Netflix's Reed Hastings Doesn't Flip-flop, He Leads

Jon Burg Senior Emerging Channels Specialist, Digitas

Posted on October 10th 2011

10a_Images_Devices Leaders will make executive decisions.  They stick to their intuition in the face of adversity.  They push their employees, their suppliers and their pricing models to the limit.  They will live and die by the direction they take.  And when they make mistakes, they fix them.  This isn't flip flopping it's leadership.

Reed Hastings is a visionary.  Reed is a leader.  He pushed his business towards a radical transformation.  When his incredibly active and loyal market spoke, he made the executive decision.  

The resonating "flip flop" media coverage of Reed's recent experiment in radical business model revision is nauseating.  This isn't flip flopping.  It's leadership.

Waiting and seeing. Talking and debating.  Listening and integrating.  All good things.  But it takes a leader to lead.  Marketing people love to talk.  There is a direct correlation between the size of the organization, the confidence of the marketer, the height of the stakes and the time spent talking rather than doing.  The greater the fear, the greater the delay.  Talking is a great way to push off making the difficult call.  In the face of all of this advertisty, leaders find the strength to lead.

Great leadership is about more than making the difficult call.  Greatness demands making and sticking  to the unpopular decisions in the face of adversity.  In today's day and age, greatness demands telling your PR and social media teams to stop addressing the negative market and start believing in the organization.  Leaders don't just ask customers what they want, they build what they know their customers will come to demand.  

Reed is a leader.  So his bold experiment flopped, good for him.  That was a jump few us of would have the balls to have made.  Here's to leaders who know how to make a jump, and when to pull back.  Here's to you Reed.  Keep it up.

Now let's just hope this change in direction hasn't significantly impacted his consumer confidence.


Jon Burg

Senior Emerging Channels Specialist, Digitas

As the Senior Emerging Channels Specialist at Digitas, a world leading digital marketing and media agency and member of the Publicis Groupe S.A, I am tasked with monitoring, tracking, analyzing, strategizing and activating against all things 2.0. Areas of particular interest include media ethnography, emerging technology, user and channel experience evolution, social media, mobile media, distributed media, gaming, the ambient web and multi-platform/multi-channel operations planning.
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Jon, I am fairly certain you're in the minority here. If anything, you could get away with praising Netflix for listening to their customers and reversing what was a bad decision in the first place.

But I think it's a stretch to say that Reed Hastings was a strong and/or positive leader throughout this fiasco. I think a true leader would have established a much more comprehensive PR plan to handle the expected backlash of raising prices and trying to split the service into two separate channels. Backpedaling after a public outcry was just a necessary reaction.

I agree with your other commenter. You are definitely in the minority here. A strong leader would have seen that this is not the time or the way to manipulate your customer base. There was too much confusion and the company did not follow a clear path. There's competition arising. I think the only thing that will save Netflix now is if they stake out a dominant position as THE movie company on Facebook's open graph. If they are overtaken there too, they are done, like Borders and Blockbuster.

I'm with the commenters on this one.  I have a feeeling this post was designed to play Devil's Advocate and stir the pot.  

Taking decisive action is important, especially in volatile economies where businesses "win in the turns" as they say.  There's also something to be said for failing faster as well.  But the need for decisive action is counterbalanced with the need to be strategically strong and look deeper than the next move.  

Every company the size of Netflix has several checks and balances built in to prevent seemingly rash decisions from being made public.  Executive teams, consulting partners, advisory panels and Boards of Directors all have a potential role to play before making such a massive shift in the business model. 

Reed Hastings deserves all the credit for having the vision and passion to see the market opportunity for Netflix years before the competition and esssentially replace the delivery model that preceded it.  But there was nothing about the Qwikster announcement that indicated the move was well thought out or there was a steady hand at the wheel.

Couple this with the similar decisions coming out of HP recently, and it seems that some beneficiaries of the New Economy (circa 1999) are having trouble determing their next move in the fact of the New-New Economy, circa 2008.    

While I respect and admire bold leaders and I will credit Reed Hastings with being that, he is also clearly arogant and deaf to his customers.  This was not a bold move, as he has made in the past, this was a move made by a CEO and company that thought they had enough market muscle and dominance to do as they wished without any, or at least minimal, reprecussions.  

Clearly they were wrong as the users, including myself, have voted with their feet and walked away from Netflix and the stockholders and Wall Street have voted with their wallets by pummeling the stock and it continues to drop.  

The good things from this are two fold; 1) Netflix just opened the door and market wide open for competition and their once loyal customers are now eager to try new services 2) this will serve as a great case study for years to come.

Great post by the way, it stirred a very interesting discussion.

All the best

Bill Grunau