Lessons - When Should An Entrepreneur Give Up? | Marc Randolph, Co-Founder of Netflix

Welcome to the lessons episodes of Success Story. These lessons episodes will be shorter clips from past guests, accomplished value community members, and myself. In each short episode, we'll feature concise and insightful actionable conversations and tactics, providing you with real-world strategies and tips to help you achieve your personal and professional goals. If you're seeking a no-nonsense approach to growth and progress, you've come to the right spot. Settle in, take notes, and enjoy. For an entrepreneur, when is the point when they're chasing the new shiny object versus giving up on a potentially viable business idea to student or holding on to it so long? There's a balancing act they have to have, and I know that I've even, you know, even one lesson from Netflix is your decision to enter or not enter Canada. That's at a macro scale, a shiny object syndrome, but how do you work through that problem so that you're not just chasing the next thing because you've given up too quick? I think that when do you know when it's time to give up is an artificial question. I really don't think people ever say that to themselves, I mean, it's an interesting thought experiment, but when you're in the trenches, you almost never give up because you just don't give up. Now I'm not saying it's because you're so persistent and bullheaded, but how many entrepreneurs do you know who give up? Almost always your force to give up. You run out of money, or you run out of time, or the things that's quite frankly don't work, but you don't like saying, oh, well done, you try something else. It's not to say you stick with the same thing. In some ways I give up all the time, I'm giving up constantly. I never get wedded to my ideas. It's not working fine, and the trash it goes and I'll try something completely differently. And I'm even willing to do that when the thing I'm giving up is working. It's just not going to be the thing I need to do to be successful in the future. I'm willing to walk away from current success to do what I know the customer is going to do. You're if they're totally separate. What you're talking about is somewhat different than the shiny object problem, which is I think different. That's a focus problem. That's a focus problem. Okay, so yeah, okay, that's fair, that's fair, but that's still I want to get your input on that as well. So let's separate those two problems, so that being forced to give up, maybe that is a thought experiment. Maybe you're right. If somebody is truly entrepreneurial, they will not give up. But tons of them don't give up on it. You know, I've got lots of people who have failed companies, and that's no, you know, no badge of shame, but it's not like they all of a sudden go, well, guess there's no more good ideas. I guess we're done or this is just not working. I'm going to stop. And it's the reason is because for most people, this is a dangerous thing to say, who are in it for the right reasons, this success part of it is not what they're looking for. As you mentioned, as you recognized me at the very beginning, it's all about curiosity and solving problems. And the fact that stuff keeps not working just makes you more curious, but what is going to work. The failed experiment teaches you something. You become so educated about your problem. It isn't like you give up on the problem. You give up on the idea in a second, that's why they're all bad ideas. But that problem, that never really goes away. But the focus is a different one because there absolutely is a shiny object problem. And there's two types of these shiny object problems. One is the fact that when you start, you're dramatically under-resourced. You have a handful, you have just you in your dorm room, so use the example from before. Or even when you start a company, you have just a handful of people, you have limited dollars, you have limited amounts of time, and there's a hundred things that need doing. To do all of them well is resources so far beyond what you have. And you have to recognize, I can't, it's impossible. And the mistake people make is they feel they have to do everything. And so as a result, they do everything to the 20% or 30% level. You know, they say we're going to a marketing program that's 20%, there's no sales, 23% or website, 20% PR, they have this huge, we're going to need to have a human resources policies. We need to write down our company culture. Everything is shitty, and half-ass and not done well. Yeah, it's just like, because they think, oh, I have to have all these things done. Or all of a sudden you launch and you've got your customer saying, we need this feature, we need this feature, this feature, this service, this, we need different price plans, we need this geography. And you can't do all those things. Well, there's so many things conspire against the startup that if you going in with everything at this 20% to 30% level, you're doomed. So the focus piece is recognizing that fundamentally there's probably just one or two things that if you get them right, all the rest takes care of itself. That it really is this triage where of all the things that are on fire, a bunch of them, well, listen, no matter what you do, they're still going to be poor. So that doesn't help. And a bunch of them, there's going to be fine no matter what you do. But there's a few that your time and attention will make the difference between success and failure. And the skill of an entrepreneur is to recognize what are those two or three things. And then have the discipline to focus their time, attention, and the company's resources on those handful of things. It's really, really hard to do, but it's such a critical skill. And like you said, there's always things that are tempting you. And the one you alluded to, of course, Netflix early days was what we called the, you know, the Canada problem, which is that people say, you should, wow, you're trying to grow youthiest expanded into Canada. That's about an almost instant 10% pop, you know, that market size is about one tenth of the United States. It's easy. And the one of the lessons, of course, is that this so-called low-hanging fruit rarely is that what seems easy once you begin getting into it ends up having all kinds of weird intricacies to it. You know, it's a different language in parts of Canada. They have a different currency. There's different rights for some of the movies you're selling and renting. And the time and attention to get that right for 10% revenue bank gain, that if you took all the time and attention you spend defocusing on going after Canada and focus it on your internal business, you'd reap way more than a 10% gain. And you have to be willing to wait. And another one was all of a sudden people hasn't began to get some success. Competitors come up, you know, someone launches a Netflix clone in the UK. And believe me, the temptation is huge to say, we better jump into the UK to nip this in the bud. But you have to say no, taking our very, very best people and keeping them focused on our internal problem here is going to be much, much more valuable because eventually when we do enter the UK in two or three years, we'll be in such a stronger position. We can't let ourselves get distracted, we can't allow ourselves to get spread to thin. And the, now we're getting deep on this one. The other hidden trap is that not only is there a distraction of doing two things at the same time, but those two things cut against each other. In other words, it's not just taking resources and putting it on Canada. But what that does fundamentally is make it worse with your core market because they conflict in many ways. All of a sudden you go, we have to structure it this way so that it remains compatible. And all of a sudden you're going, no, no, that's not what's best for the customer here in the US. I know, but we need to compromise a little bit to make it work. Yeah, at the very beginning when we launched Netflix, this is back in 1998, it doesn't look anything like it does now, we were mailing movies to people, there was no streaming. If you wanted a movie, we mailed it to you in a little red envelope. And we didn't just rent movies, we sold them and sold a ton of movies and it ended up being something like 95% of our revenue. And this was kind of a version of the Canada principle, but in reverse, is here we had this phenomenal sales business, but kind of recognized strategically, this was a bad idea, you know, that eventually Amazon was going to come in, it's back then they were just doing books. Then eventually Walmart's going to come in and came out, I don't know, Petsmart, they're all going to begin selling DVDs and then we're toast. But to the point I was just making, the problem is that doing both was making everything more difficult, it was confusing the customers. The all of our metrics were hard to interpret because there was two types of customers. Our checkout process was more complicated than it needed to be to accommodate that some people were renting, some were buying. Our inventory management, I mean, everything was being made more difficult and we said we don't have to focus, we're going to have to pick one of these, which would be hard enough to get right. And that the big strategic challenge of course was which one do you focus on and you focus on selling movies, which is 95% of your revenue, but it's eventually kind of go out of business. Where do you focus on rental, which is a tiny piece, but if you can get it right, has the potential to be huge. And so it requires this courage to say I'm willing to walk away from this case huge, huge, extremely shiny object to say fundamentally I know what I have to do for the future and I know that every minute that I maintain two lines of business is just making it less likely that the one that fundamentally is my future is ever going to see the future.