5 Lessons From Netflix’s Almost Fatal Mistake

This is a guest post by our friend Mike Marani.

Netflix is a high-flying internet company that capitalized on new technology to change the movie rental model that had sourced the once juggernaut Blockbuster. Through their postage-based DVDs and instant streaming options, Netflix experienced quick success. Until they made an almost fatal mistake during the Summer of 2011. After making video rental stores virtually obsolete, Netflix attempted to split into two separate companies. The DVD mail model would be known as Qwikster, while the Netflix brand would focus on being a technology streaming company. This change would mean rate increases for the loyal customers who helped Netflix become a dominant force in its industry. Of course, the change created massive amounts of anger among subscribers who responded by canceling their memberships in droves.

Reed Hastings, co-founder and CEO of Netflix, could have married his decision out of fear of appearing to be wrong. Instead, Hastings did something that most people in his position struggle to do. He apologized. He did so by correcting the mistake, fixing their pricing policy, and clarifying his basic vision of the company. This approach enabled Hastings to position Netflix in a way that encouraged consumers to root for a full recovery while also clarifying the direction the company was headed. We can learn a great deal from this. Here are five takeaways that we can learn from the Netflix-Qwikster debacle:

Lesson #1 – Don’t Be Afraid to Admit Being Wrong

It can be difficult, but admitting you made a mistake can pay dividends later on. The further you travel down the wrong rabbit hole the harder it is to get out. In other words, the longer you try to prove that you’re right (when you’re not) the harder it will be to repair the damage you create along the way.

I’ll admit this is easier said than done because a true leader must be willing to go against the grain at times. A leader must be willing to block out distractions and naysayers and realize the vision. The key is, be open to the possibility that you could be wrong. Moreover, remember that being right with a failed business is much worse than being wrong with a thriving one.

Lesson #2 – Don’t Hide That You’re Human

Professionalism is essential and a supporting professional appearance is crucial as well. However, this can occasionally come off as cold and impersonal. Admission of an error and an apology reveals that a business is comprised of people. This in turn allows customers to feel a closer connection when they see a more personal side of a company. Be honest about mistakes; it’s easy for people to relate because we all make them!

Lesson #3 – Remember That Without Customers, You Have Nothing

No matter if you offer services or products or generate millions or hundreds in revenue, if your customers don’t feel valued, eventually they will leave. Misleading them, intentionally or not, will have them running to the competition.

Lesson #4 – Clarify Your Vision

A company that cannot change and adapt is destined to fail. Such change, however, must occur in an upfront way for the customers. If the vision needs to change, then reward the customers for sticking with you throughout, with clear and open communication. Do not punish them by blindsiding them with additional fees and/or a weaker (or even different) product or service.

Lesson #5 – Mistakes Are Learning Opportunities

Each and every time you make a mistake you can either let it crush you, or you can learn from it and become stronger. Netflix did not stray from their vision of becoming a technology company that offers great content anytime, anywhere. They simply had to adjust the path to get there. This was made possible by reflecting on the mistake, learning from it, and moving forward.

Before moving, on take a minute to think about how these lessons can be applied to your business:

  • What can you do to show your customers that you appreciate them?
  • How can you turn your customers into raving fans?

Might these answers create additional expenses? Maybe, but theoretically Netflix’s mistake was supposed to increase revenue. How did that work out?

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