Former Netflix CEO Marc Randolph:
Most importantly, by trying to run a business that did two things well, we inevitably were forced to make an endless series of compromises that resulted in us doing neither of them well. Our landing page and sign up flow had to accommodate two different paths. Our checkout process needed to handle two types of transactions. Our shipping process had to accommodate two different types of products (one that had to come back and one that didn’t). Our content system had to accommodate titles we could only rent, ones we could only sell, and ones where we could do both.
In hindsight, it seems like such an obvious decision to stop selling and focus on renting. But wow – for a young CEO like myself — turning away from the source of 95% of our revenue was just about the hardest thing I had ever done.
Needless to say, it worked. Not only did walking away from 95% of our revenue have a way of focusing the mind on the remainder of our business, but the benefits began showing up everywhere – even in places we never suspected.
The concept of focusing on doing one thing really well has always been at the core of Netflix, as Marc shares. This is why I applauded them for having the guts to make a bet the company moment. It may have be risky, and I’m sure a few rocky years are ahead, but Reed Hastings and the rest of the leadership know this is the future.