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Lesson #4: “There are no shortcuts”

Article Overview: “Occasionally great wealth is created in a short amount of time, but it’s through a lot of luck in those situations,” says Hastings. “You just have to think of building an organization as a lot of work. It may or may not turn into great wealth.”

Lesson #4: “There are no shortcuts”

"Occasionally great wealth is created in a short amount of time, but it's through a lot of luck in those situations," says Hastings. "You just have to think of building an organization as a lot of work. It may or may not turn into great wealth."

Hastings may be enjoying his success now, but it is only the result of years of hard work, trial and error, and lots of mistakes made and lessons learned. But he was able to keep going because Hastings knew that growing a successful business meant adopting a long-term perspective. With every move that he took, Hastings was looking at least a few years ahead. "I think the stock will trade down significantly because of lower profits for the next year," he once said, "but the long term value will rise - in two years - because of our actions today, being decisive and taking the steps to ensure our continued leadership in this larger market with larger competitors."

He was able to make some of the riskier decisions precisely because he was not looking for immediate payoffs. But what made him so confident that his business would be around in the long-term?

"Americans love convenience, and they constantly choose convenience over almost every other thing," says Hastings. "Think of [a great business model] as a triad of convenience, selection, and value relative to what people are used to. You nail all three, then you take off."

"I started to investigate the idea of how to create a movie-rental business by mail," he recalls. "I didn't know about DVDs, and then a friend of mine told me they were coming. I ran out to Tower Records in Santa Cruz, Calif., and mailed CDs to myself, just a disc in an envelope. It was a long 24 hours until the mail arrived back at my house, and I ripped them open and they were all in great shape. That was the big excitement point."

It was the big excitement point because it was then that Hastings knew he had a winning business trifecta on his hands. He had the convenience of a mail-order video rental system, and he knew he could supply more selection and value to people than his competitors.

"There's a lot of brainstorming about the nature of the problem that sets the context and gets your juices flowing," says Hastings. "But ultimately there is a moment of epiphany when one recognizes the solution. With Netflix, one epiphany was that DVDs by mail could work, and the second was our subscription model with no late fees and a flat fee per month."

Adopting a long-term viewpoint has been ingrained in Hastings' management strategy since day one, he says. "Most good management isn't day to day. It's a lot of investment in things, say, over the next two years - investments in relationships, in management. So most of my time is spent making sure that the day-to-day urgent doesn't take over for the important. If you keep working on the important, you'll have to do some of the urgent, but as little as possible."

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Article Tags: amount of time, business model, convenience, decisions, dvds, excitement, great shape, hastings, leadership, mail order, payoffs, profits, rental business, santa cruz calif, successful business, term perspective, there are no shortcuts, triad, trial and error, trifecta



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