While Netflix reigns globally as a streaming giant with over 60 million subscribers, CEO and founder Reed Hastings had to overcome a lot of failure to grow the platform. It all started with the Qwikster Debacle over a decade ago.
While the idea was worthy, the public didn’t agree with it. This cost Hastings his reputation and resulted in stock prices plummeting. This wouldn’t be Hastings’ last blunder. In this article, we will highlight the 5 failures of Reed Hasting and how he overcame them:
The 5 failures of Reed Hastings and how he overcame them
1) Unnecessary inventions
When Hastings was in college, noted that people were struggling to shift between using the keyboard and mouse to type. To ease their frustrations, he had the unique idea to create a foot mouse. That meant that people could use their hands for typing while using their feet to handle the mouse. Unfortunately, the idea fell flat.
As it turns out, you can’t use your foot to control the mouse for long periods. After a while, your foot becomes sore, and controlling the mouse becomes hard. If you are stepping on it with your shoes, the mouse also becomes filthy. While he thought the product will be a groundbreaking innovation, it wound up being a disaster.
However, that failure was not a complete loss. It became a foundation for his next venture, Pure Software. This company would later spearhead the IPO. Even though it was successful, it had its fair share of struggles.
2) Pure Software
After the failure of his first venture, Hastings went on to pursue another venture. Pure Software ended up being a successful company under his leadership as the CEO. Despite its obvious success, Hastings still insists that Pure Software to him was a failure to a given extent. That’s because he was inexperienced at the time. As a result, he made decisions that didn’t work out like he’d imagined.
Even so, he still claims that his role as the CEO of Pure Software was a remarkable adventure. At the same time, his heart was not completely on being a CEO. This is because he’s innovative and product-driven. Finding a replacement for that role wasn’t easy either. As such, the entire management role in the company was his to bear. That meant immense pressure was on him, especially when it was time to make critical business decisions.
While the company sales were increasing annually when he was the CEO, he felt the need for another CEO. As such, he urged the company board to get someone who fit that role. At this point, he didn’t want to be the source of mistakes that could potentially affect the company. In spite of his feelings to the contrary, the board was comfortable with him as the CEO. Therefore, they insisted he should maintain his position regardless of his mistakes. They considered his mistakes a lesser evil than any potential mistakes that someone else could make.
By accepting his mistakes as the CEO, Reed grasped a valuable lesson. He discovered that everyone is susceptible to making mistakes regardless of their position in the company. What matters is how individuals handle their mistakes and move on from there. As a CEO at that time, he was no exception.
After the purchase of Pure Software by its biggest rival, Reed was motivated to start his next venture. This time around it was Netflix. By this point, he had a fair amount of experience and knowledge of being a CEO. As such, he embraced his CEO role at Netflix.
3) Hiring the wrong talent
Reed was very reluctant throughout his tenure as the Pure Software chief executive officer. As such, he was actively searching for a vice president to help him with some management roles. This search was the source of yet another failure. Instead of hiring one vice president for long-term service, he would change them annually. Furthermore, this didn’t just happen in the first and second years, but for five consecutive years.
Thanks to this experience, he’s now good at hiring people for various roles in a company. Drawing from his experience, he now advises people to check for references, because interviews are not reliable. During an interview, the candidate can convince you with the wrong facts.
As such, you should treat the interview as one of the several processes you will take before hiring a candidate. And if you want to understand the solid behavior of a particular candidate, then contact their references. But even with this insightful info, Hastings still claims he’s not an expert in hiring people. He advises other entrepreneurs that hiring is just but a practice.
4) Lack of Empathy
When it comes to empathy, don’t expect that from Hastings. Well, you could say he’s not an empathetic person from a natural perspective. However, that doesn’t mean he’s a bad person as many would want to believe. Simply, he doesn’t share the same experience as you and me on matters of feeling or compassion. That’s according to the co-founder of Netflix, Marc Randolph.
While Netflix was not listed in 2001, the company was experiencing significant losses. It was a period of expansion even with the high costs to run this operation. Due to that, about 40 employees lost their jobs. For Reed, this was just like any other operation in the company. He was dispassionate about employees losing their jobs. On the other hand, the experience was heartbreaking.
According to Reeds, keeping the employees for the sake of not hurting their feelings is an irrational move. But that was not the end of this approach or mindset. Netflix ended up adapting this technique in managing the rest of its employees as the company advanced. As a result, they would create a collaborative and dynamic working environment with every adjustment.
Reed would later name this approach “Road to Damascus”. With this experience, he created “the keeper test”. It’s a guide that some managers in companies use to determine the employees worth keeping.
This is especially true if the employees are getting poached by another company. With the test, they can tell whether they should keep the employees by providing more incentives. In addition, it helps them determine the level of incentives that the company is willing to offer the employee.
5) Qwikster Debacle
Even with the current storms, Netflix is still a streaming giant. However, in 2011, they were on the verge of collapsing. It was a year that the company was about to end for good. By then, the company had been running tests on on-demand streaming. And the results from it were incredibly good.
With confidence, Reed saw this as the new future for Netflix. However, he flew close to the sun with the announcement of splitting streaming subscription plans with DVD. For starters, the investors embraced the news with excitement, and thereafter, the stocks hit 42.68 USD. This amount was very high at that time.
Unfortunately, his move faced an immediate backlash when the subscribers aired their sentiments on the matter. They felt that the primary reason they were subscribing to Netflix was being stripped away. And it was all for on-demand streaming.
A couple of months later, Reed and his teams opted for a crisis management plan. This time, Netflix stocks were half their previous value. While releasing an official statement on the matter was the right take, it didn’t have a significant impact. As such, the company had to cancel the new plan. In the third quarter of that year, the company had lost nearly a million subscribers.
This was a lesson well learned for Netflix. And next time they were about to increase their rates, they played it smartly. Unlike the 2011 incident, they ended up with more subscribers even with the rising process. Most importantly, they timed the increase with the release of popular programs like Stranger Things and Black Mirror.
The Past defines the Future
During his CEO days at Pure Software, Reeds claim he came out with experience. While the company was secured by its rival, it was not a loss on his part. If anything, it’s what shaped him to be a better CEO later on at Netflix. And that’s why he repeatedly says that Netflix is redemption.
It’s an opportunity to recall his bad takes while in Pure Software and avoid them in the new company. Also, it allowed him to discover his flaws while serving as Pure Software. And thanks to his previous experience, he’s enjoying a better future.
The Keeper Test
In the early stages of the company, Netflix fired nearly a third of the workforce. And from it, the keeper test was founded. However, in this case, it’s not an encouragement to fire your workforce when the company suffers losses. Instead, it’s an important technique you can use to discover the valuable employees in the company. But how does it work?
It’s simple. First, you assess your employees. Thereafter, ask yourself if a particular person quits, would you convince them to change their mind? Well, if you will, then that’s a keeper. On the other hand, if you’re comfortable letting them go, then find a replacement immediately. With this approach, you’ll have the best talent to run your company successfully.
Accept your Mistakes
Many entrepreneurs fail because of denial. When something goes wrong with their watch, they’re always ready to pin it on somebody else. While this may save the reputation of some, it never reflects positively on them later on. However, when you accept your mistakes, you’ve got a chance to redeem yourself.
It presents you with an opportunity to do things the right way. During Reed’s tenure as the CEO of Pure Software, he openly admitted to his mistakes. And it’s among the reasons he retained his seat until the company was sold.
Like several other wealthy entrepreneurs, Reed Hasting has faced many pitfalls. And it’s thanks to some of these pitfalls that he’s a successful entrepreneur to date. From his first failed venture to the successful streaming platform, his failures have been reliable lessons. And according to him, his current success is a great redemption for his failures as Pure Software CEO.
And, since the founding of Netflix, he has been experiencing better adventures. And that’s because he leveraged his failures and use them to become a thoughtful CEO. As a business person, you can learn a lot from Hasting’s experiences. He demonstrates that you can use failures to coin a successful future. And that’s exactly what he did.
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