As a Santa Barbara County local, you’ve seen small business startups like, QAD and Yardi Systems take off running and become established household names. They all started off small, strategically growing and scaling their businesses while gaining community recognition along the way. As a local entrepreneur, it doesn’t have to be a pipedream for your business to achieve that same level of success.

Take Netflix’s humble beginning as an example. What began in 1998 as a tiny online DVD rental and sales business has transformed itself into the world’s go-to online video streaming platform, a creator of multiple Golden Globe and Emmy-nominated original series, and a shining example of a well managed company that’s basically reinvented HR.

Marc Randolph, who co-founded the company with Reed Hastings nearly two decades ago, was instrumental in the rapid growth that occurred as Netflix focused on becoming the leading DVD rental subscription provider and eventually took over Blockbuster’s market share by embracing the shift toward online streaming.

If you’re an entrepreneur or small business owner who’s looking to grow a company of your own, here are eight lessons you can learn from Randolph to kickstart your business’s growth and outsmart the competition!

1. There’s No Right Moment to Take the Jump

Whether you’ve got an idea for a new startup but you’re waiting for the perfect timing to launch, or you’ve got a business and you’re waiting for the right moment to step on the gas pedal to accelerate your growth rate, Randolph believes that the only way to figure out whether or not an idea is really going to work is to try it. He’s said that every startup reaches a place where “you just can’t research any more… The only way to do it is to jump.” Timing will never be exactly perfect, and you’ll never know everything there is to know about improving your chances for success. The only way to prove it is to do it!

2. Focus on What You Do Best

Nothing slows down a company’s growth like trying to juggle too many competing priorities or a confusing product offering. Randolph has attributed a huge chunk of Netflix’ success to their decision to focus on the DVD rental subscription model in the early days, even though they initially made far more revenue by selling DVDs. On his blog, he claims that “relentless focus” was the key to Netflix’ early success, saying that “by trying to run a business that did two things well, we inevitably were forced to make an endless series of compromises that resulted in us doing neither of them well… In hindsight, it seems like such an obvious decision to stop selling and focus on renting.  But wow – for a young CEO like myself — turning away from the source of 95% of our revenue was just about the hardest thing I had ever done.”

The moral of the story? Even if it hurts in the short term, by focusing on the clearest value proposition you have to offer, you can dramatically increase your shot at success in the long-term.

3. Know the Game You’re Really In

It seemed so unlikely – how could a tiny (but scrappy) startup like Netflix beat out an industry leader like Blockbuster? Even Randolph has said that “people today don’t recognize how big Blockbuster was. Billions of dollars — it was huge. And we were running around in those first couple of years patting ourselves on the back because we’d managed to sell a couple DVDs.”

The point is, Blockbuster could have easily won at the video rental game if Netflix had continued to compete against them there – but Netflix realized they were actually competing in the home entertainment space. Why would people buy rental DVDs when they could stream movies instantly instead?

Randolph planned this move strategically with Reed Hastings, anticipating the moment they would overtake Blockbuster by relying on a strong brand that could easily pivot to embrace new streaming technology. In his book Innovation Compass – Conquer New Shores, he wrote that “our biggest challenge was building a company that was relevant in a DVD universe, but stayed just as relevant in a digital one. Our solution was to position Netflix as delivery agnostic. We said we didn’t care how people chose to receive their movies – we would just concern ourselves with helping them find great things to watch. That worked with DVD. It works for streaming. And it will work with whatever new distribution techniques may arrive in the future.”

The takeaway here is the absolute importance of knowing the competitive landscape you’re really operating within. If Netflix hadn’t embraced a subscription model that could encompass both DVD rentals and video streaming, they wouldn’t have built up the customer loyalty to capitalize on the shift to digital video – which is where they really dominated Blockbuster.

4. Harness the Power of Storytelling

Randolph and his team knew how to capitalize on storytelling, especially when it came to their founding story. Reed had a story about how he got the idea to start Netflix after being embarassed by a large late fee on his rental of Apollo 13. The truth is, that story never actually happened – in reality, the idea of Netflix went through many iterations, and neither Hastings nor Randolph actually thought up the idea so quickly.

Randolph has said that founding myths like the Apollo 13 story are immensely helpful in communicating a new business’s value proposition to consumers. He’s said, “These founding stories are just that – they’re stories. They’re constructs that we come up with to take what’s a very messy process with input from many, many people, and condense it into a story which you can get across in a sentence or two…We morph into a story that resonates. And it’s a good story, and Netflix is a story, so I’m okay with that.” Communicating the value Netflix had to offer customers via an easy to tell, easy to understand narrative helped Netflix forge the emotional connection with users that strengthened its brand and insulated it from future turbulence. Think about this: How can you use storytelling to build strong connections with your market?

5. Be Prepared for the World to Shift at Any Moment

Not only did Netflix build a brand that would work in both the DVD rental world and the online streaming world, their total preparedness for the eventual shift is really how they beat Blockbuster. Unlike nimble Netflix, Blockbuster was saddled with debt, encumbered by store rental costs, retail staff wages, and shackled by high fixed costs across the board that made them much slower on the uptake even after they made the decision to embrace streaming.

Randolph asks, “What happens when the world shifts? How well positioned are you to handle it? We were set up very well to do that. They were set up especially poorly because they had real estate. If you have a customer base of several thousand households, and someone comes and takes away 10 percent of them, your business may not go down just 10 percent; you may end up losing your best customers and you can’t retrench. You can’t shrink your company. You can’t shrink your costs like that.”

Even today, Netflix has had to remain poised to compete among other streaming services as more rivals enter the market. In a recent interview, Randolph said he thinks this competition is a good thing. “As each of these services begins creating their own content, it purely creates an explosion of choice. And I think that’s a wonderful thing… It’s always been tough for Netflix, even from the very beginning. Any start-up is tough. And as you crest one hill and you think you’ve achieved something, you only see a bigger mountain in the future.”

If your business is going to take advantage of the shifting landscape, you can grow dramatically in a short period of time – but only if you’re ready for it!

6. Know What You’re Personally Good At (and What You’re Not)

Another lesson every entrepreneur can learn from Randolph is the importance of knowing the limits of your own abilities. He has said that one of the smartest decisions he made was to have Hastings eventually become the CEO of Netflix. Why? He says, “I had enough mileage to begin to recognize there are some things I’m good at, and some things I’m really good at, and some things I’m not very good at. And I believe I am really great at starting companies. I’m pretty mediocre at running them when they begin to hit some scale.”

Randolph knew his talent could make more of an impact during the early stages of a business such as Netflix – and was prepared to let someone whose talents complemented his own step in and make a bigger difference when the time was right. You might never need to step down as CEO; it could be as simple as hiring a new Director of Sales or even just letting someone else handle your accounting. Ask yourself, what areas of your business should you delegate to someone else? Where can you make the biggest impact, and where can you allow the company to grow by stepping aside to make room for someone with a different skill set?

7. Partner With Smart People

When Randolph first met Hastings, they were working together for the same startup and flew together to meet with a client in Boston. He described an intense trip full of probing conversation that began even before he could put on his seatbelt. “Then begins this intense discussion, and tutorial, and exploration of ideas that pretty much continued unrelentingly for five hours and forty minutes. And I’m going, ‘Holy shit, this guy has unbelievable capacity, and range of curiosity, and ways to create ideas and assimilate them in different ways.’” Although Randolph’s talent in presenting ideas was key to building the organization in its early stages, by partnering with an analytical thinker like Hastings, they become an unstoppable duo. To apply this concept back to your business, think about the type of people you’ve surrounded yourself with. Do they make your ideas better? Do they help to make your business even more unstoppable? If not, find someone who does.

8. Plant the Seeds of Your Future Company Culture Today

Although it might seem silly to focus on developing a culture before you even have more than a handful of employees, now is actually the very best time to make choices about what the character of your company is going to develop into. The decisions you make now will define the personality your company culture takes on as you scale the business.

Randolph’s decisions during Netflix’ early days molded the company into what it is today, although he stepped out of the CEO role more than 10 years ago. He has described how the culture of Netflix today carries marks of the early days, saying that “What’s remarkable is, now, even 10 years later, I still see things that are very, very deeply a part of the Netflix culture and the Netflix DNA which I know came from those early years: The analytics, the focus, the entrepreneurial spirit, the culture of performance, of accountability…. I can see myself in it — even though I know that so much of what’s been accomplished is way beyond what I was responsible for.”

The decisions you make today and the areas in which you choose to prioritize have a bigger impact than you might think. The very best time to plant seeds that will eventually grow into the future culture of your organization is before you scale.

About Megan Monroe
Associate Editor Megan Monroe is a graduate of Santa Barbara’s Westmont College where she studied Philosophy and Communications. After working for several local small businesses (where she gained firsthand experience with the frustration of manual segmentation and follow-up), Megan joined the Ontraport Growth Team. When she isn’t writing marketing copy, social media posts or educational guides for entrepreneurs, she enjoys taking advantage of the Central Coast's amazing wineries and cooking without following a recipe.