Reed Hastings on the importance of focus

August 23, 2023

Reed Hastings is the founder of Netflix.

In the clip below, he tells the story of how fending off an attack from Blockbuster taught Netflix the importance of focus.

In response to Blockbuster’s attack of offering the same selection of DVDs at almost half the price, Netflix launched four major initiatives: (1) a social network called Netflix Friends, (2) Ad sales, (3) Used DVD sales, and (4) Content.

They staffed each of these teams with 12-15 people, and the initiatives made everyone at the company feel great because they were tangible things that made the product feel differentiated versus Blockbuster’s.

In the end Netflix won, but when they looked back, none of those four efforts made any contribution to the victory. Eventually, Netflix shut down all four of these programs.

“In hindsight, we realized that when attacked, we should retreat to do the core better… It was a great lesson for us on focus. Now when people ask us if we’re getting into news or sports, we’re like: ‘Absolutely not!’ And we’re really confident in our answer. Movies and TV shows on a global basis is an enormous market.”

He continues:

“We’re now much less prone to go off and chase the tiny object… In hindsight, if we had just gone from 98% perfect to 99.9%, we would’ve done a lot more for the business.”

It’s often tempting to add new features or layer on a trend to differentiate your product from the competition, and the situation for every company will be different.

But as Reed points out, the highest leverage thing you can usually do is focus on making your core value proposition even better.