You've likely heard that you should diversify investments to reduce risks—it’s a concept investment brokers, venture capitalists and long-term-minded entrepreneurs are all fond of. Yet many businesses have been built on the backs of another business, effectively putting all their eggs in a single basket. My business, which, until recently, was completely dependent on Facebook, is one of them.
Our signature product, ShortStack, was developed to be used with Facebook—and Facebook only. Today, ShortStack is platform agnostic; it's completely independent of any one social network.
The journey to releasing a new iteration of the software—one that wasn't Facebook dependent—was long: It took us 18 months to develop our new product. But before dedicating extra resources, hiring new staff and committing to a long developmental process, there were four questions my co-founder and I asked ourselves to make sure we were moving in the right direction.
Q&A Before R&D
The following four questions—the same ones my partner and I asked ourselves—are ones that all business owner should answer before deciding whether to take as big a risk as overhauling a flagship product.
1. What does my company value that our partners and competitors don’t? Facebook places high value on a feature that we don’t value nearly as much: likes. This social network has even created products, such as its “page like ads,” to help brands grow their fan bases and limit their offerings to pages that have a minimum number of likes. (To create such an offer, for example, a page must have at least 50 likes.)
While my company and Facebook agree on the importance of relationship-building, we no longer agree on the value of likes. In the past year and a half, it had become clear to us that popularity (such as the number of likes a business has) is a subordinate priority to collecting data like email addresses, names, phone numbers, physical addresses, etc. Since this revelation, we've refined our product to focus on lead generation.
2. What makes my company the most vulnerable? For us, it was the difficulty in forecasting Facebook’s changes. Until recently, Facebook’s leadership team had a well-known mantra: “Move fast and break things.” While this sounds edgy and fun, from our perspective, it was a challenge. We were heavily reliant on an unpredictable partner’s interface, and Facebook’s urge to "break things" was at odds with our desire to provide a stable platform for our users.
We now have control over our product, regardless of what Facebook does. Ultimately this means we can provide our users with a more predictable experience. And if they want to use what they build with our software on Facebook, they can—they just don't have to anymore.
3. How should customer trends influence our product or service? Take a close look at what your customers are doing. For instance, the continued success of Twitter, Pinterest, Instagram and other social networks is a sign of the times. People aren’t just using one platform to market their businesses—they’re using several.
To create a better product, it’s my company’s responsibility to evolve and find appropriate solutions for our customers. Evolving doesn't meaning abandoning Facebook. It does mean expanding our product to establish more platform independence so that brands that don’t use Facebook, or that are using Facebook less, still find value in my product.
4. What’s my company's long-term vision? Once my company committed to the notion that likes and other social interactions weren't as valuable as data, we started building a new version of our software. In the year and half we spent building a more dynamic platform, we've more than doubled our staff and brought on more than 150,000 new users. This raises the stakes for failure but also for success, which makes it all the more important that we will follow through on the long-term vision of our company.
While the decision to devote the time, money and resources needed to build a new product was a risk, the greater risk would have been answering these questions honestly and then not taking action. Ironically, Mark Zuckerberg put it best: “In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
Had experience revamping a product or realizing you were too dependent on another business? Share with us in the comments below.
Jim Belosic is the co-founder and CEO of Pancake Laboratories, a software company in Reno, Nevada. The company is best known for its flagship product, ShortStack, software that’s designed to help small-business owners and designers harness the power of social media. Belosic is also a member of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world's most promising young entrepreneurs.
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