Dreaming About Becoming a Disruptor? Lessons Learned from NETFLIX®
Netflix Co-Founder Marc Randolph explains why you need to focus on the market that nobody is paying attention to.
In one way, the story of Netflix taking down Blockbuster is an inspiring one: just a handful of people with no experience in the video industry, using nothing more than imagination and persistence, taking down the biggest video rental company in the world.
But what if you are the 800-pound gorilla? Then it’s a different story, isn’t it? Because then the moral is a little different – and a little unsettling. Then this story suggests that the people coming after you are going to look nothing like you. And they are not going to come after the things you do well. They are going to target the things you don’t do well. Or can’t do. Or are unwilling to do.
But that’s the nature of disruption. You never know where it’s coming from. And if it’s done correctly, it’s almost indefensible.
Our dream at that time wasn’t world domination; it was simply to get to the size of a single Blockbuster store, which meant doing about $650,000 in annual revenue. But even that was ambitious. In 1999, Blockbuster boasted of having a store within a ten-minute drive of virtually every major neighborhood in the United States. Why would someone wait three or four days for their video to arrive by mail?
But the biggest reason we had confidence in our future is that we planned to disrupt their business by doing something they couldn’t do – or at least would be unwilling to do. We were going to skip renting video tapes entirely. We planned to rent DVDs.
Two years was all the time we needed. It gave us a window where we were the only game in town for DVDs. It allowed us to forge the relationships with the DVD manufacturers we would use to drive our early acquisition efforts. It gave us more than our fair share of press. And most importantly, it gave us the volumes of customers we would need to iterate, iterate, iterate until we came up with the no-due-dates no-late-fees subscription model that eventually made us successful.
Stories of disruption almost always start this way.