G1 : Reed Hastings, Netflix: Stanford GSB 2014 Entrepreneurial Company of the Year

Challenges

Getting the profitability

Stop consuming cash

Took five years to break even shipping a disc of plastic

PayPal and Overstock all went public in the same one week

Had a very fun and scary epic battle with Blockbuster

Youtube started streaming actively

Getting more global and getting more into original content

Been 13 years just in the US to get to streaming

Reed Hastings

culture of Netflix company

Where Kodak Failed and Netflix Didn't

What happened to Kodak?

Most experts agree that a failure to innovate was the main reason Kodak declined with the advent of digital photography.

Although the company essentially invented the digital camera, it suppressed the technology out of fears it would threaten the profits it made from traditional film.

Rather than look forward and adapt to new trends and technology, Kodak resisted change and struggled to keep up.

What did Netflix do right?

Some company decisions have been risky and even failures, but it has used both its failures and successes to its advantage and revolutionized the entertainment industry.

As lack of innovation was the primary cause of Kodak’s failure, Netflix’s near-constant innovation has brought it an immense success.

What are particular reasons behind Netflix’s success?

The company has not been afraid to chase trends, such as viewers’ switch to tablets and smartphones.

Before founding Netflix

He started his first company, Pure Software in 1991

Before moving for a very short time to another early stage company called Adaptive, he spent years in the AI space called Coherent Thought

After he went to work in the AI lab at Schlumberger, he spent a couple of yesrs at a failed startup in the AI space

He served as a high school math teacher before coming to Stanford to receive a master in AI

When he received his BA from Boden, he spent a couple of years while serving in the Peace Corps

He took Pure Software public in 1995

Pure Software was acquired in 1997 by Rational Software

He founded Netfilx in 1997

The connection between Pure Software and Netflix

Netflix was adaptable in unfavorable conditions. When studios would not let Netflix license their best online content on agreeable terms, Netflix expanded its business and created that content itself.

Eventually the internet would be fast enough to be able to not be dependent on the post office but on the internet

He started the company in Scotts Valley with people stuffing DVDs in envelopes

They had the web interface and building up a subscriber base on DVD

He realized five gigabytes mailing could be a very efficient digital distribution network

freedom of responsiblity

right people

reinforce the value

at 2002 when they realized that working with incredible people and hard problem is the meaning

set the context goal

Reed hopes that if he can make less fewer decision as possible, and the company is getting better, that's when the time he is very proud of

making working time valuable, instead of long

let the managers feel that they can make changes

Rather than relying on existing expertise and fighting to defend the status quo, Netflix encourages creativity and innovation among its employees.

Netflix focuses on subscribers and analyzes which show or movie titles most contribute to attracting and keeping subscribers.

Unlike Kodak’s repeated reshuffling of leadership to try to regain its market share, Netflix co-founder Reed Hastings has been the company’s only CEO.