How to Be A (Good) CEO: Reed Hastings Whiffs A (Rare) Point

Founder and CEO of Netflix, Reed Hastings, cla...

Founder and CEO of Netflix, Reed Hastings

Netflix CEO Reed Hastings is easy to admire.

The video content distribution company he founded stared bigger companies – Blockbuster, WalMart come to mind – in the eye and outperformed them when the business was a DVD market. As technology evolved away from DVD distribution to streaming video Hastings has astutely guided NetFlix through that transformation into another market leading position.

Customers are happy and continue to grow in number beyond 23 million, and shareholders are very happy as the stock has surged 145% by $160 per share over the past year. It’s estimated that 30% of peak hour internet traffic in North America is now NetFlix related.

What’s not to like?

Well, occasionally even good CEO’s miss a point – think Warren Buffet’s faulty judgement regarding David Sokol as a likely successor – and you get my drift.

This week at the D9 Conference in Los Angeles (Rancho Palos Verde for those who want to be geographically corrent) he distilled the art of doing business in response to a question from Kara Swisher to one sentence.

The whole relationship thing is overstated,Reed said.  He added, “You know – if you have a big checkbook you can do business and make them money.

Hasting is wrong – for those of you who take words from CEOs literally. He should have said “If you have the biggest checkbook by far and people want to sell, then relationships are overstated.” The fact of the matter is that unless you have the better relationship, you better have a much bigger checkbook because you’ll need it.

One quick example. Amazon and Google just launched music sharing cloud-based services. Both companies have tons of money. Both companies apparently lack decent relationship with the music companies. [See “Google Bungles Music Beta Launch, Leaves PO’d Record Labels in An Uproar” from FastCompany]. Apple will apparently launch a cloud based music service with the participation of all the major labels next week. Apple will pay the music companies for it – but Apple gets to pull it off because since the dawn of iTunes Steve Jobs and crew have been cultivating relationships with music and movie execs. “Hollywood,” it is said, “hates Silicon Valley, but they hate Apple the least.

So when Reed Hasting says relationships are overstated, take the wisdom with a grain of salt.

Business gets done by economic gain and who you like doing business with. It’s not an either or – it’s a both and.

And relationships count.

Life Back West is an occasional set of writings focused on ways people, teams and organizations can be both more effective (doing the right thing) and more efficient (doing the right thing well). More about executive, career and team / leadership coaching services can be found at the “About J. Mike Smith and Back West, Inc.” sidebar or the “Hire Me” tab above. You can also read an online interview with me at WhoHub, as well as participate in my learning community courtesy of KnowledgeCrush.


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