In the fall of 2011, Reed Hastings found himself mired in trouble.
As the CEO of the struggling on-demand video business, Hastings had just learned that during the third quarter, Netflix lost roughly 200,000 subscribers. At the same time, shares continued a nosedive, from $300 earlier in the year to $94 by October.
That summer, Hastings announced what seemed like a hastily hatched decision: Netflix would spin out its DVD-by-mail service into a new company called Qwikster. Meanwhile, the company would also raise prices by 60 percent.
By Oct. 11, beleaguered by bad press and sliding stock prices, Netflix scrapped its entire Qwikster plan.
Hastings’ situation further soured. By the following spring, the company lost 70 percent of its value.
But over the next year, the company—and Hastings in particular—mounted an incredible comeback.
In 2013, Netflix shares doubled. News also came that Netflix’s entrée into original content—the political thriller “House of Cards”—became the most streamed content from the company ever. Followed suit by releasing new episodes of the comedy “Arrested Development.”
How did Hastings pull off such a dramatic turnaround in just one year? The answer provides a great case study for leaders in the art of the C-suite comeback.
First, Hastings heeded customer and stakeholder feedback. One Goldman Sachs analyst praised Hastings decision as an example of a company “listening to its customers (finally) and working to fix its relationship with them.” Next, Hastings apologized.
Finally, he sketched out a plan for the future. In a 17-page, October 24, 2011 shareholder letter, Hastings wrote: “Moving forward, we are focused on continually improving our service, by expanding our streaming content library and enhancing our user experience, to both build consumer trust and to stay ahead of the competition,” Hastings promised.
Over the last year, Hastings’ holdings in Netflix have more than doubled, from $265 million to $559 million. In the fourth quarter, the company gained 2 million subscribers, too.
In June, Hastings continued to focus—and execute—the strategy he outlined to investors back in 2011: He announced a deal with DreamWorks Animation for 300 hours of original video content aimed at children.
In business and in life, one of the most important skills we can master is how to mount a comeback. The first step is always to listen to others’ feedback. Management and leadership experts recognize the value of listening and self-awareness. One survey of 75 members of the Stanford Graduate School of Business Advisory Council found that self-awareness is the most important for leaders such as Hastings to develop.
For Hastings’ comeback to work, he had to realize his actions were interrupted by customers and shareholders as unilateral. He did, and that led to his listening to shareholders and the marketplace for potential solutions.
When we do listen to others feedback and act on it, the marketplace typically rewards us.
