What does it mean to fail fast and why you should do it often

2 min read

Fail fast and fail often is a mantra oft-repeated in the world of Silicon Valley tech start-ups. And it’s one Marc Randolph firmly believes in, having applied it to the development of his best-ever idea, Netflix. 

At a recent BT Next event, Randolph’s keynote address highlighted the importance of not merely being open to risk and failure, but embracing it with both hands. His philosophy is simple: while failure is intrinsic to success, it can be difficult to accept. But without risk, it’s impossible to sort good ideas from the bad. 

What does fail fast really mean?

The original version of Netflix was nothing like the Netflix of today. It was a DVD rental business, clinging to the old ways of due dates and late fees. The only innovative thing about it was that it was by mail. Most revenue came from selling DVDs, which Randolph and his partner, Reed Hastings, knew was not a long-term plan with behemoths such as Amazon and Walmart playing in the same space. The pair took stock of their setup and decided they needed to “do one thing, and do it well.” So they chose to focus on the rental side of the business, walking away from sales. “When in one day you walk away from 99% of your revenue, it has a way of focusing your mind”, Randolph says.

Failing fast in action

With limited money and time, it was crucial to make this new version of the business work. This meant testing ideas at speed, failing fast and learning quickly. “We tried everything; rent one, get one free; promotions – everything - because we were looking for this needle in a haystack. At first all my tests were beautiful works of art, Randolph recalls. “We’d spend a month on each test and it would fail. So we thought, ‘Okay, let’s go faster’.

Randolph says it’s a commonly held Silicon Valley-ism that, “No business plan ever survives a collision with a real customer.” “You have to take these ideas and, as quickly as you can, collide them with reality. That’s how you figure out if it’s a good idea or not. You have to learn how to go quickly. Success is proportionate to the number of tests you can try,” he adds. “And the number of tests you can try is proportionate to how quickly and cheaply you can do them. The key to doing it quickly and cheaply and figuring out how to fake it.”

Risking it all

There comes a point when you’ve tried every test you can think of and you’re running out of time, or worse, money. This happened to Netflix. Then Randolph had another idea – to remove due dates and late fees, and then finally – to allow users to keep one movie until they were ready to send it back, then automatically sending them another from their queue of preferred titles. This entire concept was rolled out in a single test. At the time, it was a huge risk and an untested business model. And it worked.

Nobody knows what works

Netflix is just one of seven startups Randolph has founded. But of all of the ideas he had in the years leading up to it, he says there was no way he could have known the streaming giant would be his big success.

One of his favourite quotes regarding the magic formula for success comes from Hollywood screenwriter William Goldman, (Misery, The Princess Bride, Butch Cassidy and the Sundance Kid), who famously wrote, “Nobody knows anything.” He was, of course, talking about what makes a box office smash. But it applies to all ideas, according to Randolph. “I couldn’t have told you which idea would succeed and which one would fail,” he says, “because – genuinely – nobody knows anything.”

Are you looking for a new way to build your wealth? You can take advantage of innovative leading edge technology now with BT Invest, giving you access to a range of investments and intelligent tools and expertise to help you easily set up, track and manage your investment portfolio, all in one place. Find out more.

Wellbeing 22 Nov 2017
Netflix co-founder, Marc Randolph reveals the secrets to success, and demonstrates fundamental learnings that can be applied to any sector.
2 min read
Wellbeing 22 Nov 2017
When it comes to investing, a lot of focus is placed on how much money a company makes. It can be just as valuable to know how a company makes its money.
3 min read
Solutions 18 Dec 2017
Invest how you want, when you want with a BT Invest expertly managed portfolio, or you may like to consider one of five managed portfolio options.

This information is current as at 29/03/2017.

BT Portfolio Services Ltd ABN 73 095 055 208 AFSL 233715 (BTPS) is the operator of BT Invest. BT Funds Management Limited ABN 63 002 916 458 AFSL 233724 (BTFM) is the issuer of BT Cash. Westpac Financial Services Ltd ABN 20 000 241 127 AFSL 233716 (WFSL) is the issuer of BT Managed Portfolios (together, the BT Invest Products). An Investor Guide is available for BT Invest and a PDS is available for BT Cash and BT Managed Portfolios and can be obtained by calling 1300 881 716, or online. You should obtain and consider the relevant disclosure documents before deciding whether to acquire, continue to hold or dispose of interests in the BT Invest Products.

This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it.

This article may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.