Lessons in Innovation from Zillow and Netflix

Rich Barton and Ted Sarandos on the importance of failure and embracing your “frenemies”

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Innovation. We’re all after it. But how does it really happen? Zillow CEO and co-founder Rich Barton talked to Netflix co-CEO and Chief Content Officer Ted Sarandos about innovation. They’ve known each other for roughly 20 years, first meeting when Barton joined the Netflix Board of Directors. The session was part of Zillow Unlock, an industry conference about the future of real estate. Here are the top takeaways, edited for clarity. 

Early attempts to innovate often fail

BARTON: “I would say that to all the great small business people out there, it’s okay to fail. Dreamers and innovators absolutely fail. The key is to learn from the failures and to have the tenacity and courage to continue to move forward.” 

SARANDOS “It’s so easy, once you’ve burned your hand on the stove, to never touch it again. Do the opposite: Take everything you learned from that, and go back and touch it again, but differently.”  

 “Consumer joy” is the metric that matters most 

SARANDOS “At the beginning, a lot of people told me releasing all the episodes of a TV series at the same time was a terrible business model. We saw that people really love to watch this way, so we figured out how to build a business around things that people love, not deny them.”

BARTON: “I feel that same way in the real estate industry. Let’s stay focused on the consumer joy and everything else will work itself out long-term.”

Don’t get too far ahead of your customers

SARANDOS: “I remember when we decided to break up DVD and streaming to have two separate subscriptions and two separate services. Customers didn’t like it. And so that was an interesting learning, we were on the right path, just a little too early. Our superpower, I think, was our ability to move fast. And in that case, it was our Achilles heel.”

BARTON: “A really good friend of mine, a coach, says, ‘it’s not what happens, it’s how you deal with it.” Netflix dealt with it really well and recovered really quickly, and then emerged on the other side with a combined streaming and DVDs, single subscription that was just really the killer bundle, and turned Netflix into the powerhouse it is today.”

Do better on diversity and inclusion

BARTON: “The real estate industry has a bit of a sketchy history with adding to segregation and adding to lack of diversity in the industry. We are being very introspective right now and all trying to lead ourselves out of this kind of history of systemic racism and trying to turn on the lights for everybody and make home ownership a whole lot fairer than it has been in the past. And all of us here at Zillow Unlock are in a great position to do this”

SARANDOS: “On my own leadership team, I have six direct reports, five women, black, brown, gay, straight, probably one of the most diverse teams I could have imagined working with. There was no sacrifice putting that team together. Sometimes it takes another moment to think about it, but in general, it’s always paid off. Our board, which you serve on, is one of the most diverse boards of a public company. And I think all of that has led us to do things with our programming that’s really going to reflect everyone we see everyday, because we know that’s what’s happening outside of our walls. There’s a unique payback in it and it’s really good business.”