How Working at a Startup Called Netflix Made Me a Better Entrepreneur (and Mentor)

Yesterday I had the pleasure of seeing Reed Hastings again for the first time in about 14 years when he spoke at an event in Nashville, where I've lived for the past 11 years. It made me stop and appreciate how much I learned during the time when I used to see him every day, at the office.

I was employee #70 or so, if I recall correctly what Patty McCord, then the Chief Talent Officer, told me as we completed my paperwork. That was including quite a few permanent employees in the warehouse, so the "corporate office" had only 30 or 40 employees, but it was still hardly a garage startup by then. On the other hand, we were still in our first office in Los Gatos, where the company still calls home. The company had launched mid-way between the beaches of Santa Cruz, where many of the founders and earliest employees lived, and the sprawl of Silicon Valley, and had moved to Los Gatos, still on the very southern-most edge of what might be considered the Valley, to be near the wealth of software developers who could be recruited there.

It still felt like a startup in many ways. When I got the phone call with my offer, my soon-to-be-boss, the executive editor, whispered her side of our salary negotiation to me in Italian over the phone because she was in a cubicle and none of the offices with doors were available. When I arrived for my first day, on crutches and a boot-brace because I'd twisted my ankle hiking in the hills of Palo Alto on Earth Day, I was threatened with termination if I didn't decorate my cubicle by the end of the week. I started the same day as my friend Tom, who worked for many years as a freelance writer covering Hollywood and had interviewed everyone from Gene Kelly to Frank Sinatra. It was a colorful place.

Having grown into an entrepreneur myself and a mentor to startup founders, I find that I often look to the lessons I learned in Los Gatos. I share them with my startup mentees and clients, so I'll share them now with you.

Embrace iteration as the road to improvement, but don't let that lull you into rolling out poorly-thought-out crap. In one year, we rolled out two redesigns that together took the site's sophistication from Kindergarten to high school Freshman. Having worked in and consulted with very large companies before and since Netflix, I can say that these projects, happening over a matter of a few months each, were lightning fast by Fortune 100 standards but having worked in many much-smaller startups, I also know that they were painfully slow by most startup standards. In Goldilocks project management terms, these projects were just right because they were well-thought-out, slim in scope, and able to be built upon.

The first required rethinking the structure of genres from flat assignments of genre to a movie, to a multi-level relationship between genres and sub-genres. I worked closely with the database administrators on that one and by launch, we felt the entity relationship diagram was such a work of art we could've framed and hung it.

The second introduced the ability to display site content dynamically based on a variety of factors. This went beyond the standard movie recommendations features, which were already beginning to be pretty amazing. Instead, this dealt with feature content of a more editorial nature throughout the site, like "epic fight flicks" or "buddy movies" or "weep-worthy romances," which might be manually-curated lists of, say, 20 movies, but where five might be shown. Which five movies appeared would be based on an algorithm that took into account a user's rating history, rental history, and page views, as well as business factors like inventory and any revenue share agreements we might have had with a distributor.

In other words, what we introduced then was the beginning of what the framework that's the standard for e-commerce even now. We built it piece by piece, and we didn't rush it but we didn't bite off too much at one time, either.

Talk openly about numbers. Every month, we rented out the Los Gatos Theater, a great old art deco-style place, for a monthly metrics meeting. And even though you probably nodded off when you read the words "monthly metrics meeting," these weren't what you're picturing. Yes, they had PowerPoint projections, but they were on a movie screen, and the whole company snacked on popcorn and soda while we watched, say, the CFO talk about profit and loss. Both Reed and Marc Randolph, as co-founders, seemed to embrace a very open culture of communication about the company's financials and operating numbers. Every month in the Los Gatos Theater, the entire company saw when we missed a month of profit, and felt the pang of it, or saw when we exceeded a retention goal, and felt the joy of it. Sharing those numbers made sure the whole team was along for the journey. Also, each department head, and sometimes a select representative from the department overseeing a special project, would present his or her monthly numbers in about 10 minutes each. (And there'd usually be a short movie clip to break up the monotony of the numbers and charts. We had a lot of fun, even when we were dealing with Serious Numbers.)

Keep the entire company focused on moving a single key metric that really matters. Ours was customer-focused and most early-stage companies will want theirs to be, too. We wanted to have one million active subscribers to the service by July of that year. You can choose a different "most important metric" as time goes by and you hit your goals, and the business needs shift and grow. But having everyone making daily decisions based on knowing that one top-level goal ensures you will have the best chance of hitting it.

Empower your department heads to determine a relevant key metric for their area of focus that influences the company's key metric. Not only does this help grow the management capabilities of every area in the company, it helps everyone think through how their work is accountable for hitting or missing the big number. As the manager of the content group, I was given latitude to understand and determine what my department's key metric would be. I chose content completeness, understanding that a rigorous attention to thorough metadata would be meaningful if we wanted customers to navigate organically to the deepest recesses of the content library so they'd appreciate the richness of their rental options and remain customers longer. We determined a standard set of metadata we wanted complete for all titles in the catalog, and based on this matrix, when we started, the catalog was 3% complete. Within a few months, we were at 97% completion, all while improving the efficiency of our content entry and while working on other new projects. It was a small thing in the grand scheme of things, but my team was proud of it.

Keep an eye on the long game even while you're aggressively playing to win the short game. In 2000, when Blockbuster launched a monthly subscription program in response to Netflix, the DVD rental business was the battleground, and we were fighting to win. But at the same time, Reed began investing in R&D towards streaming movies and set-top boxes, which would lead to the success of Netflix integration with Roku, Apple TV, and online streaming overall. It made the transition from a DVD-centric operation to a streaming-centric one possible, whereas a shift like that might've tanked most companies.

When strategy, culture, and brand harmonize, they amplify one another and resonate loud and clear. We were all movie nuts. If you wanted to play movie trivia, you had people who could go toe-to-toe on the most obscure details of just about any film. Having our company meetings in a movie theater reminded us all about the joy of cinema we were translating to the comforts of home. We had a few missteps along the way in trying to make that translation, such a badly-designed brand identity package that played off of the visuals of TV static and a small screen, but we could feel those missteps immediately because they didn't resonate. The metaphor of red velvet curtains over a big screen and a red ticket stub resonated, because they reminded us of the larger-than-life feeling of movies, and that's what fired us up.

When all of these things come together and you have a team that loves what they're doing, you have the makings of a big screen success story. You also have an environment that spins off a lot of other success stories, too, as employees move on and take their learnings with them to build and influence other companies. In fact, you might say it's pretty much a perfect Hollywood ending.

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Kate O’Neill, founder and principal of KO Insights, is a speaker, author, and consultant focused on meaningfulness in business and in life. Kate speaks with characteristic candor, energy, and wit at national conferences, private corporate meetings, association meetings, and other groups and events. She consults with select clients, often adding much-needed context for strategic growth opportunities in data-rich and customer-centric environments. Kate writes frequently for a variety of online outlets, and has been featured in CNN Money, TIME, Forbes, USA Today, and other national media. She has been named “Technology Entrepreneur of the Year” and a “Woman of Influence,” along with numerous other awards and recognitions.