Is it time to change how we classify companies?

very_old_pigeon_holes
Facebook CEO, Mark Zuckerberg, hit the headlines recently with his response to a question from a student at Rome’s Luiss university. When asked whether his company was planning to become a media organisation Zuckerberg explained that Facebook was “a technology company, we build the tools, we do not produce any content. The world needs news companies, but also technology platforms, like what we do, and we take our role in this very seriously.”

This reply has prompted many commentators to disagree with Zuckerberg’s view and explain why Facebook is actually one of the most powerful media companies in the world. Facebook has a key role as a curator and distributor of content. It drives traffic to media sites, it provides a platform for media companies and celebrities to make and share videos, and its algorithms, which decide how content appears in its users’ timelines, are influencing what content gets produced and how it is promoted. According to many commentators, this is all evidence that either Facebook is a media company, or that the definition of what constitutes a media company should change to include such activities. Either way, these commentators argue, Zuckerberg is wrong and he is actually running a major media business.

I disagree with this view but I also do not wholly agree with Zuckerberg’s reply that Facebook is just a technology company. Facebook’s mission is “to give people the power to share and make the world more open and connected.” Now, technology clearly plays a key role in realising this objective and it is without doubt fundamental to what the company does. Without technology, Facebook simply would not exist. But Facebook also does a lot more than just technology in order fulfil its mission.

But I suspect that Zuckerberg was actually giving his best response to an out-of-date question. Most people still want to pigeonhole companies using industry and sector classifications that were developed for a different age. But these classifications do not allow for the more dynamic and fluid nature of the digital world. The companies that are succeeding in this new world rarely fit neatly into a single old world sector or industry and neither do they view themselves in this way.

Digital does not stop at organisational or even sector boundaries; it flows through and across organisations and sectors to create integrated offerings and a seamless customer experience. Customers do not see separate markets and neither do they define companies into narrow industry classifications. If they can meet multiple needs via one provider (whether a single organisation or an ecosystem) that provides a better experience, then they do not care what market or industry that provider is originally from. Companies such as Facebook, Apple, Google and Amazon all recognise this. They allow their focus on customer needs to determine what products and services they provide and are not constrained by what industry they are in or how others classify their companies.

This is the outside-in perspective through which companies look at their business from their customers’ viewpoint and use this perspective to drive innovation in products, services and the underlying business model. Sector classifications, current products and services, and even current capabilities do not drive such organisation’s thinking about what they do next. Facebook is a mission-led company that is focused on the primary customer need of sharing and connecting. Meeting this need with the outside-in approach takes the company into many traditional sectors, including technology and media.

So, rather than analysing or criticising Zuckerberg’s answer, perhaps we should be looking at the question and challenging whether the systems that have been used to classify industries and companies in the past are still relevant in the digital age.

Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: