Hey, Nick here! In this newsletter, I curate insights and timeless principles on how to build great products. You’ll improve your product skills with every issue.

Here’s a video for you today…

Reed Hastings on Building a Streaming Empire

Reed Hastings is known as the founder of Netflix, but many people don’t know he was a successful founder prior to Netflix. He was able to fund Netflix via the capital he gained from taking his previous company, Pure Software, public in 1995. 

Here are 6 lessons from his conversation with Reid Hoffman in the Blitzscaling series.

1. Build the company first, then focus on culture

Hastings takes an opposite approach to how most founders talk about culture. His top priority was making sure Netflix would survive and then he focused on culture. Many founders talk about how they define their culture while building their business, but Hastings wanted to be a stable business.

That being said, Netflix was a trailblazer around culture after publishing its “culture deck”, sparking conversations in the HR and tech world in 2009. This was the brainchild of Hastings and his Chief Talent Officer, Patty McCord. They laid out what it means to work at Netflix, with a strong focus on talent and removing corporate fluff.

2. Managers should inspire and lead, not micromanage

The phrase Hastings uses is “context, not control.” Managers should be setting the context of what needs to get done and let their team figure out the best solution. Managers can best help by setting constraints and turning the team’s focus back on the larger purpose of solving the problem.

“If you get good at setting context, you don’t have to direct the micro-specifics.”   

3. Experimental with people just like you might be experimental with a product 

Hastings zags compared to how many founders talk about their company. Founders use the term “family”, but Hastings is explicit in saying that Netflix isn’t a family, it’s a business. It may sound harsh, but he treats people just like you might treat a product or feature. Experiment with them for a couple of months and if it doesn’t work out, let them go.

It took Hastings many years to fire someone for the first time. There was a switch in his head that as CEO, he needed to act in the company's best interest. In his mind, the amount of work that needs to be put into a severely underperforming employee isn’t worth the time and energy for both parties. Hasting understands the value of talent and wants to maximize it.

Netflix is known for its large severance packages, which are 3 months at a minimum. This makes everyone more at ease if someone is let go. The person who has been fired has a runway to find a new job and the person doing the firing knows there is a cushion.  

4. When competition rises, double down on your core product offering

When Blockbuster was Netflix’s main competitor, Netflix tried many different tactics to fend them off. They created “Netflix Friends” as a social network component of their service. They also added ads and used DVD sales to try to boost their revenue.

According to Hastings, none of these efforts moved the needle. What worked was improving their core product offering. This is the tried and true way of adding and retaining customers.  

5. Every 12-18 months, ask the company “What would you do if you were CEO?

This is a simple way for him to get the pulse of the company. It’s a more specific question than “how are you feeling?” As the CEO, you need to have a genuine interest in the well-being of your people. There could be interesting ideas that get presented to the CEO that otherwise wouldn’t with a large company.

6. Don’t try to be someone you aren’t 

There isn’t one style to become a great leader. There are countless management books and they are still being produced. Hasting says that everyone needs to know their “emotional center” and use that to their advantage. 

Having a strong team allows for everyone to be themselves and fill gaps for others. People have different communication styles and ways to look at a problem. Leverage others who are best suited to solve the problem.

Link to the full video by Reed Hastings and Reid Hoffman.

End Note

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Have a great day,

Nick