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The Netflix Way: Learning from Failure, Constantly Innovating

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"Build your own media empire!” the headlines scream. It seems as if every pundit, consultant, and social media expert is proclaiming the power of creating your own video network. The battle cry “The brand is the channel” reverberates off boardroom walls in New York and coffee shop couches in San Francisco. Even I have been guilty of cheering on anyone and everyone to create content and take over the world. But the motivational encouragement can sometimes feel like those cheesy banner ads that promise this one old, weird trick to get six-pack abs. Creating your own media channel is for startups and college dropouts drinking Adderall lattes, right? Are traditional companies and Average Joes and Janes really meant to build their own media brands?

In this edition of Spicy Ideas, we’ll skip the cheerleading and look at how one company built its own network. It’s not one old, weird trick but rather simple concepts that require strategic implementation and effort. The story of Netflix provides great examples, not just for motivation but as inspiration to make changes. So put down the pom-poms, put on the hard hat, and let’s get to work.

Getting laughed out of the Blockbuster CEO’s office seems like an unlikely first step on the road to creating a media empire. But Netflix’s rejected partnership proposal to Blockbuster in 2000 was just one of the many building blocks for its ultimate success. Failure is not just an option for Netflix; it seems to be hardcoded into its company DNA. Constant innovation in any company requires trying new things, falling on your face, getting back up, and trying something else. Renting DVDs by mail doesn’t sound like a sexy startup plan, and it wasn’t. But constant innovation and a learning environment fostered by Netflix CEO Reed Hastings turned this mail-order service into a true media giant.

Netflix’s history is a testament to its agility. In 1997 it launched with 925 titles available on single DVD rentals via mail, and late fees applied. Two years later Netflix added the monthly subscription service and killed the late fees, then in 2000 it dropped the single DVD rental option. 2002 saw the company’s initial public offering (IPO), and in 2003 Netflix had its first profitable year with revenues of $272 million dollars. By 2005 it was shipping 1 million DVDs a day. Early on, the company found a way to take a traditional mail-order business and look ahead to what customers would want next.

The success of Netflix is also a story of massive failures turned into huge wins. In 2008, a collapse of its database shut down shipments for 3 days. But the failure ultimately led Netflix to Amazon cloud computing. Netflix has flourished in the cloud, and at any one time it has 20,000 servers processing its data. In an interview earlier this year, Netflix cloud architect Adrian Cockcroft said, “We’re using Amazon more efficiently than the retail arm of Amazon is.” The more recent failure in 2011 came from the plan to split the DVD and streaming businesses into Qwikster and Netflix. Pricing concerns, irate customers, and general confusion caused the company to ditch the idea and return to a single brand. But even in the chaos of mistakes, Netflix learned from its shortcomings and continued to focus on its customers.

In the last 2 years, Netflix has truly hit its stride in the media empire arena by focusing on original programming. With hits such as Arrested Development (fourth season), House of Cards, and Orange Is the New Black, Netflix has proven that it can create content that rivals anything on TV or out of Hollywood. The best is yet to come for this company inspired by a $40 late fee on a really late movie rental. The constant focus on trying new things, failing big, and learning from mistakes should be an inspiration for us all. So whether you are a multimillion-dollar business, an individual with a story to tell, or a group of friends doing what you love, you can build your own media empire and change the world. Tune out the hype, turn up the hustle, and create something spicy!

This article appears in the December 2013 issue of Streaming Media magazine as "The Netflix Way."

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