Over the past few weeks, Facebook has lost over $100bn of market value. Its troubles stem from an early strategic decision it made. Who is the company essentially designed to serve—the user or the advertiser?
This question, one that every CEO needs to ask early on, is not about sales or market segmentation. This question determines your Primary Beneficiary, the individual or entity for whom you are designing your business model to serve. It is also the foundation of a Purpose-driven strategy.
In 1998, Larry Page and Sergey Brin, founders of Google, faced a similar dilemma of whom they were designing Google to serve. At that time, free search engines were designed to serve the advertiser rather than the user, so search results were skewed in favor of advertisers. Google made a crucial decision that its Purpose was “to organize the world’s information and make it universally accessible and useful,” and that its Primary Beneficiary was you, me, and anyone else anywhere searching for information. Advertisers were not the entities for whom the engine was designed; rather, they became the strategy by which to fund the delivery of free information to us. The integrity of our search results would never be distorted by business considerations, the Google founders decided.
Newspapers have had to deal with the same dilemma. Are readers or advertisers honestly their Primary Beneficiaries? Is their Purpose to deliver accurate reporting and journalism to readers using advertisers as the means to deliver news affordably? Alternatively, are advertisers the Primary Beneficiaries of newspapers, and news is the means by which to attract customers and deliver them to advertisers? This dilemma was often the foundation of the tensions between editors and publishers.
In early 2012, Mark Zuckerberg noted that his social network wasn’t originally designed to be a company. “It was built to accomplish a social mission—to make the world more open and connected.” Once Facebook became a profit-pursuing company, this statement ceased to be true. Last June, Zuckerberg updated his vision for Facebook, saying “We give people the power to build community and bring the world closer together.” This was not a true statement of Purpose either, and most people knew it. By stating a Purpose that is not reflected in its strategy, Facebook has lost the trust not only of many of its users and advertisers, but also of its employees. Some speculate that Facebook’s culture is at risk.
Intelligent Facebook users know that they are Facebook’s product, not its customer. Users’ detailed information is the product that Facebook delivers to seekers of mass personal data. These seekers of data, then, are Facebook’s true Primary Beneficiaries. Given this Primary Beneficiary, Zuckerberg’s lofty vision statements ring hollow. Facebook would enjoy greater trust if Zuckerberg had acknowledged that Facebook’s true Purpose is to “organize the personal information of every person in the world and make it universally accessible to anyone who will pay for it.” Facebook could have explained that it would buy our information for the price of our free utilization of its platform for social connection. This is the reality of its business model, and this should have been articulated clearly as Facebook’s Purpose.
In defining the Purpose and choosing the Primary Beneficiary of an organization, leaders should be sure of their capacity to stay true to the Purpose. When Purpose is used as a vehicle for PR and morale-boosting rather than as a strategic North Star, the company and its leaders lose credibility.
Much has been written about the power of Purpose. But like all powerful tools, Purpose can also be destructive. A Purpose statement must be honestly mined from the company’s DNA, its legacy, its leaders’ and founders’ values, and its unique capabilities; otherwise it will be inauthentic and will undermine trust rather than inspire confidence.
Have you carefully considered who your Primary Beneficiary really is? Of course, countless individuals and entities beyond your Primary Beneficiary will benefit from your product, but who, most primarily, is your business model designed to serve? What type of individual or entity will get maximum value from the unique ways you can deliver value? The answer to this question is the core of a Purpose-driven Strategy.
This conversation is one of the hardest conversations we have with our clients, and it addresses one of the toughest strategic issues to resolve. It unleashes value, generates innovation, and sets the company on a focused direction, inspiring to its employees as well as its customers.
Feel free to contact firstname.lastname@example.org to learn how best to set about this process.