Meta and Twitter: Examples of How Not to Do Business Transformation

Paula Quiroz

2 years ago

Examples of How Not to Do Business Transformation: Meta and Twitter

Business transformation is difficult.

You have to know your strategy, have a clear execution plan, clearly communicate with employees, partners, customers and investors, and you have to be prepared to invest appropriately.

Meta and Twitter broke almost all these requirements over the past few months.

I could go on and on about issues and opportunities facing both companies, but what is interesting is to specifically focus on their business transformation efforts and what we can learn from their mistakes.

Meta Over Invests in Metaverse

Meta is trying to transform the way that users interact with its services from flat screen interfaces to access content and media to immersive AR/VR interfaces through Metaverse.

This is a significant technology and business model transformation.

Meta’s investment into Metaverse thus far has been $15billion; for perspective that is approximately 12% of the company’s revenues. And the company is slated to invest much much more.

This week, Meta announced plans to lay off 11,000 employees, approximately 13% of its workforce after negative year-over-year Q3 earnings and lackluster year-over-year 12-month earnings.

Meta’s revenue dropped 4% in the third quarter, while its costs and expenses rose 19% year over year. Operating income declined 46% from the previous year to $5.66 billion.

What went wrong? Meta has not managed its business transformation investment well. Meta is pushing Metaverse as innovation, and people aren’t buying it. We question if Meta actually has a clear market-driven strategy for metaverse. Is this a business investment with a clear business plan, or a technology vision without a clear plan.

While Zuckerberg places some blame on the economy and impacts of COVID 19, he does accept that he had miscalculated the market acceptance of Metaverse versus the required investment to bring it to fruition.

To support business transformation, organizations must have a clearly articulated business strategy, and determine and track the investment in business transformation versus on-going operating costs and revenues.

Twitter’s Rough Transformation

This past week, Twitter announced it was firing approximately half the company.

The company then realized that it had fired dozens of needed employees and tried to backtrack on their firings.

Twitter’s CEO, Elon Musk, appears to be using a private equity playbook of cutting costs to get to a lower breakeven point and doesn’t seem to have a crisp plan over the reduction in force.

Later in the week, Twitter CEO, Elon Musk, threatened to “name and shame” advertisers that backed off Twitter out of concerns for Twitters content policies. Today, Musk held a call with Twitter advertisers explaining how he was going to increase revenues and use of Twitter by adding and even incentivizing payments, and by adding more levels of verification.

Twitter can survive through a rough transition because Elon Musk has enough money and backing from investors to survive a rough transformation.

However, most organizations making a business transformation do not have this luxury. It is important to recognize mistakes made.

First and foremost, it is critical to have a strategy for future revenues and growth, and to articulate this to partners, employees, customers and investors; not just seemingly making it up as you go.

Second, making operational changes is a big deal.

Massive lay-offs, changes in investments and internal upheaval may be a common investment capital strategy, but it can come at the cost of product quality, customer engagement and short-term revenues, as well as creating a negative public brand.

Bottom Line

Business Transformation is tough, and both Twitter and Meta illustrate how tough it is. However, they are both in the enviable position of being able to make massive mistakes and still recover. Can your business?

For the vast majority of businesses, we would say, do not follow the lead of Twitter and Meta in terms of executing business transformation.

Your business must fully understand the business case driving transformation, investments needed, business value and outcomes and ensure you are measuring the impact.

UPCOMING WEBINAR

Good Governance Fuels Business Transformation

The biggest challenges organizations face with business transformation are largely people issues; lack of leadership, vision, management and purpose.

Defining strong governance is critical to ensuring people know why, what and how to transform. In this webinar we will discuss how organizations support business transformation and introduce Aragon Research’s governance framework.

Join us for this lively discussion and learn how you can use good governance to fuel business transformation.