“It is difficult to see what many companies are going through today. Automobile manufacturers, media, entertainment industry businesses, banks and other financial institutions; they and others are being seriously challenged by market forces, technological changes. and the changing dynamics of a globalized world. economy. Some of them are fighting for their own survival. ” – Bridget van Kralingen, CEO, IBM North America
How can a high-tech or internet company succeed in 2012 and beyond? You must first understand why so many have failed in the past and continue to fail in the present. The mistakes of the past should not be repeated.
In 1984, IBM was on top of the world with a ton of money and a full steam chest and successful business results for its huge customer base. They were the number five company in the prestigious Fortune 500 and were best known as the “world leaders” in technology. Unfortunately, IBM executives and its shareholders became convinced that no competitor in the world could challenge their greatness. They were completely wrong.
Just nine years later (1993), IBM published what at the time was the largest loss in American business history, $ 8 billion. Why?
IBM was resting on its laurels and embracing its PC past, while its nimble and hungry competition quietly won out. Upstarts like China-based Steve Job and Lenova’s Apple were not standing still and were constantly innovating with their own computing devices; leaving the IBM swollen and heavy in the dust. For IBM, the home computing war was finally lost and the flag of surrender was raised.
In December 2004, IBM sold its PC division to the China-based Lenovo Group and acquired a minority stake in its former rival in a deal valued at $ 1.75 billion. Without a real appetite for success, they simply exited the competitive home computing market to focus more on corporate software and services.
Stay slim, mean and hungry or you will fail
The business world moves much more slowly and at a much slower pace than the consumer market of “what has occurred to you lately.” The corporate world is a much more familiar and comfortable place for IBM these days. Even in your comfort zone, you better heed the lessons of the past. They must be aware of market intelligence and constant innovation or the mistakes of the past will come back to haunt them once again.
Market intelligence at the beginning of the 21st century means being attentive to the web and listening to the consumer. Today’s most successful companies constantly monitor social media and listen carefully to the current and future needs and wants of their customers. They realize that it is unwise to dictate to the consumer what their needs should be, based on what the company has to offer them. The consumer now knows that they can go elsewhere to get what they want. A salesperson can no longer hope to sell a red truck to someone looking to buy a blue sports car, just because it is not currently available on the lot.
To be successful, a business must be prepared to offer the customer what they want today and also know what they will want tomorrow. Trying to offer an unsatisfactory substitute only confuses the customer and causes them to go elsewhere to find what they are looking for.
According to van Kralingen, “The path to success lies in understanding relevant trends, discovering how your strengths and resources can capitalize on them, and position yourself as a leader.”
What Facebook can learn from IBM, Groupon and Foursquare
Facebook is a very special company that needs to learn what IBM discovered too late. There are too many social media companies that aspire to do so like Google (Google+) because they believe they can overcome them by improving their business model.
Social media coupon giant Groupon appears to be falling off the leaderboard for not being much more than a stunt pony. Perhaps yours is the wrong “trick” for today’s and tomorrow’s users.
Why is Groupon failing? Your business model is flawed. They charge their clientele, made up mostly of small and often struggling businesses, too much to participate. If they sign up, many are overwhelmed by an onslaught of fickle bargain hunters looking to take advantage of a one-time deal and offering few promises of continued customer loyalty (at full price). Experience often does more harm than good for a small business trying to thrive in a tough economy. Many simply cannot handle the sharp increase in demand and may end up creating a negative experience for their customers.
Groupon’s problem is very simple: it lacks a sustainable strategic advantage. You already have hundreds of competitors, and there are likely to be more. Size or being “first to move” offer no significant advantage. They went public before making a profit and showed the world a flawed business model that doesn’t really solve their participating companies for sustained business growth.
And should Groupon, which is waiting with deeper pockets and hoping to take the model a positive step further, should hesitate?
Google has almost unlimited funds, they have much more leverage than Groupon. They can advertise / market Groupon into oblivion. Ultimately, Groupon has a neat website and a ton of hipster writers and not much else. Most likely, Facebook or Google will buy Groupon for a minimal price and integrate and improve the service themselves or shut it down to eliminate any additional competition.
Then there is the case of Foursquare. It has approximately 20 million registered users, who can alert their friends when they “sign up” at a particular business location. The simple act of registering on your mobile device can earn you special offers. They can also post reviews and upload photos on Foursquare about their experiences eating great bagels or shopping for trendy clothes.
Recently, Foursquare faced similar challenges as Groupon. Google Places and Facebook have been trying to drain some of the excitement that Foursquare has generated since its inception.
Foursquare has proven to be a much more viable competitor than Groupon. They have done their homework well and understand their demographics better than most others on social media. They are also aware that they must continue to innovate and introduce new and better user options to succeed in a difficult space with Google and Facebook on their heels.
To that end, Foursquare is beginning to sell promoted updates, which may be Foursquare’s most promising source of income. They work like Google’s Promoted Listings or Twitter’s Promoted Tweets. Pay-per-action ad placements only appear when a user is searching for a place on Foursquare’s Explore tab. Foursquare launched the pilot program with 20 merchants in July. So far, it has been well received by the business community. The company is far from done when it comes to looking for additional revenue streams to satisfy its users.
“We’re thinking of things that will be valuable to merchants that they will want to pay more for,” according to Steven Rosenblatt, chief revenue officer for Foursquare. “I really believe in the content that is being created. We are in a unique position that what merchants create really improves the product. People could pay to get more from merchants on Foursquare,” says Rosenblatt.
The handwriting is on the Facebook wall
Where is Facebook in the continuum of successful business models? If its recent IPO fiasco is any indication of strength, Facebook is somewhere between IBM and Foursquare. They have 900 million users, which makes them somewhat resistant to being seriously challenged by any of their current competitors like Google. At fifth place among the Fortune 500, IBM once believed it was too big and popular to be challenged. We already know they were wrong.
But what if a revolutionary new network appears and dodges them? It is unprecedented for this to happen. We have already seen the fall of internet mammoths like AOL and MySpace. Both were caught sleeping and succumbed to competitors with much better business models. Could the same fate run for Facebook? Most likely, something will eventually overtake it. We just don’t know who Facebook’s heir apparent will be, not yet. But, social media technology is sure to continue to change and Facebook could go past, compared to whatever the “next big thing” is.
What are the main vulnerabilities of Facebook? Zuckerberg and company still have a lot to learn about Wall Street to begin with. People will not spend their money on smoke and mirrors. The company has yet to show that it can make money, a lot.
Facebook also continues to repeat a significant development mistake over and over again. They generally do not “listen” to their users to determine how to improve the Facebook experience. In fact, on several occasions they have irritated millions of people, especially when it comes to their security practices. This, the right to privacy, is probably the only area where the main problems are relentless.
Facebook has also not mastered mobile technology and has not been able to create a satisfactory advertising outlet for these devices. Here, another similar platform may capture a huge advantage, as the number of mobile computing devices will exceed that of all others early next year.
These are two areas Facebook needs to address if it hopes to stay on top of social media indefinitely.
On the bright side, like Foursquare, Facebook is always thinking of ways to improve the user experience. The creativity is there, if not the call for greater user participation. If the significant changes and improvements are well received by the public, it makes Facebook much more difficult for its competitors to grasp.
With 900 million users on board, it could take a business earthquake to move that many people to another network. Such an earthquake is possible and the fear of it happening should act as a healthy drive for continuous improvement.