GUEST POST from Greg Satell
Today, it’s hard to think of Netflix as anything but an incredible success. Its business has grown at breakneck speed and now streams to 190 countries, yet it has also been consistently profitable, earning over $12 billion last year. With hit series like Orange is the New Black and Stranger Things, it broke the record for Emmy Nominations in 2018.
Most of all, the company has consistently disrupted the media business through its ability to relentlessly innovate. Its online subscription model upended the movie rental business and drove industry giant Blockbuster into bankruptcy. Later, it pioneered streaming video and introduced binge watching to the world.
Ordinarily, a big success like Netflix would offer valuable lessons for the rest of us. Unfortunately, its story has long been shrouded in myth and misinformation. That’s why Netflix Co-Founder Marc Randolph’s book, That Will Never Work, is so valuable. It not only sets the story straight, it offers valuable insight into how to create a successful business.
The Founding Myth
Anthropologists have long been fascinated by origin myths. The Greek gods battled and defeated the Titans to establish Olympus. Remus and Romulus were suckled by a she-wolf and then established Rome. Adam and Eve were seduced by a serpent, ate the forbidden fruit and were banished from the Garden of Eden.
The reason every culture invents origin myths is that they help make sense of a confusing world and reinforce the existing order. Before science, people were ill-equipped to explain things like disease and natural disasters. So, stories, even if the were apocryphal, gave people comfort that there was a rhyme and reason to things.
So it shouldn’t be surprising that an unlikely success such as Netflix has its own origin myth. As legend has it, Co-Founder Reed Hastings misplaced a movie he rented and was charged a $40 dollar late fee. Incensed, he set out to start a movie business that had no late fees. That simple insight led to a disruptive business model that upended the entire industry.
The truth is that late fees had nothing to do with the founding of Netflix. What really happened is that Reed Hastings and Marc Randolph, soon to be unemployed after the sale of their company, Pure Atria, were looking to ride the new e-commerce wave and become the “Amazon of” something. Netflix didn’t arise out of a moment of epiphany, but a process of elimination.
The Subscription Model Was an Afterthought
Netflix really got its start through a morning commute. As Pure Atria was winding down, Randolph and Hastings would drive together from Santa Crux on Highway 17 over the mountain into Silicon Valley. It was a long drive, which gave them lots of time to toss around e-commerce ideas that ranged from customized baseball bats to personalized shampoo.
The reason they eventually settled on movies was the introduction of DVD’s. In 1997, there were very few titles available, so stores didn’t stock them. They were also small and light and were easy to ship. Best of all, the movie studios recognized that they had made a mistake pricing movies on videotape too high and planned to offer DVD’s at a level consumers would buy them.
In the beginning, Netflix earned most of its money selling movies, not renting them. However, before long they realized that it was only a matter of time before Amazon and Walmart began selling DVD’s as well. Once that happened, it was unlikely that Netflix would be able to compete, and they would have to find a way to make the rental model work.
The subscription model began as an experiment. No one seemed to want to rent movies by mail, so they were desperate to find a different model and kept trying things until they hit on something that worked. It wasn’t part of a master plan, but the result of trial and error. “If you would have asked me on launch day to describe what Netflix would eventually look like,” Randolph wrote, “I would have never come up with a monthly subscription service.”
The Canada Principle
As Netflix began to grow it was constantly looking for ways to grow its business. One idea that continually came up was expanding to Canada. It’s just over the border, is largely English speaking, has a business-friendly regulatory environment and shares many cultural traits with the US. It just seemed like an obvious way to increase sales.
Yet they didn’t do it for two reasons. First, while Canada is very similar to the US, it is still another country, with its own currency, laws and other complicating factors. Also, while English is commonly spoken in most parts of Canada, in some regions French predominates. So, what looked simple at first had the potential to become maddeningly complex.
The second and more important reason was that it would have diluted their focus. Nobody has unlimited resources. You only have a certain number of people who can do a certain number of things. For every Canadian problem they had to solve, that was one problem that they weren’t solving in the much larger US business.
That became what Randolph called the “Canada Principle,” or the idea that you need to maximize your focus by limiting the number of opportunities that you pursue. It’s why they dropped DVD sales to focus on renting movies and then dropped a la carte rental to focus on the subscription business. That singularity of focus played a big part in Netflix’s success.
Nobody Knows Anything
Randolph’s mantra throughout the book is that “nobody knows anything.” He borrowed the phrase from the writer William Goldman’s memoir Adventures in the Screen Trade. What Goldman meant was that nobody truly knows how a movie will do until it’s out. Some movies with the biggest budgets and greatest stars flop, while some of the unlikeliest indy films are hits.
For Randolph though, it’s more of a guiding business philosophy. “For every good idea,” he says, “there are a thousand bad ideas it is indistinguishable from.” The only real way to tell the difference is to go out and try them, see what works, discard the failures and build on the successes. You have to, in other words, dare to be crap.
Over the years, I’ve had the chance to get to know hundreds of great innovators and they all tell a different version of the same story. While they often became known for one big idea, they had tried thousands of others before they arrived at the one that worked. It was perseverance and a singularity of focus, not a sudden epiphany, that made the difference.
That’s why the myth of the $40 late fee, while seductive, can be so misleading. What made Netflix successful wasn’t just one big idea. In fact, just about every assumption they made when they started the company was wrong. Rather, it was what they learned along the way that made the difference. That’s the truth of how Netflix became a media powerhouse.
— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash
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After a week of torrid voting and much passionate support, along with a lot of gut-wrenching consideration and jostling during the judging round, I am proud to announce your Top 40 Innovation Bloggers of 2022:
Greg Satell is a popular speaker and consultant. His first book, 
Mike Shipulski brings together people, culture, and tools to change engineering behavior. He writes daily on Twitter as 
A twenty-five year Procter & Gamble veteran, Pete has spent the last 8+ years applying insights from psychology and behavioral science to innovation, product design, and brand communication. He spent 17 years as a serial innovator, creating novel products, perfume delivery systems, cleaning technologies, devices and many other consumer-centric innovations, resulting in well over 100 granted or published patents. Find him at pete.mindmatters@gmail.com
Soren Kaplan is the bestselling and award-winning author of Leapfrogging and The Invisible Advantage, an affiliated professor at USC’s Center for Effective Organizations, a former corporate executive, and a co-founder of 
Arlen Meyers, MD, MBA is an emeritus professor at the University of Colorado School of Medicine, an instructor at the University of Colorado-Denver Business School and cofounding President and CEO of the Society of Physician Entrepreneurs at 
Jesse Nieminen is the Co-founder and Chairman at 
As an experience architect, Alain helps leaders craft customer, employee and shareholder experiences for profit, reinvention and transformation. He does this through his personal consultancy Alain Thys & Co as well as the transformative venture studio 
Diana heads marketing at 
Art Inteligencia is the lead futurist at Inteligencia Ltd. He is passionate about content creation and thinks about it as more science than art. Art travels the world at the speed of light, over mountains and under oceans. His favorite numbers are one and zero.
Dainora (a.k.a. Dee) creates customer-centric content at Viima. Viima is the most widely used and highest rated innovation management software in the world. Passionate about environmental issues, Dee writes about sustainable innovation hoping to save the world – one article at the time.
Dr. Dean Anderson and Dr. Linda Ackerman Anderson lead 
Phil McKinney is the Author of “Beyond The Obvious”, Host of the Killer Innovations Podcast and Syndicated Radio Show, a Keynote Speaker, President & CEO CableLabs and an Innovation Mentor and Coach.
Dr. Ralph-Christian Ohr has extensive experience in product/innovation management for international technology-based companies. His particular interest is targeted at the intersection of organizational and human innovation capabilities. You can follow him on Twitter 
Norbert Majerus is a popular keynote speaker and consultant. His latest book, Winning Innovation – How Innovation Excellence Propels an Industry Icon Toward Sustained Prosperity, is available now. Follow him on 
Scott Anthony is a strategic advisor, writer and speaker on topics of growth and innovation. He has been based in Singapore since 2010, and currently serves at the Managing Director of Innosight’s Asia-Pacific operations.
Anthony Mills is the Founder & CEO of Legacy Innovation Group (
Paul Hobcraft runs 
Rachel Audige is an Innovation Architect who helps organisations embed inventive thinking as well as a certified Systematic Inventive Thinking Facilitator, based in Melbourne.
After a week of torrid voting and much passionate support, along with a lot of gut-wrenching consideration and jostling during the judging round, I am proud to announce your Top 40 Innovation Bloggers of 2021:
Nicolas is an International Innovation Executive, expert in corporate innovation programs, and innovation labs, designing place where good innovation thrives! He currently helps the 20 innovation managers of Orange Africa to develop their projects locally. In 2019 he wrote 
Gijs van Wulfen helps organizations to structure the chaotic start of innovation as author, speaker and facilitator. He is the founder of the FORTH innovation method and author of the innovation bestseller The Innovation Expedition. He was chosen by LinkedIn as one of their first 150 Influencers. Follow Gijs @gijsvanwulfen
Tom Koulopoulos is the author of 10 books and founder of the 
Michael Graber is the cofounder and managing partner at 
Shawn Nason, founder and CEO of MOFI, lives his life with a commitment to make everyone he meets a part of his family. Armed with the gift of discernment, he has the uncanny ability to walk alongside people as they struggle to connect with their deepest passions and engage their most debilitating demons. He challenges the world around him to be fully present, get real, and knock down the barrier that separates the various compartments in their lives.
John Carter has been a widely respected adviser to technology firms over his career. John is the author of 
Ludwig Melik is CEO of Planbox, whose mission is to help organizations thrive by transforming the culture of agile work, continuous innovation, and creativity across the entire organization… Connect with him on LinkedIn or join the conversation by following Planbox on Facebook, Twitter, and LinkedIn.
Eric Eskey is a Managing Director at Strategyn, an innovation consultancy. Eric is in the business of creating the future. I aim to use the resources he has – his work, investments, voice, and imagination – to encourage innovation and defeat the hidden forces that resist it.
Mick Simonelli is an innovator with 20+ years of implementing change and positive disruption at USAA. As a military veteran, he held transformation roles in numerous military organizations; and as a business executive, he purposely hired vets to help launch numerous innovations as the Chief Innovation Officer for a Fortune 500 company. Mick currently serves as an innovation consultant and can be found at www.micksimonelli.com Follow @MickSimonelli
Mitch Ditkoff is the Co-Founder and President of Idea Champions and the author of “Awake at the Wheel”, as well as the very popular Heart of Innovation blog.
Peter Cook leads Human Dynamics and The Academy of Rock, providing Keynotes, Organisational Development and Coaching. He is the author of seven books on business leadership. His three passions are science, business and music, having led innovation teams for 18 years to develop life-saving drugs including the first treatments for AIDS and the development of Human Insulin. Peter is Music and Business editor at Innovation Excellence. You can follow him on twitter @Academyofrock.
Mukesh Gupta is Director of Customer Advocacy, SAP India Private Limited. He also served as Executive Liaison for the SAP User group in India, and as a Global Lead in Sales & Business Development. He blogs, and shares podcasts and videos, on his site rmukeshgupta.com
After a week of torrid voting and much passionate support, along with a lot of gut-wrenching consideration and jostling during the judging round, I am proud to announce your Top 40 Innovation Bloggers of 2020:
Francesco Pagano, Vice President, EMEA Head of Portfolio of Licenses Brands at Fossil Group Europe, is passionate about craft brands, innovation, brand management, brand communication and international business. He is always up for irresistible product concepts, ultimate communication via integrated campaigns and great Italian food.
Dimis Michaelides is a keynote speaker, author, consultant and trainer in leadership, creativity and innovation. Contact him for a workshop or a presentation at 
Greg Heist is the Chief Innovation Officer at Gongos, a decision intelligence company.
Urko Wood helps clients of Reveal Growth find and capitalize on the best opportunities for innovation and growth in their markets. He is one of only a handful of people in North America who are expert practitioners in the breakthrough “jobs-to-be-done” (JTBD) innovation approach that has enabled over 400 of the Fortune 1000 to generate billions of dollars in new revenue and achieve new product success rates of over 80%.
Neil Sholay is re-shaping innovation and digital experiences as a Vice President of Digital Innovation for EMEA & JAPAC at Oracle. He leads a curious, multidisciplinary team of thinkers, Ideators, strategists, designers, developers, storytellers, rebels and proud geeks, who are reshaping Innovation and digital experiences. They bring new ideas & business models to life, using co-innovation and rapid prototyping.
I originally posed this software design challenge to application developers in September 2008 based on an InfoWorld 
It used to be that when you formed a rock band to seek fame and fortune, all you had to do was find a lead singer, a guitarist, a bass player, a drummer, and maybe another guitarist or a keyboard player if you wanted a richer sound. But the digital age presents a level of complexity and opportunity that John, Paul, and Ringo never had to deal with.