Great Leadership With Jacob Morgan

The Covid-19 pandemic has hit a lot of organizations hard in a way that they might never recover.

Some of these organizations have chosen to let thousands of employees go just to make their numbers better.

And it got me thinking, what if organizations couldn’t fire people when the company didn’t meet its numbers?

Would they be able to come up with creative solutions to keep those people employed? Would they do things differently?

Cutting employees should always be the company’s last resort.

Employees are the greatest asset of organizations around the world.

Jim Heppelmann is the CEO of PTC, a technology software company with 6,500 employees in 30 countries. Jim was named one of “7 IoT leaders to Watch in 2017” by Hewlett Packard Enterprise, he was recognized as “IoT CEO of the Year” by PostScapes, “Technology CEO of the Year” by the Massachusetts Technology Leadership Council, and he received the CAD Society Leadership Award for his work with the Internet of Things. Together with Harvard Professor, Michael Porter, Jim has co-authored three highly influential articles on the transformational impact of the Internet of Things on business. 

David Cote is the former Chairman and CEO of Honeywell and author of the bestselling book, Winning Now, Winning Later: How Companies Can Succeed in the Short Term While Investing for the Long Term. During his time at Honeywell David fixed a toxic work culture and grew the company’s market capitalization from around 20 billion to 120 billion, delivering returns of 800%. Currently David is Executive Chairman of Vertiv Holdings Co, a global data center products and services provider. He is a member of the Aspen Economic Strategy Group on Foreign Relations and the Conference  of Montreal. 

Both Jim and David have had unlikely paths to being the CEOs of two well-established, global companies. Jim grew up on a dairy farm in Minnesota as one of eight children. In college he studied mechanical engineering with an emphasis on computer-aided design. 

It was actually one of his older sisters who inspired him to attend college and study to become an engineer in the first place. After she graduated from college and got her first job she was already making as much as their parents, and Jim was amazed by that. So engineering brought him to college, but once he got there he fell in love with computer science.  He studied at the intersection of where software meets engineering.

David nearly quit high school, because although he was good at school, he hated it. He ended up sticking with it and became the first one in his family to graduate high school. David was accepted to the University of New Hampshire, but decided he didn’t want to pursue college so he went to work as a mechanic with his dad in a small garage.

After that job didn’t pan out he went to Michigan to work as a carpenter with his uncle, but learned he wasn’t good at that either. So he enlisted in the Navy for six years on a nuclear submarine. The day before he was supposed to swear in he called the chief petty officer and asked what would happen if he didn’t show up. And although the chief petty officer made it sound almost impossible to get out of, when David realized cops wouldn’t just show up at his door and arrest him, he made the decision not to go.

After that David decided to go to college, but after two years there the Assistant Dean of Students told him he could no longer live on campus because he was too much of a troublemaker. So, needing some money, David decided to get a job working second shift while going to school, which he did for 6 months, when a buddy of his invited David to come work with him on a fishing boat in Maine. 

Because he was spending so much time on the boat he ended up doing very poorly in school, so he decided to quit. He ended up getting married and one month later his wife was pregnant with their first child. David says this is the moment he realized he had to do something, he had to get direction and stay focused. He was scared he wouldn’t have enough money to raise their child. And from that moment on he had a purpose and a focus that has brought him to where he is now. 

David’s advice on how to lead in tough times 

Leaders today are definitely leading through difficult times, and David has led through his share of challenging times as well. He says one of the toughest times was the great recession of 2008-2009. And he knows how it feels to be in the middle of a crisis and feel like it is the worst one ever. But it is important to realize that while these recessions are unique, there are certain actions that we can take regardless of the situation that can help organizations to survive it. 

David’s advice for anyone leading in tough times is:

  • Don’t panic
  • Make sure that you keep thinking independently 
  • Never forget to put the customer first
  • Be thinking about the recovery even while you’re in the middle of the recession

What to do if you feel stuck in your job

Some people may read or hear David’s background story of what he went through before he became CEO of Honeywell and they may feel like they are in a similar situation where they feel stuck in a job. Maybe you feel like there is not a clear progression forward in your career. David gives his advice to people in this situation, some things that helped him get to where he is now. 

And he breaks this advice up into a few different points. First of all, you have to have performance, and your performance can’t just be okay. You’ve got to be like the top 10%. Where you went to school makes a difference for your first job, after that it is up to how you perform. Be a standout in all you do. 

You also need visibility. If you are performing very well, but the person who can do something about your career can’t see it, nothing will happen. So make sure you have visibility. But you have to be careful with this one because you don’t want to go around tooting your own horn or wearing your ambition on your sleeve. It is a delicate balance.

If you have a boss who doesn’t feel that you are performing as well as you think you are, this is where you have to be self aware and figure out is there something you can fix or do you just have a bad boss, which David says happens less often than people think. So learn to be self aware and realize when there is something you need to fix. We all have issues, and it’s important to know what they are. 

Achieving work-life balance as a CEO 

As the CEO of 6,500+ employees, Jim seems very relaxed and happy. He doesn’t seem stressed out at all. One thing that has helped him with this a lot is having a work-life balance. He not only leads the organization, but he also makes time to spend time with his family, take care of the animals on his farm, and cook. But that wasn’t always the case.

Jim says when he first became a CEO he burned the candle at both ends, he tried to do everything on his own. And overtime he learned that was not sustainable. When sharing what he learned he says, “what I should do is focus my energy where I really bring a lot of value to the table, again, which tends to be around product strategies, marketing strategies, marketing messages, competitive strategies, and so forth. And let somebody else manage the financial plan, let somebody else manage the professional services margins, and things like that because I don't need to do that and I don't bring a tremendous quality to it, you know, nothing super unique or special. And at the end of the day, you’ve got to pick your battles, there's just not enough time for a CEO to be in charge of everything. So I got a lot happier after I realized I should roll with the punches and just really add value where I think I have the most value to add.”

This is such great advice for all CEOs, don’t try to have your hand in all the cookie jars. Don’t take everything upon yourself and don’t think you have to have all the answers. You will get burnt out that way. Surround yourself with people who are good at what you are not good at and rely on them. 

Three ways to battle entrenched thinking 

No matter what industry you work in, you may find that people around you are entrenched in old ways of thinking, especially if they have been in a certain role for a long time. People don’t like change, it’s just a fact of life. So how do you change that? Jim has three ways that he battled entrenched thinking inside of PTC when he first joined. 

  • Make change part of your company branding--Create a company culture that likes change. Part of what Jim did to change the culture was he adopted some slogans like Take a Fresh Look. Everything about the company should embrace change and discourage getting complacent. 
  • Lead by example--Live out the values you want to see inside your organization. If you want employees to embrace change, you must first be the one to embrace change. Make sure people know it is not about making one change and then staying there, it is about constant change. The point is to try to be that company who changes all the time, you can't pin them down, because they're too busy changing. 
  • Celebrate change--Recognize individuals who step out and do something different, even if what they tried didn’t work. 

Jim and David may not have thought about being CEOs growing up and in their early careers, but it goes to show that no matter what your past looks like, you can achieve greatness. Every leader has their own unique path to greatness, every individual has their own unique path, to unlock the potential of who they are. We all deal with our own challenges and obstacles, but it is important to remember that your past does not dictate where you can go and what you can achieve. 

If you have a growth mindset, meaning you believe you can continue to grow and develop throughout your life through dedication and hard work, then you can achieve great things. 

So what is your story going to look like? I hope these two stories from David and Jim motivate you, inspire you, push you and get you to realize that you can build and shape a future that you want to have for yourself.

Direct download: Special_Podcast_Episode_26_Oct._-_DONE.mp3
Category:Business -- posted at: 1:47am PDT

What are you doing to push yourself out of your comfort zone?

Pushing yourself is important because growth only happens when we venture into the uncomfortable. We can’t be scared to go there.

The stress, anxiety, awkwardness, and frustration is all temporary. These things exist as a way to challenge you, so you must overcome them.

Nothing worth doing is meant to be easy.

What are you doing to push yourself out of your comfort zone either personally or professionally?

Direct download: What_are_you_doing_to_push_yourself_out_of_your_comfort_zone.mp3
Category:Business -- posted at: 1:22pm PDT

Steve Bilt is the CEO of Smile Brands, a company with 5,000 employees that provides business support services to over 425 dental offices. Smile Brands has been on Glassdoor’s Best Places to Work list three times and Steve is one of the top CEOs on Glassdoor.

Steve was recognized as People Focused CEO of the Year and Healthcare CEO of the Year by American Business Awards. He is also a top rated US Large Company CEO on Glassdoor, Comparably and CEOWORLD Magazine. 

Steve was on the founding management team of Smile Brands in 1998. He started as the company’s CFO before becoming the CEO a year and a half later. As the CEO he worked hard to build close relationships with the dentists so that he knew what kind of support they really needed. That is what has set Smile Brands apart from other companies, because it allowed Steve to tailor the business model in a way that works at scale with a lot of dentists. 

Several other companies who were trying to provide similar services ended up failing, and Smile Brands was able to acquire a few of those companies. From 2003 to 2004 Smile Brands went from 45 locations to over 300 locations. 

Smiles for everyone

The mission of Smile Brands is really built on three words--Smiles for Everyone. It is the purpose behind everything they do. Steve really wanted to make sure that every party involved in Smile Brands got a fair deal and was happy with the result. So everyone at Smile Brands is focused on making sure patients, employees, vendors, the community, and the investors all get a fair deal, it is always a win-win for everyone. 

Giving an example of this mission Steve says, “I was just on the phone today with someone saying, you know, I'm sensing by your body language, that you feel like this isn’t a good deal for you. It's a good deal for us, but if you don't, you shouldn't do this. That's Smiles for Everyone. The guy was like, wow, that is great to hear. And let me clear that up. And as we had a great conversation with that basis, we think that way with all of our employees, our patients and everyone that becomes part of your DNA as a culture.”

At one point Steve left the company. He had been the CEO for a while and it was suggested to him that he retire. At the time he took the hint and left. After he left the company the leadership decided to try to move to a more execution oriented model, which was very different from Steve’s purpose driven style with focus on direct interaction with the dentists. 

The mission statement went from Smiles for Everyone to Give providers and their dental teams the freedom to put patients first so that they can become the most preferred dental office in their community. And while it’s not a bad statement, it really did not resonate with the Smile Brands team. Moving from focusing on purpose to focusing on metrics really caused the company to lose its soul and its art. 

Steve was actually away for 2 ½ years and he missed the business a lot. But in 2016 he was given back the role of CEO. And as he went around to different locations to meet with employees he realized how much they had been waiting to go back to Smiles for Everyone. In fact he had originally had bracelets made with the phrase on it for everyone to wear. And when he returned he found people pulling the bracelets out of their drawers saying they had been saving them for the day he returned. 

Creating a mission that resonates with employees

Anyone can come up with a mission statement or a company purpose that sounds good. But it can’t be something that just lives on a wall or in the company handbook. It has to be something that is infused into every aspect of the business. 

Steve believes it needs to be something short and catchy that people can remember. It needs to be something that you can evaluate and check in on to see how well the company is living up to it. It has to be something that is living and breathing inside your company.

For example, with the mission Smiles for Everyone, Steve says he uses the phrase in every meeting and he tries to use it in every interaction to show people what it actually looks like to live out the mission. 

Steve says, “As soon as you start to lengthen it, to create more explanation for it, you're doing two things, you're making it harder to use. And you're also telling people what the standard of success is. When the point of the mission statement that we have is only you can say what makes you smile in this situation. So I can't put criterion around it to say, well, as long as my lighting is good enough, you're gonna be happy with this interview. As long as my, you know, shirts the right color, I can't put the standards on it. Only you get to judge that. And so that's why I kept it very short, so it was highly subjective. But you as the constituent and me as the constituent would evaluate it qualitatively. That's another thing, which means I have to ask you, if it's working for you, not just hand you statistics and say it is working for you, which is what most businesses do.”

Leading through a pandemic

This year has been difficult on so many businesses around the world. And Smile Brands has definitely been impacted by current events. Their business dropped by around 93% in three days when the pandemic first started. Steve and his leadership team knew they had to act fast. 

One thing they implemented right away was daily calls for the leadership team. For the first full month of the pandemic the leadership team met every single day Monday to Sunday. And after the first month they eliminated their Saturday and Sunday meetings, but they still meet every Monday through Friday even now, six months into the pandemic. 

He also told his leadership team early on, “his is my first pandemic. So I'm probably not going to do it that well. I'll make you guys a promise, my second pandemic, I'm gonna be really good at this.” He says it was tongue in cheek, but it also was his way of letting leadership know that they have the freedom to figure out things together as they go. He was telling them none of us have been through this before, so mistakes will be made, and that’s okay. None of us should be afraid to fail. 

They also did have to furlough 85% of their workforce, which was a really hard decision for Steve and his team to make. But he explained to employees that while it is painful to go through this now, it would be even more painful to go through this and come out the other side and not have a job to come back to. 

One of the biggest things they have done to help employees through this tough time is constantly communicating with them. Employees have been kept up to date throughout the entire pandemic so they know what is going on, what to expect, and how to plan for the future. 

They also provided webinars and assistance with common issues employees were dealing with, such as how to sign up for unemployment in their area. 

Steve says, “We also set in mind a canyon metaphor, not a mountain metaphor, but a canyon metaphor. And the reason the canyon was so important, as we sort of started here, we slid down to the bottom, which could still be a mountain metaphor. But what I wanted people to think about is surviving on that canyon floor during COVID. And then building back to a new place, not climbing back to the old place. So we really reinvented every aspect of our business, while we're on the canyon floor.”

The good news is they have started emerging from the canyon floor. They’ve got 100% of their revenue back and they are starting to hire back their employees.

Steve’s advice for leaders looking to be more effective 

One of the biggest pieces of advice Steve offers to others looking to be more effective leaders is to find a mechanism as a leader to be wrong. Leadership is not about knowing everything and having all the answers. 

He says, “It's not reality, especially today, when things are happening so fast, and short cycle. And oh, by the way, we're in the middle of pandemic and social unrest and everything else. So you know, you're doing a lot more to help people understand how to explore their way to making decisions or to commit to a decision than you are necessarily knowing the answer. So I think that's number one. And so, you know, that thing about that being my first pandemic was a freeing trick, if you will. All of us as a leadership team need to say, hey, don't sweat it. We don't have to be right. We just have to be moving.”

Steve believes that one of the most powerful things leaders can do is to say “I don’t know the answer to that. Let’s figure it out”. Growth comes when everyone is questioning things and exploring things together instead of having answers given to them. 

Direct download: Steve_Bilt_Podcast_-_DONE.mp3
Category:Business -- posted at: 7:03pm PDT

I have someone I work with who helps me with content. She assists me with writing course descriptions, research, worksheets for courses, etc.

A year or so ago, I threw a lot of work her way and her response to me was, "How would you prioritize these different projects?". It was her way of saying, "No, I can't do all of this, you need to pick and choose."

It took me a while to realize that what she was really doing was saying no to me, but in a way that didn't cause any tension or friction.

This is much better than saying something like, "Sorry I can't do all of this," or "Sure, I can do it", but then not being able to deliver.

It made me realize that I was indeed throwing too much work at her, and it forced me to think about what projects were important and what could wait.

She still uses this every time we speak--it's an amazing technique that anyone can use. Give it a shot and see what happens!

Direct download: How_Can_You_Say_No_Without_Getting_in_Trouble.mp3
Category:Business -- posted at: 3:54pm PDT

Doug DeVos is the co-Chairman and former CEO of Amway, the world’s largest direct selling company that provides health, beauty, and home care products. The company was actually founded over 60 years ago by Doug’s father and his father’s best friend. The company now has around 15,000 employees. 

Doug has been inducted into the U.S. Direct Selling Association Hall of Fame and he received the Direct Selling Education Foundation’s Circle of Honor award. He currently chairs the Executive Committee for the National Constitution Center and he is a chairman of the World Federation of Direct Selling Associations.

The world has been going through some challenging times over the past year with the pandemic, political unrest, extreme weather, and social injustice. Businesses are having to learn how to adapt quickly. 

The founders of Amway, Doug’s father, Rich, and his father’s best friend, Jay, were no strangers to tough times. Growing up Rich’s family went through the Great Depression, they didn’t even have a dime to their name. Rich’s father lost his job, they lost their house, they had to move in with Rich’s grandparents. But they didn’t give up. 

Before Rich and Jay started Amway they were in World War II together and when they came back to the US they wanted to start a business. So they started a flight school, even though neither one of them knew how to fly. After that endeavor failed they bought a boat and decided to sail to South America. They made it to the coast of Cuba when their boat sank. But that didn’t stop them. 

Doug shares, “It was these stories of determination and persistence that seemed to turn out well in the end. And that's been my experience, not that life is without challenge, of course, there's challenges. Of course, there's tragedy. I know you've dealt with it, everybody deals with it. You lose a loved one unexpectedly. Something happens that you didn't plan on, it's crushing. But you just have to keep moving forward. And in my experience, I've seen people move forward from really, really tough circumstances, and find a better future. And it's a lot better to keep that pursuit alive than to just stop and feel stuck.”

How Amway is navigating through challenging times 

Just like every other business around the world, Amway is finding ways to continue providing great products and services in the midst of tough times. And Doug shares that the key to successfully getting through times like this is knowing who you are as a company. As a company you have to understand who you are and why you do what you do. That is the foundation that you can go back to in times like these.

Doug says, “When you talk about injustice in the world, we go back and say we have provided an opportunity for everybody, anybody from the very beginning. So we can express our values through how we operate. You know, because we've been doing it ever since we began. So we don't have to make something up or try to catch up or adjust. But what we do have to do is look at ourselves honestly and say, can we do it better? Can we provide a better opportunity for more people, that becomes more real, and can we give them better products to sell and better support with technology and operations? Those are the things that we have to challenge ourselves and be honest to say, you know, in some aspects of the business, we could be better, we should be better, and we will be better.”

Inside of Amway they have also had to reinvent themselves in three main ways to keep working effectively in this new world of work. 

  • Technology: They have heavily invested in new technologies to allow them to keep working while everyone is at home. They are coming up with creative ways to allow employees to communicate with each other, with leadership, and with customers while working remotely from home.  
  • Workplace practices: They have changed the way they receive feedback from employees. Instead of doing a survey every two years they are now getting feedback every 30 days. The leaders at Amway have put attendance and vacation policies on hold and they are focused on making sure all of their employees are set up well at home, that they are safe, that they are supported, and that they are rewarded. 
  • Communication and collaboration: In order to keep moving the company forward in these times the leadership at Amway knows they have to express the company vision to everyone. They have to be able to communicate and collaborate while working remotely. They have found that they are communicating more often now, with technology, than they did when everything was done in person. 

Doug says Amway is continuing to be successful because, “We believe that people given an opportunity can have a business of their own and be successful, we feel the same way with our employees, they want to work, they want to be productive, they want to do well. And so when we allow that to happen, we can follow their lead.”

The center of Amway’s culture 

Culture is a critical part of any company. When asked how Amway looks at culture Doug says they start with the heart. When it comes to fostering culture he believes that you have to have a heart for the business and for other people.  

Doug gave an example of a time when Amway had put a program in place to foster communication within their manufacturing team. And after going through the program an employee described how much of an impact it had on him. The employee said he had a coworker who he couldn’t stand working with. The coworker was hard to get along with and they just didn’t work well together. But after going through this program and communicating with each other he learned that his coworker was going through some really tough things at home and he brought a lot of huge burdens in with him to work. And after understanding that they were able to communicate better and ended up enjoying working together. 

Leading with your heart is a big part of the Amway culture. The other two major components are having a growth mindset and always being creative, and thinking of new ways to move forward.

The concept of leading with your heart is so needed inside of organizations right now. As we go through tough times leaders need to be able to be empathetic and understanding of what employees are going through. Even when tough decisions need to be made, like letting people go or huge layoffs, leaders can make those decisions while showing they care. For example, at one point when Amway had a downturn and had to lay off quite a few people they reached out to other local businesses to see if they were hiring. They worked very hard to match outgoing employees with local jobs based on their skills and abilities. So being empathetic doesn’t mean you will never have to make a hard decision, but it means you won’t make that decision easily and you will do whatever you possibly can to try to help your people. 

Some people may feel that leading from the heart is too soft or doesn’t make sense for making money. But as Doug shares, “leading from the heart doesn't mean you don't hold people accountable. It doesn't mean you don't set targets and goals for yourself or for others. It just means that when you're working with people, you work with them differently, that you're not a boss with a subordinate, you're a leader with a team. And so your role, you begin to think of your role differently of bringing people in.”

The biggest challenge for businesses right now 

This year has been difficult for business leaders, and while we will get through this pandemic eventually there will always be challenges for leaders to overcome. One major issue Doug believes that businesses are facing now and that they will continue to face for a while is division. And the worst thing we can do, Doug says, is blame other people instead of working together to overcome challenges.

He says, “I'm blessed to have had a chance to continue to serve on the National Board of Trustees of the National Constitution Center in Philadelphia. And you find that through the US Constitution, you know, there's a lot of things there. But what it is, is it's an idea, and a document that helps bring people together, not that we have all the answers, we want to be a more perfect union.  But it's a place if we'll work together, even if we disagree. And there's been a lot of disagreement since the founding of our country. But people found a way to work together, even the formation of the Constitution took a whole bunch of people all summer long arguing until they found something. But they didn't give up on the conversation. They didn't give up on their future. And I think I think the biggest challenge for business is to continue to apply that faith, that belief in the future, and really challenge ourselves to work through whatever the challenges are, but to do it together, don't blame other people, but figure out how to connect with other people. Say, let’s focus on the problem or the challenge and see what we can do to address it.”

There are always going to be changes in the marketplace and challenges that come our way, but the most important thing is to face these challenges together in collaboration. Overcoming things together will always be more effective than dividing and turning on each other. 

Another challenge that business leaders of the future will have to deal with is the pace at which things are changing. Leaders in the past had the luxury of being able to be able to know the general direction that they needed to go, but the variations today are so dramatic and things are so uncertain it is hard to know which way to go. 

So what can leaders do? Doug says, “You lead then from the inside out, you know, you start with your values and your belief systems, what do you believe in? And then you figure out how to apply it to those changing conditions. You know, we would have to do that on a regular basis to say what do we believe in? Because your belief system, whatever it is for you, it is going to drive a set of behaviors, in my opinion. So when you believe something, you're going to go in a direction and then you're going to make adjustments, you know, to the uncertainty Wow, I didn't see that one coming. But here's how we can turn this challenge into an opportunity. You know, and here's how we can move, and minimize the bad or maximize the good in whatever change is happening.”

And ultimately you have to believe in your people and the teams around you to try to come together and find solutions. 

How to reinvent yourself 

A lot of people these days are having to figure out how to reinvent themselves, whether it is because they are being laid off or because they foresee disruptions coming in their industry, etc…

Doug himself has recently gone through a reinvention after moving from CEO of Amway to co-Chairman. And he has some advice for others trying to make a transition. First of all, he says that just because your job or your position or something around you has changed, it doesn’t mean that your value as a person has changed. You still have the same talents, the same skills, and the same values as you have always had. 

He also says it is important to look at the bigger picture, don’t pigeonhole yourself into a certain industry or job title. Consider alternatives that would be a fit for your skills. It might be something outside of your comfort zone or something you hadn’t considered before. Be open minded and curious. 

And finally he says, don’t let yourself get stuck. This is something he learned from his father and his grandfather. No matter what setbacks you face, just keep moving forward. 

He says, “You'll probably have a few failures, a few things won't work out, you won't get the next opportunity to come your way that you were hoping for. But if you keep at it, and you keep that attitude strong, and you keep working at it, I think people put their money on people who are trying to find a way forward even in tough situations.”

Direct download: Doug_Devos_Podcast_-_DONE.mp3
Category:Business -- posted at: 6:59pm PDT

When was the last time you did something to recognize your people?

I'm amazed at how easy it is to show appreciation, yet how few of us (especially #leaders) actually do it!

Here are some super simple ideas for you:

  • 🙌Go up to someone and thank them for the hard work they are doing.
  • 📧Send an email to the team or company recognizing someone for their hard work.
  • 🍕Take a coworker out for lunch.
  • ☕Bring a coworker coffee or tea.
  • 💬Post a comment thanking someone on your internal collaboration tool.
  • 📣Shout out an employee during an all-hands meeting.
  • ❤️Give an employee a gift card.
  • 📜Write a personal note to a coworker.

There are literally hundreds of things you can do, so why aren't you doing them?

One of the best ways you can serve those around you is by recognizing them. It feels terrible to work hard on something and not be appreciated!

Direct download: How_Can_You_Recognize_Your_People.mp3
Category:Business -- posted at: 5:45am PDT

Marc Randolph is the co-founder and founding CEO of Netflix. He also served on the board of Netflix up until 2003. And Netflix wasn’t his only startup, he’s founded or co-founded 6 other successful startups. He is also the author of the bestselling book, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea

From very early on Marc was entrepreneurial. As a kid he was always trying to find problems and unique ways to solve them. He sold seeds door to door, did candy arbitrage, he even carried a notebook around with him to write down invention ideas he had. He was always starting clubs and groups and coming up with products throughout high school and college. And as Marc shares, one of the keys to being an entrepreneur is practice, practice, practice. 

In his early career Marc had a small startup that he was helping run. After the company was sold he had to find something else to do so he went to work at another startup company which just happened to be led by a man named Reed Hastings. 

How Netflix came to be

Marc and Reed ended up carpooling to work each day so they got to know each other pretty well. One day they found out that the startup they were working for was being acquired and they both would be losing their jobs in the merger. So they had to figure out their next move.

Marc had several more ideas for products and companies so he wanted to continue his successful journey with startups (he had done 5 previously). But Reed wasn’t as eager to start another company, he had other plans. But they came to an agreement that if Marc came up with a great idea Reed would be the angel investor and he would share the board. 

So Marc got to work to come up with the next winning idea. And as they carpooled into work Marc would pitch Reed his ideas. And after many not so great ideas such as personalized dog food and customizable shampoo, Marc pitched an idea that at the time didn’t make sense, but that later on would become Netflix. They both agreed that in theory the idea was a great one. The only problem was that at the time he came up with the idea of video rental by mail the only video format was the VHS cassette which was heavy and expensive to ship. So that idea at the time was discarded with the dog food and the shampoo. 

It just so happened that at a later date Reed found an article about a new technology called the DVD and realized this could be the missing piece to an otherwise great business idea. So they went and got a used music CD and a small envelope and they mailed it to themselves to see what would happen. And in less than 24 hours they had the small envelope with an unbroken CD in their mailbox and they knew they had something. 

How to scale culture 

As Marc shares culture is not just what you say, it’s not something that you put up on posters around the office, or some catch phrases that you come up with in a meeting. He says, “Culture is how you act. It's how you are, it's the things you do. And even more importantly, culture springs from how the founders and the early employees act with each other, with their employees, with their customers. And so, huge amounts of the Netflix culture arised organically, from the way that Reed and I behaved, the way that I treat people, the way I worked with people before.”

When Netflix first started as a company they had a very small staff of around 20 or so people and most of them had worked together before in other companies. So it made it easier to maintain a culture at that point. Marc says he knew that he could ask an employee to take ownership of a project due in two weeks and then know that in two weeks they would show up with the results no matter what. The small team worked really well together and had a culture of mutual respect, trust, and ownership.

But that gets hard to maintain when your company grows and you have 100, 500, or 1,000+ employees. 

“When you get bigger, something happens where someone shows up late, or they show up but don't have everything done. And a lot of managers would say, Oh, this isn't good. Okay, we can't have that happen. Everybody, I want status reports. I need to know if there's gonna be a problem in advance. So everyone needs to send status reports. And everyone goes, Oh, status reports. And then someone else shows up and they're there on time with it all done, but they spent too much. And  many managers will go, Oh, I can't let that happen. Okay, I need to pre-approve anything over $100 to make sure you don't make a spending mistake. I need everyone to send expense reports. And then everyone goes, oh, god expense reports.”

And as Marc goes on to share what happens over time is you build the company in a way that protects you from people with bad judgment, but along the way with these added rules, steps, and processes you are simultaneously driving the people with good judgment crazy. And that is how you lose good employees. 

So what the team at Netflix decided early on was that they would build a company just for people with good judgment. People that they knew they could count on, people that weren’t afraid to work hard and take ownership of things and in exchange the leadership team could give employees freedom and the ability to make their own decisions. And while Marc admits there was a time when they almost lost the culture as they grew, ultimately they have been able to keep it with intentionality, even now with almost 9,000 employees. 

How Netflix overcame a 40% decrease in workforce

Up until the spring of 2000 Netflix was doing great. They had been offering monthly subscriptions, they had no due dates and no late fees and people were loving it. But then the dot com bubble burst and they were in trouble. They were on the brink of going broke and they needed help fast. Marc and his team were actually exploring selling Netflix at that point. 

But they also had another idea that they felt could save the company from ruin and that was to pitch an idea to Blockbuster. And while it may seem odd now because Blockbuster isn’t even around anymore, back in 2000 business was booming for them. They had 9000 locations and Netflix saw an opportunity to make a partnership. Basically they were hoping that Blockbuster would agree to a blended model, which would mean they would continue their current in-store business, but they would also give customers the option of ordering a movie online, having it delivered to their house, and then dropping it back off to a Blockbuster location in person or vice versa, picking a movie up in person and then mailing it back in. 

But Blockbuster wasn’t interested. They said no to Netflix, and they decided to use that model but to do it on their own. So not only did Netflix not get the rescue they were hoping for, but now they had another competitor. But that didn’t stop them. They realized there would be no one to save them, they would have to save themselves and that just pushed them to work harder. 

But even though they were working hard to figure out a solution, they were still bleeding cash. Marc and his team knew they had a tough decision to make. They were going to have to say goodbye to some people on the team. They had to lose 40% of the employees. And as Marc shares it was the most painful decision he has ever had to make, especially because a lot of these people were hired by Marc himself. 

After reducing the workforce the Netflix team went into survival mode. They got back to the nitty gritty of the business to figure out ways to bring costs down, turn visitors into subscriptions more quickly, and how to run things more effectively. Marc says they had some big breakthroughs, but they also had a lot of luck involved in bringing them out of this tough time. 

The greatest lesson Marc has learned 

Marc has started six successful businesses, he has mentored hundreds of early stage entrepreneurs, he has been a CEO, a board member, and an investor. Along the way he has learned a lot, but his biggest piece of advice for leaders looking to create great companies where people want to work is to empower people to make mistakes. 

He says, “The thing that I've learned over and over and over again, is that there's no such thing as a good idea. That too many companies believe that there are good ideas and the people who have them, that the proportion of good ideas commensurate with how high you are in the company. And I learned that's just ridiculous, and that the only way to find out whether ideas are good or bad is to try them. And so the trick is not building an organization just good at coming up with ideas, but building an organization which is tremendously good at trying thousands of bad ideas.”

In order to do that leaders not only need to allow their people to make mistakes, but they also have to give people the power to make decisions. This is incredibly hard to do, but as Marc shares just because it is hard doesn’t change the importance of doing it. Marc believes that the most effective way to build a culture of innovation and risk taking is to demonstrate it at the top.

Also, when it comes to entrepreneurship Marc believes that while anyone can have a good idea, “The singular difference between an entrepreneur and someone else is a predisposition to action. Everyone thinks of ideas, a small number of people say let's do something about it.”

Randolph’s Rules for success 

Marc’s dad imparted eight rules for success to him as a young adult, and he still looks at this list everyday, in fact it’s hanging up above the sink in his bathroom. So I asked Marc to share what these eight rules are. They are:

  1. Do at least 10% more than you are asked
  2. Never, ever, to anybody present as fact opinions on things you don’t know. Take great care and discipline.
  3. Be courteous and considerate always--up and down
  4. Don’t knock, don’t complain--stick to constructive, serious criticism
  5. Don’t be afraid to make decisions when you have the facts on which to make them
  6. Quantify where possible
  7. Be open-minded but skeptical
  8. Be prompt
Direct download: Marc_Randolph_Podcast_-_DONE.mp3
Category:Business -- posted at: 7:25pm PDT