People Over Process

From Reed Hastings and Erin Meyer, No Rules Rules: Netflix and the Culture of Reinvention (Penguin Press, 2020). The book opens with Hastings’s account of a meeting in early 2000, where he and his co-founder Marc Randolph offered to sell Netflix to the video-rental chain Blockbuster for $50 million. Its CEO, John Antioco, turned them down. The quote is Hastings’s answer to a question he says he is often asked: “Why could Netflix repeatedly adapt but Blockbuster could not?”

The phrasing has a precedent. The 2001 Agile Manifesto put “Individuals and interactions over processes and tools” first. Hastings’s next clause, “innovation over efficiency,” names a tension management researchers have studied for decades. In 1991 the organizational theorist James March split what organizations do into “exploration of new possibilities” (his list includes “innovation”) and “exploitation of old certainties” (his list includes “efficiency”). Exploiting pays off sooner and more surely, he argued, so organizations drift toward it and are likely to become “effective in the short run but self-destructive in the long run.”

“Blockbuster held all the aces,” Hastings writes of that meeting. The chain was then a $6 billion company with almost nine thousand rental stores; Netflix had one hundred employees and would lose $57 million that year. By 2010 Blockbuster had declared bankruptcy, “unable to adapt from DVD rental to streaming.” Netflix, which started by mailing DVDs, became a streaming service and a producer of its own shows and films.