There’s a wealth of information available to start-ups to help you identify the steps, strategies and tools you should use to establish your business and grow it in the initial years.
Some of the most engaging insights and best learning come from observing those that have tread the path before you.
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There are lots of examples to choose from, and one well-documented case is that of Facebook. The culture, philosophy and business strategy of Facebook provides several examples and key learning points for start-up SMEs.
Below are some of my favourite lessons from Facebook.
1. Have a compelling reason “Why”
Founder Mark Zuckerberg wasn’t interested in riches and glory when he established Facebook. His focus was to connect people, enable them to learn from each other and have an impact on the world by providing a great place for them to find each other and communicate.
Making money became necessary to continue to evolve in the pursuit of this vision, not the other way around. It is this vision and passion that sustained the business in its formative years and created the drive to make the business what it is today.
2. Understand your growth and value models
Facebook has achieved amazing scale, even in internet terms, in such a short period of time. When “thefacebook” first launched eight years ago it had 650 users in their first week, building to over 800 million now. That type of scale lends itself to multiple monetisation options. So how did Facebook achieve that type of scale when other more established social media sites such as Friendster and My Space had failed to do so?
When Zuckerberg started Facebook he focused on a niche segment he knew about – college students. The college students became the early adopters and helped him refine his value proposition. They also became advocates helping to propel the business into the mainstream market.
Zuckerberg understood that to achieve scale, users had to become “sticky” and keep on using the site. They would only do this if they could enjoy a pure user experience without the distraction and annoyance of monetisation activities. In fact, Facebook resisted implementing early monetisation strategies exactly for that reason. Get the user experience right and the money will follow.
The “virality” of the business model created a powerful network effect. Friends encouraged their friends to join and the pure user experience become captivating.
The monetisation, mainly through advertising, was only introduced after scale was achieved and the user experience was consolidated.
3. Discover and learn
Facebook tests, refines and continuously improves, using a discovery-driven approach or, as Zuckerberg calls it, “The Hacker’s Way”. He describes hackers as believers that things are never complete or finished, instead, there are always opportunities to be better.
Hackers don’t waste time talking about and trying to build something that is perfect for release. Instead, they roll up their sleeves and just do it. They take a longer-term perspective of development and quickly release prototypes, followed by frequent small enhancements to eventually build the best. That way, they try new things, see what works and learn from the feedback.
Facebook fosters this approach by building it into the culture and operations of their business. One example is the hack-a-thons they conduct every couple of months that generate many of the new ideas and enhancements that go on to become successfully deployed products and features. All staff, regardless of their role in the business, are required to attend training so they can participate, build prototypes of their ideas and share them with the whole Facebook team.
Facebook isn’t afraid to take risks – fast and frequently. This allows them to discover opportunities, occasionally make mistakes, but above all constantly test, refine and improve.
4. Build on your strengths
Like most successful tech entrepreneurs, Zuckerberg is first and foremost a product person. He started Facebook at 20 while at college, with no prior business experience. Although he was a programming prodigy, his real strength was that he knew how to translate users’ needs and wants into code to create a compelling product. As Zuckerberg says, “Code wins arguments”. That strength together with the compelling “why” are the key drivers behind Facebook’s success.
Today, Facebook is not just a social media company; it is a powerful software platform on which other developers create games and other applications. The best known of these is a game called Farmville developed by a company called Zynga, which is now a publicly listed company with a market capitalisation of about $9 billion.
To support its platform Facebook invests heavily in R&D and software engineering, making it equal to any of the software giants in Silicon Valley.
5. Share information and take advice
Facebook tries to be as open as possible by sharing information so everyone can make the best decisions and achieve results. The sharing of ideas during hack-a-thons is a good example of this. More broadly, open source code and the free sharing and pooling of knowledge in the software development industry in general, provides a good example for Australian SMEs. Putting it out there creates momentum and spurs you on to pursue and possibly achieve your vision.
The start-up entrepreneur that has a clear and compelling vision, understands the value and growth drivers of their business, plays to their strengths, shares and takes risks and tests, refines and improves their product or service, is more likely to achieve their goals, just like Facebook has.
Marc Peskett is a director of MPR Group a Melbourne based business that provides business advisory, capital raising, grants services, as well as tax, outsourced accounting, finance lending and wealth management to fast growing small to medium enterprises. MPR Group is a member of the Proactive Accountants Network. You can follow Marc on Twitter @mpeskett