Post-mortemCase studyLeadershipGrowth and business modelsDecision-making
The mistake was how quickly we moved, not where: a chief executive locates the error
Reed Hastings · Netflix's third-quarter 2011 letter to shareholders · 2011
The idea
Netflix's third-quarter 2011 letter is a rare written account by a chief executive of exactly what went wrong with a pricing decision. The letter still defends the new prices. What it concedes is the pace, moving to them too fast, made worse by not explaining the rising cost of streaming content, so that many members read the change as greed. Subscribers fell, yet new sign-ups were up a fifth on the year, which the letter reads as proof that demand for streaming was intact. The precision is the lesson: a post-mortem that separates the decision from its execution and names which failed is more useful than an apology for both.
In a post-mortem, separate the direction from the pace and the explanation, and say which one failed.
When it works
Subscription pricing, crisis communication, and the behavioural question about a mistake you made.
When it may fail
The letter is a defence as well as a confession, and the company's view of its own pricing is not disinterested. The structure is the lesson; the conclusion was theirs to argue.
How to use it
Structure a mistake answer as three questions: was the direction right, was the pace right, was it explained? Answer each separately. A candidate who says the direction was right and the pace was wrong is showing judgement rather than contrition.
Where it came from
Letter Netflix's third-quarter 2011 letter to shareholders · Reed Hastings and David Wells
What the source says. The letter locates the mistake not in the new prices, which it defends, but in how quickly Netflix moved to them, made worse by not explaining rising content costs; unique subscribers fell to 23.8 million while new sign-ups rose nearly 20 percent on the year.
“What we misjudged was how quickly to move there.” · Reed Hastings
Competing perspectives
Argues against
There is often no good option, only the least bad one taken quicklyWhen every option is bad, the cost is in the delay; choose the least bad one and move.
Connected ideas
Puts it to work
A good decision and a good outcome are separate thingsJudge a decision by what was knowable when it was made, and keep the outcome in a separate column.
Concepts
Put it to work on L3VLUP
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