for staying out was even simpler.

If we took the amount of effort, manpower, and mind-power Canadian expansion would require and applied it to other aspects of the business, we’d eventually get a far greater return than 10 percent.

Canada would have been a short-term move, with short-term benefits. It would ...

once I realized that the decision was similar to the one we had faced six months earlier, when we’d decided to drop DVD sales—once I realized, in effect, that we were facing an opportunity to apply the Canada Principle—I was on board.

we knew that the subscription model was the future,

À la carte users only made up a small percenta...

we were confusing customers, giving them too many options.

Focus. It’s an entrepreneur’s secret weapon. Again and again in the Netflix story—dropping DVD sales, dropping à la

carte rentals, and eventually dropping many members of the original Netflix team—we had to be willing to abandon parts of the past in service of the future. Sometimes, focus this intense looks like ruthlessness—and it is, a little bit. But it’s more than that. It’s something akin to courage.

again. For months, we measured the results. What we found was incredibly surprising. Next-day delivery didn’t really change our cancelation rates. Where it mattered was in new customer sign-ups.

“We’re not telling them ahead of time that they’ll be getting their movies the next day—we’re just doing it! Do they just…intuit that they’ll be getting things quickly?”

“Marc, no. You’re missing the forest for the trees.” I waited. “They’re telling their friends. It’s word-of-mouth advertising.”

longer we ran the test, the more apparent it was that next-day delivery was a real game changer—jus...

Next-day delivery inspired real dedication, the kind that makes you tell all your friends about t...