Howard Schultz

Innovation and Strategy: What's Wrong with Facebook?

Yesterday I wrote about a talking head on a business news program that was explaining why it made sense to dump Apple stock. (The link to that post is below.)

In that same program, he also talked about why it makes sense to run like the wind away from Facebook.

That got me wondering:
While the talking head's logic about Apple's future innovations made no sense to me, why is it that when that same logic is applied to Facebook there's a core of sense that makes me think he might be right?
Here's my thinking:
Where Apple innovates outward, Facebook innovates inward.
Let me explain.

Facebook's strategy, in some ways, mirrors Apple's (and Google's and Amazon's). Once you get your users into your ecosystem, whatever you do, don't let them go!

It's the "Cheerful Ruthlessness" strategy I've described before. (The link to that post is below, too.) Under the guise of "You're our customers and we love you" you're actually being held prisoner as they take down everyone in their way.

But, where Apple and the others innovate outward into markets, Facebook is building its business based on what it can provide to other Big Boys from within:
  • Its users. 
  • Its data. 
  • Its targeting.
Facebook is operationalizing the marketing concept of "mass customization" to a whole new level.

But will it translate?

When Amazon "mass customizes," it looks like personalized recommendations from Amazon to you.

What's key about that - and also how Google's algorithms have evolved - is that it looks like it's the company, itself, that's doing the personalization. Not someone to whom they sell their data.

And that's why I'm uncomfortable with Facebook's strategy on a long-term basis. Even its new services - like "Gifts" and "Graph Search" - that give its users access to information about other users, are inward directed. It's all about the data.

The question is: What about the humans?

Targeted ads are great - but if they look, in any way, like the only reason that those advertisers know to target you is because Facebook sold them data that led them to you, you feel more used than user.

It feels like an invasion of that privacy that's so hard to keep on the platform.

Don't get me wrong. I think Facebook is an amazing company. It really did change the world - both personally and on a corporate level - fast and furious. It enculturated social media as part of how we live and work...and that's not going to go away.

The question is whether, 1+ billion users and still but more slowly growing, it will stay the leader in its space.

Facebook needs to do more to understand the human aspect of social media. Not the technology nor the data nor the algorithms. Those are for them.

What will keep Facebook viable - as the industry leader and innovator for the long-term - is looking at and incorporating the satisfaction people find in all the other ways that humans socialize with and without social media.

It's not about what Facebook can do. It's about what they're not doing...for their human population. Not their advertisers.

This is a hard one in the strategy world. It's when you've got the operations to execute on just about anything - which they do - and are hard-pressed to figure out what to execute on.

But, just as Starbucks (another Cheerfully Ruthless company), began to cannibalize itself and had to do a u-turn on its growth, products and services to save itself, so does Facebook need to stop looking at its data as the only answer. By looking in that one direction, only, it, too, cannibalizes itself - only in this case, it's the data that drive the users away.

So the question for you is:
How are you, by what you're doing now, making it easy for your customers to want to find someone else to provide your product or service?
If your focus is wholly internal, you're missing opportunities all around you. Go back to the five questions I laid out for you in my Apple post. That will get you going in the right direction...and keep you there.
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Innovation and Strategy: What's Wrong with Apple? Nothing. (llk)
The Secrets of Success: Cheerful Ruthlessness (llk)

The Secrets of Success: Cheerful Ruthlessness

There's something particularly enjoyable about the shopping experience - in person and online - that some retailers simply know how to create.

They make you happy to do business with them. In fact, they make you so happy to do business with them that you begin to forget to do business with anyone else.

It's not their products or services or branding - or not necessarily. And it's not even their customer service - although that plays a part.

It's their ubiquity. Just as "xeroxing" became a verb for the action that is, in fact, photocopying, these organizations make themselves so common to your retail transactions in their spaces that they become a default.

Which is exactly their goal.

How do they do it? It's what I call "Cheerful Ruthlessness."

For those organizations that have nailed the strategy, they feel and operate and keep working to be unbeatable. They work with the assumption that there is simply no aspect of the industry in which they define themselves as leaders that they're not going to own.

And it's that bit "the industry in which they define themselves" that's most important to watch. Because that's how they become ubiquitous. They see their space as the whole space - not just an aspect of it. And particularly not as an aspect that would be defined by those outside.

That's how they fool everyone as they build and expand and then expand some more. While the competitors are looking at the company either for what they think it is or what it was in the past, these Cheerfully Ruthless companies define themselves in their own terms - and then bring the consumer right along with them.

(By the way, this is as applicable for the Big Boys as it is for the Little Guys, so everyone pay attention.)

The easiest way to explain how Cheerful Ruthlessness works is to take two primary examples: Amazon and Starbucks.

When Amazon first started, it was an online bookstore. Or so everyone thought. In fact, as everyone who wasn't paying attention found out later, it was all aspects of online retail. Here's how it goes:
  • You have a small business providing specialty items you want to sell? You can do that on Amazon.
  • You're a Big Boy but haven't been able to crack online retail? Amazon will partner with you.
  • You're a customer and you purchased something - whether for yourself or as a gift? You're going to get guidance and pings on a regular basis to 'help' you find more of the same...or different, as the system learns your preferences.
And everything comes packaged in a box with a smile on it.

After a while, no matter which aspect of the retail experience you touch, you're going to turn to Amazon. And that's exactly what Jeff Bezos, its Founder and CEO (among other titles) wanted to achieve.

It was never about being an online bookstore. That was the Test Drive. It gave the organization the chance to kick the tires of putting the internet and retailing together for the first time. But, even by Bezos' own reckoning, it was a matter of selecting what the company would start with first. That was never where it was intended to end.

Which takes us to Starbucks. In the world of ubiquity, there are those who would argue that no organization can beat Starbucks for being everywhere. But there's more to it than that.

Because Starbucks isn't just Starbucks any longer.

After all the years of expansion and brand-building followed by the years of too much expansion, negative reputation and the effort required to rebuild what was lost, Starbucks figured out two things:
  1. People drink things besides coffee that the company can make and sell, and
  2. There are people who don't like the Starbucks brand...but they still like coffee.
As a result, Howard Schultz, its Chairman and CEO (twice), has taken the company into:
  • Juice-like drinks (that have a base of green coffee beans)
  • Energy drinks (that are canned, bottled and can easily be found in your local shop, gas station or supermarket) and, most importantly, 
  • "No-name" Starbucks coffee houses.
Yes, it's very possible that you are going to a Starbucks in your neighborhood which has a neighborhood-like name ("34th Street Coffee," for example) but is, in fact, a Starbucks. Because for everyone who doesn't want to support the Big Beast coffee vendor, they can say, "Oh, I don't go to Starbucks" - but the company is still gathering their cash.

All with happy barristas serving you whatever you want.

It's Cheerful Ruthlessness. They're finding every way to get consumers through their doors or on their site or seeing their products - all the while making them feel as if they still have a choice.

And they do - which is the most important point, because, when you work it right, that's where you and your company come in.

For those who are competing against a Cheerfully Ruthless competitor, you watch, learn and change how you define your win...because, realistically, you're not going to put these guys out of business (which is their intent for you).

So, it's on you to figure out how to differentiate yourself enough that they can keep doing what they do (because they will) - while you out-perform them at every turn in your own particular part of their bigger than big space.

But, before you start, there's one thing you need to know: They're afraid of you.

Yes, you. Scared to the bones. Because what they know (and hope you don't...or hope you forget as you stress about them) is that you can do things - both online and off - that they can't. Specifically:
  • You're faster and nimbler. 
  • You're more responsive and personable. 
  • You create personal relationships while theirs are all at least one, two or three degrees of separation removed - frequently more.
b2b or b2c, those are your greatest selling points and point of differentiation. Add in your ability to be innovative and you can take and keep your piece of whatever your market is.

Business is ruthless. It's the nature of the game. Even if you're in the charity sector, you're competing against every other charity - in and out of your field - for the money people are willing to spend. And that makes you ruthless as you do your good deeds.

So, as you add Cheerful Ruthlessness to your and your organization's skill set and strategy, first stop thinking of it as a bad thing. Instead, think of it as being completely committed to:
  • Taking and keeping your particular part of your market, in part by
  • Determining what your customers need,  while moreover
  • Meeting and exceeding those expectations regularly, by
  • Building an organization that is as committed as you to those goals. 
Never feel bad about being strong and consistent and tough about what you want. As long as you're clear about what you do and where you're going, not only will you take your employees along with you (who will help you get there and beyond faster, cheaper and smarter than you ever hoped) but your customers will gleefully go along for the ride.

Because, in your ruthless commitment to their satisfaction, you've made your customers cheerful - which will bring a smile to your and all your other stakeholders' faces, too.