“Disruption isn’t about violent upheaval, but constant pressure…and whoever gets closest to the consumer wins,” said Mitch Lowe, the former CEO of Movie Pass, former President of RedBox, and was a Co-founding Executive of Netflix.
Hala Bou Alwan, Founder and CEO, Hala Bou Consultancy, talked to Lowe to better understand his highly accomplished journey through success and failure, as he openly shared some profound insights about business and life.
Never Burn Bridges
Some incredible opportunities came through people with whom I had a tough business relationship, but years later they became allies, partners and even friends. I have learnt to not let emotions or competitiveness destroy relationships.
For example, in the early 1980s, I started a business of renting movies through vending machines. One of the companies I worked with overcharged me unfairly, beyond our agreement, for some software development. And though I was not happy with the negotiations, I kept the relationship, and 20 years later, they played a big role in the success of Redbox which grew to US$1.5 billion in annual revenue.
Not Being Able to Quit
You hear, too often, that perseverance is important for success, but the kind of perseverance I’m talking about isn’t “should not quit” but “not being able to quit”. It comes from a drive deeper inside you that needs to see a project through to the end or pivot it in a different direction to accomplish what you wanted.
Caring for Others
Through I’ve seen many people succeed without this characteristic of caring for others, I don’t know if they are all that happy with their success. The most important characteristic that helps me create long-term partnerships with people is that I truly care about their future. This is not always about monetary value, but I care that they have a happy life and are able to take care of their family. This, I believe, is an important characteristic for all managers.
Growth Can Distort Reality
The MoviePass business was an extreme failure. It was a period in my life where I forgot all the lessons I had learnt in the past. And in hindsight I see that we all got so caught up in its initial amazing growth trajectory that even though we were getting attacked from all sides, our enthusiasm made us blind to the reality of what was going on and respond accordingly.
The Netflix Story
It was 1997-98 and they were interesting times. There were no videos, almost no pictures on the Internet, and we had the green flashing cursor. We wanted to find a way to deliver entertainment to a larger audience and we needed to build a loyal customer base, and the way to do it was through the DVD. Mark Randolf (co-founder and CEO of Netflix) had an epiphany that if we removed the case then the disk weighed less than an ounce, and in USA, the first-class postage was only 32 cents for this weight and the DVD would be delivered in under three days. So, when Mark approached me (since I owned video stores and a home delivery service, at the time), we wondered what would happen to the DVD without a cover case in the mail, since it was a fragile piece of plastic. We found out that all mail goes through a metal roller and gets bent, and in our testing process with the disks, many broke in the early days. So, we worked with different studios to remanufacture the materials of the disk and started a subscription model where members paid US$20 for receiving four movies at a time, and they could send any movie back and we would send them another one from their wish list. We created a rotating library for members, no late fees and availability to a wide genre of movies from Hollywood, Bollywood, Europe, documentaries, Silent films, etc. from our gigantic library based in San Jose, California.
The Netflix Culture
Sharing stories of failure
One of the things I learned at Netflix from Reed Hastings and Mark Randolf, who are the true founders of Netflix, is an organisational technique that encouraged people to talk about their failures and share the experiences with others in the company. When you are growing fast, it is great to share these experiences, making everyone more aware and learn the lessons needed to not repeat the mistakes. This was a critical part of the early days of Netflix. It was a culture of total transparency with mistakes and failure worn almost as a badge of honour, thought it wasn’t acceptable to make the same mistake twice. However, people were encouraged and supported when they shared those mistakes, creating a kinder and more mature work environment.
I learnt this from Patty McCord, Head of HR at Netflix. It is about empowering everyone in the organisation, by setting very clear goals, providing the relevant resources, and then giving the employees the freedom to figure it out and even fail. No micromanaging the process. This gives the people a sense of ownership and accomplishment, which is a great motivation, as much as salary or time off. People tend to work harder and are more creative when we let them navigate the way to reach the goals. As soon as you tell them how to do it then you are sharing in their accomplishment, and people aren’t as motivated. Patty is the one primarily responsible for the culture at Netflix. I tried to do as much as I could to copy her principles and embrace them totally, and her book ‘Powerful’ is a must read.
Clash Between Disruptor Startups and Incumbent Companies
Why did Hilton not start Airbnb? Why did Hertz not start Uber? What makes a big incumbent company unable to innovate and be agile? And sometimes their response to the disruptor challenger startup can be quite violent. In some cities, the large taxi companies hired gangs to scare away drivers from joining Uber. When I was travelling in one such city and ordered for an Uber, the company could not find any driver brave enough to take the job, so they hired one from another city. On the way to the airport, a van pulled up and pointed a shiny silver gun saying, ‘get out of town’. However, Uber just never gave up and worked hard to expand.
Another example is of the incumbent Blockbuster, which was offered, by newcomer Netflix, 50% of its company for only US$50 million but they declined. Today, Blockbuster has gone bust. It’s a warning to anybody in business, that though you may have a successful and highly profitable company, a little startup can take away your business if you do not embrace change and innovation. Invest in and empower your people to find new ways to deliver your product or service or bring new ideas to the table.
Create a Culture of Innovation
Though innovation is difficult because it takes resources away from the job that you must get done today, it is worth creating a culture that is going to encourage innovation. Not only does it make work more fun, but you will be surprised by what your people can do if you give them some latitude. The kind of culture you create is what allows you to pivot properly. It is gives you the understanding about what data is important and needs action. For startups and entrepreneurs, I would say, find ways to solve important problems and you will have a business.
And finally, I cannot stress this enough, know your customer and product very well. Use your product, order your service on a regular basis, and find out what the customers are really experiencing so that you can improve continuously.