Crossroads

At the intersection of technology, finance and the Pacific Rim.

Monday, September 28, 2009

Last week we discussed Netflix and their Netflix Prize. An interesting story about them (especially love his vacation policy) in Wired--as they write in a very interesting read:

It had taken the better part of a decade, but Reed Hastings was finally ready to unveil the device he thought would upend the entertainment industry. The gadget looked as unassuming as the original iPod—a sleek black box, about the size of a paperback novel, with a few jacks in back—and Hastings, CEO of Netflix, believed its impact would be just as massive. Called the Netflix Player, it would allow most of his company's regular DVD-by-mail subscribers to stream unlimited movies and TV shows from Netflix's library directly to their television—at no extra charge.

The potential was enormous: Although Netflix initially could offer only about 10,000 titles, Hastings planned to one day deliver the entire recorded output of Hollywood, instantly and in high definition, to any screen, anywhere. Like many tech romantics, he had harbored visions of using the Internet to rout around cable companies and network programmers for years. Even back when he formed Netflix in 1997, Hastings predicted a day when he would deliver video over the Net rather than through the mail. (There was a reason he called the company Netflix and not, say, DVDs by Mail.) Now, in mid-December 2007, the launch of the player was just weeks away. Promotional ads were being shot, and internal beta testers were thrilled.

But Hastings wasn't celebrating. Instead, he felt queasy. For weeks, he had tried to ignore the nagging doubts he had about the Netflix Player. Consumers' living rooms were already full of gadgets—from DVD players to set-top boxes. Was a dedicated Netflix device really the best way to bring about his video-on-demand revolution? So on a Friday morning, he asked the six members of his senior management team to meet him in the amphitheater in Netflix's Los Gatos offices, near San Jose. He leaned up against the stage and asked the unthinkable: Should he kill the player?

Three days later, at an all-company meeting in the same amphitheater, Hastings announced that there would be no Netflix Player. Instead, he would spin off the device, letting developer Anthony Wood take the technology and his 19-person team to a small company Wood had founded years earlier called Roku. But Netflix, which had already begun streaming movies to users' PCs, was hardly giving up on the idea of streaming them to televisions as well. Instead, the company would take a more stealthy—and potentially even more ambitious—approach. Rather than design its own product, it would embed its streaming-video service into existing devices: TVs, DVD players, game consoles, laptops, even smartphones. Netflix wouldn't be aPublish Post hardware company; it would be a services firm. The crowd was stunned. In half an hour, Hastings had completely reinvented Netflix's strategy

So how does Reed Hastings manage?

A quiet, hands-off leader, he sets the tone and objectives and lets his employees figure out how to execute them. His main directive is that everyone act like an adult: Netflix has no vacation policy (take as much as you need, when you need it), pay is flexible (stock or cash, your choice), and though firings are unusually common, severance checks are unusually generous. Hastings is comfortable creating his own rules for how to run a business; you don't see any management tomes in his office. In fact, he doesn't even have an office. The CEO prefers to stroll around, a ThinkPad in hand, pitching camp in an empty conference room or huddling in an engineer's cubicle to whiteboard some formula.

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