Today, Netflix has customers in nearly every country in the world, but that wasn’t always the case. In fact, for our first 12 years, we limited our services to the United States.
When we started out, we simply didn’t have the infrastructure, or the money to serve international markets. Those first few years we had a couple of guys in a bank safe hand stuffing envelope, and our entire business model was based on US postage rates. Nonetheless, we thought frequently about expanding into Canada. It was close, the regulations were easy, and the postage and transport costs were low. When we ran the numbers, we saw that we could probably get an instant revenue bump of about 10 percent.
But we didn’t do it.
Why? Two reasons:
First, we knew it was inevitably going to be more complicated than it looked. Because French is the main language spoken in some parts of Canada - and required by law to be used in those regions - we would have translation headaches. Canadians use a different currency, which would have complicated our pricing. And the fact that Canada also calls that currency a “dollar” threatened to be a communications nightmare. Postage was different, too, so we would have to use a different envelope. In other words, even something seemingly simple was bound to be a huge pain in the ass.
But the bigger reason for staying out was simpler.
If we took the amount of effort, manpower, and mind-power Canadian expansion would require and applied it to other aspects of our business, we’d eventually get a far greater return than 10 percent. Expanding to Canada would have been a short-term move, with short-term benefits. It would have diluted our focus.
We called this The Canada Principle and it served as a constant reminder to us to make sure we didn’t run around chasing what appeared to be low hanging fruit, all the while taking our eyes off what was truly important in scaling our business.
It’s why I’m so excited to share episode fourteen of the That Will Never Work podcast, which is out this week. You’ll meet Jessica, an experienced fitness industry executive who, in the midst of the pandemic, had the courage to launch a chain of kickboxing studios. When I caught up with her, she had already brought 35 franchises online, and had plans for hundreds more.
But Jessica knew better than to ask me about kickboxing. Instead, she was wondering about a particular opportunity that was hanging in front of her. Could this be the new feature that took her business to a new level? Or was this an example of a tempting - but potentially hugely distracting - bright shiny object that threatened to take her eye off the ball.
It was the perfect time to talk through the nuances of The Canada Principle, and more importantly to walk Jessica through the process that I use to figure out whether a new initiative is going to be helpful or hurtful. In Jessica’s case, my answer just might surprise you.