Tuesday, April 11, 2017

Facebook : How it maintained its market position by adopting Coherence

Facebook is a social networking service launched in February 2004, founded by Mark Zuckerberg. Originally launched as “Thefacebook”, it’s mission is to give people the power to share and make the world more open and connected. Initially funded by investors (like Paypal and Accel Partners), Facebook company reached on to a valuation of $1.5 billion in just under 7 years of its existence. The company went on public by 2012 with an opening share value of $42.05, which was twice as large is the hen GE share value ($ 20.2).

Facebook has maintained a perfect coherence between its vision and its capability.  It started with a simple profile page and developed adding more features like ‘Timeline’, ‘News Feature’, ‘Game sections’, to its base feature. Although Facebook has added features, what is interesting is that it maintained the same display and color of its interface. It understands that its customer love the simplicity of its platform and has never tried to compromise on that feature. This shows that the company has maintained its coherence by consciously choosing its capabilities and implementing them to support a focused strategic purpose.

What started as a simple social site has developed into an advertising and data collecting platform. Facebook developed its business strategy from a simple social site to a profit generating site. Their revenue generating model is to sell the data gathered from its ‘Sellers’ (that is the users) to their ‘Buyers’ (The advertising agents, business conglomerates, etc). Keeping this model as their focus, they have selected specific companies for acquisition. One such example is ‘WhatsApp’. Although the merger was a costly deal for ‘Facebook’, it knew WhatsApp provided more specific source for its user data. The deal is made on the condition that ‘Facebook’ shall use the data collected by ‘WhatsApp’. The merger is a success for ‘Facebook’.

Facebook identified that being a social media company it is always challenging to sustain in the internet market. In order to continue to grow, it needs constant change that affects the lives of people but keeping their base model the same. And to bring such change there needs to be a constant innovation. Facebook follows a strategy similar to the “IB” strategy, which was created by General Electric’s (GE). Each year the summer Intern Projects undergoes an internal voting system, where top 10 teams are selected for Final Pitch to the ‘Board of Directors’. From this top 3 feature projects are selected and pursued for regional test implementation on its website. This idea has developed several new features like recent ones of ‘Fixed Running Video screen’ when we scroll down the webpage.

Mark, the CEO of Facebook has also identified, the importance of the meet with its customers. To stimulate ideas that would drive the innovation, he started a monthly Town Hall Meet with customers and buyers, much similar to the one started by CEO Immelt in GE. This meeting helps him to connect the internal innovation with current market needs and drive his organization accordingly.

What makes Facebook stand-out and sustain is this successful applications of strategies to achieve coherence. In the market as volatile as social media, Facebook has retained its position for more than a decade and is still growing by placing itself strategically sound. What remains to be seen how this giant-head evolves around the time.


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