In the last six months Netflix has achieved two major milestones. First, it exceeded 50 million subscribers and second, its market value reached $33 billion which exceeds that of CBS Network. It’s clear that Netflix should now be viewed as a major media player.
What Netflix has achieved is really amazing when you consider it was less than 20 years ago that they were founded. Specifically, their original website was launched in August of 1997 with a pay-per-rental service where you could go to their website, order a particular movie, and they would send the DVD by mail. In 1999 they launched their monthly subscription service where you could rent an unlimited amount of DVD’s for a flat monthly fee and soon after that they dropped the single rental service.
In 2007 Netflix shipped its billionth DVD and also that year it launched its video-on-demand streaming service. This enabled viewers with robust broadband internet connections to watch movies whenever it was convenient for them. In the last few years, Netflix has begun to produce movies while also launching several extremely successful television shows which come in the form of annual series that subscribers can watch at their convenience. Some of these shows, such as “House of Cards,” have become wildly popular.
What Netflix has done is not easy; they have continually innovated their basic business model, while executing well on a day-to-day basis. Many organizations fail at that. Consider RIM – the Blackberry maker, My Space, Blockbuster and Kodak. All four failed to innovate while being consumed by executing the day-to-day business.
Stepping back, you have to admire Netflix for doing two things extremely well:
1.) Innovation – Netflix has evolved its business model very rapidly and in many instances, bet the company on some very bold changes. For example, moving away from DVD’s by offering video-on-demand via internet streaming could have destroyed the financials of the company. Launching television shows is about as risky as it gets.
2.)Execution – While they’ve had their glitches here and there, generally they have been minor and the company has done a very good job of executing its business model at every step. This takes major focus to deal with the surprises that occur each and every day when you are running an ongoing operation.
Strong leaders realize that doing both of these things is absolutely necessary for ongoing success.