Netflix business strategy: the belief system of Reed Hastings

In 1997, after the technological advancement of DVDs changed both the film and information storage industries, a new company emerged in the movie rental scene. Netflix took advantage of the emergence of DVDs and found a way to make seeing your favorite films even easier than renting it for a few days from a chain store. Netflix spanned the innovations of the Internet and DVDs perfectly, and their appeal was almost immediate.

Not only could you choose hundreds of DVDs on a “To-Watch List” for lack of a better word, you could also keep the movies for as long as you wanted, without the fear of steep late fees and the pressure of watching a film in 24 or 48 hours like many of the other rental companies. Netflix gained popularity almost immediately, because it changed the way that business was done, and offered a modern option for those individuals who saw the writing on the wall in regards to the massive presence that the Internet would soon have on our lives.

Companies like Blockbuster made another mistake: underestimating the dynamism of technology. The way that information was recorded had already been a rather dynamic area of study and design, yet the huge investment in resources and money that Blockbuster put towards its rental service meant that it would be far too large and narrowly focused to ever effectively “switch gears” should the time ever come. In effect, traditional movie rental companies failed to account for the inevitable changes that would occur, hoping that they could find success and manage to maintain it despite the ever-changing world. Fortunately for Netflix, its co-founder recognized how quickly the world was changing, and didn’t want to get caught into a strict infrastructure that would eventually result in them becoming obsolete. Reed Hastings is the visionary CEO of Netflix, and he adopted a belief system at the start that would guarantee the survival of the company for more than 15 years now. Basically, as has been said a number of times, “It foresaw its possible demise at the moment of its own creation.”

Can Akdeniz

Can Akdeniz is the author of seven books and founder of Business Hacker, a popular business blog. His books such as Go Nuts, Cool Boss, Happy Company and MBA 2.0 have changed how people think about business, productivity and work.