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"We named the company Netflix, not DVDs by Mail because we knew that eventually we would deliver movies directly over the Internet," says Hastings. "DVDs will be around a long time, but we're building for the day when they're not."

Throughout his years at the helm of Netflix, Hastings has learned one important lesson: that building a company is all about tomorrow, rather than today. What will be happening tomorrow? Who will the big players be tomorrow? What will people want tomorrow? It is only in asking these questions that Hastings has been able to stay ahead of the curve.

But asking those questions is only one part of the game. The other part is responding to those questions. And how does a company do that? "Stay flexible," says Hastings. "An example: AOL failed to adapt to the broadband world and clung to its narrowband dial-up specialty."

"I was a Peace Corps volunteer right out of college in rural Africa, in Swaziland," says Hastings. "Either that developed my risk tolerance or it was symptomatic of it." Either way, Hastings has been able to build a company that is flexible enough to respond to the rapidly changing industry in which he finds himself.

One example is the response of Netflix to the advent of Blu-ray technology. Hastings implemented a Blu-ray rental option, which approximately 10 percent of his subscribers have opted for.

"We're very happy with the Blu-ray adoption," says Hastings. "This fall, we hope to see some very low-priced Blu-ray players with increased adoption. The biggest factor would be how low they can get the player prices. Walmart had an offering at $99 last week. It would be great if that spread." Hastings responded ahead of time, and must now accept the risk that comes with waiting for the market to catch up with him. But that flexibility often comes at a price, he says.

"In 2004, we were entering the U.K," he recalls. "We'd moved people over, hired others, but ended up closing just before we launched." The reason? The competition back at home was too aggressive. "With Blockbuster attacking, we needed to concentrate on the home market. That decision turned out very well but was heartbreaking."

Despite the significant amount of time and resources Hastings and his team had deployed in order to enter the U.K. market, as soon as he realized that he needed those resources back at home, he did not hesitate for a second to close down shop and focus on the U.S. market.

Still, the U.K. episode demonstrated the often high cost of flexibility. How do you avoid those high costs? Watch the growth paths of others' companies and see where there is room to move. "With failures, you learn one of 99 things to avoid," he says. "So they are not that useful. I think it is more useful to learn from others' failures."

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