The Virgin Way: Everything I Know About Leadership by Richard Branson Page A
Authors: Richard Branson
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conversation never took place.
In July of 2011 Netflix was flush with success. It had twenty-three million subscribers, its stock price was riding at an all-time high at around $300 and new members by the boatload were signing up every month. And then in September, for reasons that no one can fully explain, the DVD rental giant shocked Wall Street analysts and its employees and customers alike by announcing it was revamping its highly successful business model. They announced that a new spin-off company, Qwikster, would take on the mailbox DVD rental side of the business, while those customers who preferred streaming video would buy that separately from the newly pared-down Netflix. What had been working just fine for them – a single monthly fee to Netflix for both services – would now be payable to two separate entities – doubling the complexity and forcing customers to lock into choices they didn't really want to face.
The attempted transition was so badly executed on every front that it quickly turned out to be an exercise in ‘united we stand, divided we fall’. Some analysts speculated that the company may have been foolishly attempting to fast-forward evolution by trying to wean its client base away from the old-fashioned business of having DVDs delivered by mail with all the associated logistics, warehousing complexities and costs – none of which existed with the rapidly growing online streaming mode of video delivery. Everyone agreed that video streaming was indisputably the way of the future, but such a monumentally dumb move was certainly not the way to get there. The customer reaction was instantaneous and furious: within a month almost a million of them cancelled their subscriptions and the company’s stock – which in July had been trading above $300 – had fallen to around the $100 mark by early September.
It was way too late for the publicly embarrassed Reed Hastings to have that dinner table chat with the family, but to his credit he did at least react quickly by instantly hitting the brakes before the ill-conceived new structure ever took effect. Qwikster was ‘qwikly’ gone and in what was described in one report as a ‘tear-stained apology’ to both the remaining and recently departed Netflix subscribers, Hastings openly admitted, ‘I messed up and I owe everyone an explanation.’ What that explanation didn’t say, however, was, ‘If only I’d talked this over with my friends and family, none of this fiasco might have happened.’
While Netflix almost managed to ‘snatch defeat from the jaws of victory’, happily the company has recovered well as a predominantly online provider, although the dinosaur-in-waiting of DVDs by mail still contributes significant revenues. A lesson to be learned from this story is the importance of leaders displaying the courage to own up to and accept responsibility for their mistakes then act to quickly fix them and move on. Last time I checked, Netflix stock was in the region of $450, so its shareholders’ pain was a temporary thing as a result of the quick actions of a CEO who wasn’t afraid to admit that, like all human beings, he was fallible.
HOW TO SHOOT YOURSELF IN THE CAN
While the Netflix story is one of the more recent examples of failing to look at a business from the outside in, in the annals of blinkered decision-making it is by no means the most incredible. That honour must surely belong to the Coca-Cola Company. ‘Coke’ is not just one of the world’s biggest selling and most recognisable brands but it has fiercely loyal customers – as we discovered when we tried to go up against them with Virgin Cola – or ‘Virgin Coke’ as I was prone to calling it until several of our lawyers suggested I might be wise to cease and desist!
Unfortunately for us, Virgin Cola never succeeded in wreaking one tenth of one per cent of the damage to Coca-Cola that they managed to inflict upon themselves in the mid-eighties. I am usually a
In July of 2011 Netflix was flush with success. It had twenty-three million subscribers, its stock price was riding at an all-time high at around $300 and new members by the boatload were signing up every month. And then in September, for reasons that no one can fully explain, the DVD rental giant shocked Wall Street analysts and its employees and customers alike by announcing it was revamping its highly successful business model. They announced that a new spin-off company, Qwikster, would take on the mailbox DVD rental side of the business, while those customers who preferred streaming video would buy that separately from the newly pared-down Netflix. What had been working just fine for them – a single monthly fee to Netflix for both services – would now be payable to two separate entities – doubling the complexity and forcing customers to lock into choices they didn't really want to face.
The attempted transition was so badly executed on every front that it quickly turned out to be an exercise in ‘united we stand, divided we fall’. Some analysts speculated that the company may have been foolishly attempting to fast-forward evolution by trying to wean its client base away from the old-fashioned business of having DVDs delivered by mail with all the associated logistics, warehousing complexities and costs – none of which existed with the rapidly growing online streaming mode of video delivery. Everyone agreed that video streaming was indisputably the way of the future, but such a monumentally dumb move was certainly not the way to get there. The customer reaction was instantaneous and furious: within a month almost a million of them cancelled their subscriptions and the company’s stock – which in July had been trading above $300 – had fallen to around the $100 mark by early September.
It was way too late for the publicly embarrassed Reed Hastings to have that dinner table chat with the family, but to his credit he did at least react quickly by instantly hitting the brakes before the ill-conceived new structure ever took effect. Qwikster was ‘qwikly’ gone and in what was described in one report as a ‘tear-stained apology’ to both the remaining and recently departed Netflix subscribers, Hastings openly admitted, ‘I messed up and I owe everyone an explanation.’ What that explanation didn’t say, however, was, ‘If only I’d talked this over with my friends and family, none of this fiasco might have happened.’
While Netflix almost managed to ‘snatch defeat from the jaws of victory’, happily the company has recovered well as a predominantly online provider, although the dinosaur-in-waiting of DVDs by mail still contributes significant revenues. A lesson to be learned from this story is the importance of leaders displaying the courage to own up to and accept responsibility for their mistakes then act to quickly fix them and move on. Last time I checked, Netflix stock was in the region of $450, so its shareholders’ pain was a temporary thing as a result of the quick actions of a CEO who wasn’t afraid to admit that, like all human beings, he was fallible.
HOW TO SHOOT YOURSELF IN THE CAN
While the Netflix story is one of the more recent examples of failing to look at a business from the outside in, in the annals of blinkered decision-making it is by no means the most incredible. That honour must surely belong to the Coca-Cola Company. ‘Coke’ is not just one of the world’s biggest selling and most recognisable brands but it has fiercely loyal customers – as we discovered when we tried to go up against them with Virgin Cola – or ‘Virgin Coke’ as I was prone to calling it until several of our lawyers suggested I might be wise to cease and desist!
Unfortunately for us, Virgin Cola never succeeded in wreaking one tenth of one per cent of the damage to Coca-Cola that they managed to inflict upon themselves in the mid-eighties. I am usually a
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