Five things Netflix can teach us about innovation

9 min read

Netflix co-founder, Marc Randolph, knows a thing or two about disruptive innovation. Here, he reveals the secret to Netflix’s success, and demonstrates fundamental learnings that can be applied to any sector.

Back in 2000, a start-up, called Netflix was turned down for investment by the $6 billion category leader Blockbuster. A decade later Blockbuster went bankrupt and Netflix now has 100 million+ subscribers.  The moral of the story? Netflix was started by two Silicon Valley entrepreneurs with no experience in the movie rental industry but who managed to usurp a seemingly invincible household name.

Here are five things that Neflix can teach us about innovation.

1. Disrupt yourself

Disruptive innovation in business most often occurs where the biggest player in an industry doesn’t look ahead and leaves itself open to threats from newer and more forward-thinking companies who see new opportunities through new technology and trends. As Randolph explains, “If you’re not prepared to disrupt yourself, if you’re not constantly innovating and changing and trying to stay current, then you are leaving the door wide open for someone to come and disrupt that category for you.” 

Marc Randolph, Netflix co-founder – Disrupt yourself

2. Look for pain

In order to innovate, you need ideas – and lots of them. “They don’t need to be big ideas or even new ones,” Randolph explains. “People have been selling books since the invention of the printing press but just think of the innovations that have been coming from Amazon,” he says. “Mark Zuckerberg just wanted to meet girls and now we have Facebook.” So how do you find your idea? Randolph suggests, “Look for pain. You have to train yourself to see everything as imperfect and ask yourself: ‘what’s wrong’? Look at things closer to home that you know well. Processes with dealing with customers, processes you do every day at work. What frustrates you? What do you bump into that’s a problem? Randolph cites the design of the humble paint can, which hasn’t been updated in 40 years and which remains difficult and inefficient to use, as the perfect example. 

3. There are no bad ideas

In the course of developing Netflix, Randolph and his partner Reed Hastings had hundreds of ideas. They quickly learned “the half-life of any idea is only 24 hours”. Rather than look for more ideas, Randolph moved to “trying to validate one that seemed pretty good”. They tested one idea a month, then one every two weeks. Soon they were testing two or three things a day. Rather than having a perfectly crafted test for one potentially bad idea, they focused on testing many ideas in an imperfect manner. 

Marc Randolph, Netflix co-founder - Good ideas

4. Embrace risk

A tolerance for risk is essential in the innovation process, Randolph says. “You must be willing to go down the path when you don’t know where it’s going. When we started Netflix, we could see the road for only 100 feet and then it turned a corner. We were forced to do that thing every entrepreneur does – take that step and base your decision on incomplete, inconclusive – or worse – contradictory information. Take that risk and do it any way.” You also need confidence, Randolph adds. Buckets of it. “You need the confidence to believe that, even though each idea didn’t work, this one is going to.”

Marc Randolph, Netflix co-founder – Confidence is key

5. Persist at all costs

“Innovation is the critical piece, but having confidence in your ability to keep going is what drives it all” says Randolph, quoting Atari founder Nolan Bushnell, “Everyone who has ever taken a shower has had an idea. But it’s the person who gets out of the shower, dries off and does something about it that makes a difference.”

“I’m pretty persistent. I’ll get knocked down 99 times and I’ll struggle back up and charge in again. But the thing I’m proudest of is my optimism. I’m not just a glass half full guy. I’m a glass overflowing optimist.”

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