I am very much surprised to see many analysts thinking seriously that Facebook facing a colossal data-gate, could turn around and suddenly become customer-driven. This doesn’t make a whole lot of sense. Facebook will be Facebook. But to understand that you have to go past obvious solutionism (they should do this or that) and understand that any successful business was born with a powerful DNA.And you can’t change your DNA.
Facebook as a Democracy?
This is a quote from Mark ZUCKERBERG:
As people share more information on services like Facebook, a new relationship is created between internet companies and the people they serve. The past week reminded us that users feel a real sense of ownership over Facebook itself, not just the information they share. Companies like ours need to develop new models of governance.
You might think it’s coming from just a few days ago. It’s not.
In 2009, the Zuck wanting to help Facebook users swallow a new policy change, got an idea: let people decide (to some extent) the way we operate the company. Addressing at that time about 200 million people, Facebook gave two slightly different versions of the new policy they wanted to implement to vote on. If more than 30% of the user base would vote for one, it would be binding and the democratically chosen policy would go live.
Less than 0.3% of the users decided to vote.
Between two versions of the same very long, exceedingly technical, and pretty much identical versions of the documents, no one cared enough to engage in a “democratic” process. Facebook quickly decided to forget about all this democratic crap and created a Site Governance page to have something to show for it. Then, they did what they intended to in the first place.
Nine years later Facebook will reproduce a variant of the same process. How do I know that? Because their DNA is not customer-driven.
Business model and DNA
The term DNA can be replaced by ‘culture’ to some extent but it’s not really that. The culture of a company derives from its DNA.
The core of what drives a company is its DNA, then there are VALUES (collective identity, mission, brand), VISION (leadership, strategic intent) and BEHAVIOURS (management, processes).
The DNA appears early on, when the first founders start to opt for a business model, when the first employees are hired and the first product is branded to the market. This won’t go away or really change, because these first steps when they are a success will serve as a template to push the company forward even more. More employees thinking in the same way will be hired. More processes reinforcing the way the teams act will be created, etc. Cue in the innovator’s dilemma after five to ten years…
Explained in another way, the DNA of a company is the systematic way it decides to prioritize how its business model will operate.
If you consider the business model of any company as resolving three strategic questions: What is the problem we solve for our customers? How do we create value doing so? What product do we need to build to support that? Then the DNA of a company will drive it to always answer one of these three question first. And that will be always the same one.
Amazon and AirBnB are customer-driven
Customer-driven companies drive their core strategy by answering the first question: what is the problem we want to solve for our customers?
They are very often driven by short to medium term decisions, because they need to have a market already existing to interact with. Sometimes they make bold leaps in the future… of technology, not in the way the market will act. They feed of emerging trends, weak signals and are usually built from the ground up to be powerfully reactive to market sways and turn arounds.
Their DNA is about delivering pretty much whatever the customer wants, with highly personalized care (if not plain tailor-made products). They trust that value will appear by keeping as close as possible to customers’ whims and desires. Amazon ending up inventing long-tail retail, being only the most extreme case of such a focus.
The products they build and deliver are side-effects of this focus. The customers might love the products and services, but what they really buy is the attention, the care. Or if your prefer ‘intimacy’.
Customer-driven means much more than listening to the customers.
And most companies aren’t customer-driven. Not because they are bad companies, dislike their customers, or just don’t care. But because it’s a very specific way to operate.
Apple and Uber are future-driven
Consider Apple. They aren’t amazing at dealing with their customers and yet they aren’t customer-driven. Remember Steve JOBS saying with disarming honesty: “A lot of times, people don’t know what they want until you show it to them”?
Apple would be more of a future-driven company. The kind of company that side-steps the customers’ problem and immediately jumps to a new value they wish to create in the market. They are always strategically leaping to the next unseen opportunity, being the first to invent value while others are trying to make sense of the current market. Technology is not an end-goal either, just a tool to get this new value. On the other hand design is very often a core capability for such companies.
Guided by ego, hubris, or genuine vision, they impose breakthrough ideas to a market that will need time to adjust. Think of the Apple Watch that is not a watch (it’s on the wrist that’s all), that seems simple to build (a small touchscreen with a few sensors, poor battery life and apps) and that in two years engulfs the nascent ‘wearables’ market, eventually selling more than Rolex or the Swatch group…
And because there is such visionaries or egotistical personalities driving these businesses, they are most of the time an hellish workplace for employees, or at their best benevolent sect-like operations.
Facebook and Google are process-driven
So we come to the third type of DNA, the one of companies that are driven by engineering, technology and products. Their end-game is building the perfect machine.
As such, Google and Facebook are very alike. The ‘machine’ is their algorithm fuelled by data and users (don’t dare call them customers, they are mere moving pieces of the master plan). As such, these two companies have even been remarkable at disconnecting revenues from their core product: we don’t pay Facebook or Google for the quality of the social connection or the searches. Others (the real customers) pay them for the way they accumulate data.
If we find them useful and extraordinary services it’s not because they care of us. They just need us to be involved in willingly feeding their product every hour of our lives. Not all process-driven companies are like that though. But they all aim at building fantastic machines and later find customers for them. Build it and they will come if you will…
Facebook is for sure an extreme outcome of this type of DNA.
You can change your DNA (not)
On paper if the DNA of a company like Facebook can be changed it’s still a tremendously traumatic procedure. That would involve the change of 80% of the executive committee (CEO included), a one year psychological massage of the shareholders, and three to five years gradual shift of all the procedures of the company and divisions culture.
Sounds familiar? Take the recent case of Uber. They know what went wrong culturally (it’s not rocket science at this point) and they managed to push Trevor KALANICK away. But what now? They are still more or less in the same situation.
See, DNA doesn’t have a strategy. It just works in a specific way.
And while you ramp up your business, embracing your DNA with borderline autistic determination can yield extraordinary results. But it does show limits when you reach the early core market and problems eventually bloom when you reach the late core market (has Facebook does now). You can’t fine-tune different market approaches with a single-minded machine as Facebook built to harvest and crunch data.
If you’re process-driven there is no engineering way to emulate care.
What of Facebook before 2020?
Being the optimistic guy I am, believing that Facebook will engage such process is quite a stretch for me.
It’s a too extreme company to be able to turn around ever so slightly. And most importantly ZUCKERBERG won’t let go of any measure of power in his own company. With only about 15% of Facebook stock, the Zuck still has about 60% of the voting rights.
By design there is zero counter-power built in this culture.
If you believe that there will be some change brought to Facebook in a near future, I can only believe in three scenarios:
1. Governmental regulation deciding that Facebook is a) a fully fledged monopoly that needs to be broken down; b) a media company, not a technological platform, that will be from now on legally responsible for its content; or c) an effective push-back from European digital laws that will inspire US legislators.
2. Slow and steady erosion of users activity bringing less profitable ads, and after a few years of struggles and various initiatives, the evidence that Facebook will have never on-boarded Millenials and won’t find its future.
3. Divestment and diversification following the trend of Instagram, Whatsapp and Occulus. With Facebook already spending more than $23 billion trying to find its future, the buying spree could accelerate as the core business of Facebook becomes less and less relevant. Then of course, as in any acquisition the buying company injects its DNA and usually defeats the purpose of the operation…
In the end I don’t know what will happen and where Facebook will go.
I just know that Facebook cannot be reborn as a customer-driven company. It’s a tremendously efficient machine that will die pushing its process to the limit.
[ UPDATE April 11, 2018 ]
As of one our reader pointed out from an article on Wired, Zuckerberg was already very apologetic and contrite well before 2009, back then in 2003:
(...) In 2003, one year before Facebook was founded, a website called Facemash began nonconsensually scraping pictures of students at Harvard from the school’s intranet and asking users to rate their hotness. Obviously, it caused an outcry. The website’s developer quickly proffered an apology. “I hope you understand, this is not how I meant for things to go, and I apologize for any harm done as a result of my neglect to consider how quickly the site would spread and its consequences thereafter,” wrote a young Mark Zuckerberg. “I definitely see how my intentions could be seen in the wrong light.”