You Don’t Have to be First to Market…

January 31, 2012

As long as you are the best.

For example, MySpace was first to market, generating an incredible following and was by all standards a huge success – THE player in what we now know and love as social media. MySpace was purchased by News Corporation and had all the advantages of professional management and financial backing to guide and fuel its continued growth. In effect, the social media market was MySpace’s to lose. And lose it did. To a company called Facebook launched by some college undergrads.

Why? Because while MySpace was an innovator, it wasn’t a leader. MySpace captured a sizeable market share by being first with a great idea – validating the existence of a market – but it failed to capitalize on its first-mover advantage. Instead, Facebook took the lead in truly learning about what customers wanted and adapting its offering, eventually taking the lead in market share.

Adam Hartung’s interesting Forbes article, How Facebook Beat Myspace, characterizes MySpace’s downfall as demonstrating the “…big fallacy of modern management. The belief that smart MBAs, with industry knowledge, will perform better. That ‘good management’ means you predict, you forecast, you plan, and then you go execute the plan.”

The danger in this, Hartung says, is that professional managers feel that you “…should be able to predict and perform without making mistakes. That once the bright folks who create the strategy set a direction, it’s all about executing the plan. That execution will lead to success. If you stumble, you need to focus harder on execution.”

In effect, MySpace lost its leadership through traditional management practices. Better execution on MySpace’s part using their current management/business practices would not have helped against Facebook. That’s because Facebook wasn’t attempting to predict the future with a “plan the work and work the plan” mindset. Far from it. As Hartung points out:
“...the brilliance of Mark Zuckerberg was his willingness to allow Facebook to go wherever the market wanted it. Farmville and other social games -- why not? Different ways to find potential friends -- go for it. The founders kept pushing the technology to do anything users wanted. If you have an idea for networking on something, Facebook pushed its tech folks to make it happen. And they kept listening. And looking within the comments for what would be the next application -- the next promotion -- the next revision that would lead to more uses, more users and more growth.”
Hartung attributes Facebook’s success to what he calls White Space management, where you don’t forecast and plan, but get to market and learn. Facebook continually tested ideas and listened to its customers. This same approach is advocated by Jim Collins and Morten T. Hansen in Great by Choice and Eric Ries in The Lean Startup.

It’s all about using a low-cost, low-distraction, low-risk, empirical learning process to discover the truth about what works. The goal, Ries says, is to generate feedback and data as quickly as possible to learn what customer likes and dislikes; to understand how many people use a feature and find it valuable.

Another term for this is business agility, where agile and Lean principles are applied to create a learning, responsive and adaptive organization – one that is focused on delighting its customers by providing an intuitive product with easy-to-use features.

MySpace initially reaped the rewards of being an innovator, but lost in the long term because Facebook took the lead in learning and adapting its offering by being closer to the customer. While most business advice tells you not to compete with an established competitor, Facebook clearly had a hidden advantage in how they conducted business. Agility has its rewards!

2 comments

Scott Sehlhorst said...

Great post. I agree that the business-agility way is successful. I'm not sure it is the differentiator between Facebook and MySpace, however. In the source article, Mr. Hartung describes MySpace as both "plan and execute" and "stagnating." Unless the plan was "do nothing," both statements can't be right.

I don't remember MySpace doing anything interesting while Facebook was crushing them - maybe it was, I need to do some research (and Mr. Hartung didn't provide a timeline for comparison).

It may be more of a "tortoise and hare" situation.

January 31, 2012 at 9:37 AM
Dave Moran said...

@Scott,

I agree with you, MySpace's plan wasn't to do nothing, and I'm sure they worked hard at many things. In my opinion (with some "reading between the lines") MySpace stagnated as the source article asserts because they failed to do the right things, making their hard work less valuable to its customer base. Meanwhile, Facebook kept building what customers truly valued until it caught up with and surpassed MySpace, doing so by being close to the customer and continually learning and adapting in (presumably) short cycles.

January 31, 2012 at 1:13 PM

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