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- Marc Randolph on how it took Netflix a year and a half to find product/market fit
Marc Randolph on how it took Netflix a year and a half to find product/market fit
When Marc Randolph and Reed Hastings founded Netflix the model didn’t work at all. As Marc tells it:
“You ordered a disk. We mailed it to you with a due date. If you missed the due date, we had late fees. And the reality is the idea was ridiculous. It didn’t work. Nobody would rent from us, and if you did rent from us once, you didn’t rent from us again.”
The two co-founders quickly realized they had to try something different.
“This began a year and a half long process of trying to figure out some way to get people to rent DVDs by mail from us,” Marc explains. “We tried almost everything you could think of.”
Most of these they tried were bad, but that didn’t matter. It was about the process:
“It’s not about having a good idea. It’s about building this process and culture of trying lots of bad ideas. And we got really good at trying lots of bad ideas. One after after another — hundreds of them — each one informing us about what to try next.”
And finally, they found the idea that worked.
Marc and Reed were in the Netflix warehouse looking at several hundred thousand DVDs when they said to each other:
“It’s such a shame that all of these DVDs are here in the warehouse where they’re not doing anyone any good. I wonder if there’s a way to store them at our customer’s houses. Let them keep them, and then when they’re done, they mail it back. And rather than having them pay each time to replace it, let’s just have a monthly subscription and they can rent as often as they want.”
Marc continues:
“There were no due dates. No late fees. It was a ridiculous idea. But when we tested it, it was that mythical product/market fit. It worked. People loved it and couldn’t get enough of it. They told their friends. And they did not cancel their subscriptions.”