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