“Instagram is not a company within a company anymore. It’s a product division.” So said Sarah Frier, author of the new No Filter history of Instagram and a top Bloomberg tech reporter. She spoke at a recent Techonomy roundtable with Alex Kantrowitz, a senior Buzzfeed tech reporter who just published Always Day One. It explains why the five tech giants (Amazon, Apple, Facebook, Google, and Microsoft) have won thus far, and what other companies can learn from them. Both journalists also cover Facebook day to day.
Frier’s comment about Instagram’s downgrade reflects the central message of her book. I was moderating, and characterized it as “a story of betrayal.” The book tells many tales of deep disappointment inside Instagram after it was famously acquired in 2012 by Facebook for $1 billion when it only had 30 million users. She details how the service was marginalized as tensions grew with its corporate owner, particularly with CEO Mark Zuckerberg. Many of Frier’s comments at the roundtable evoked those of Steven Levy, a guest at another recent Techonomy session, whose Facebook: The Inside Story tells repeated tales of dishonest and questionable behavior.
Kantrowitz has serious concerns about Facebook himself. But his book also explains one key element that has enabled this company to keep growing and continually reinvent itself: a culture of “feedback” engendered by Zuckerberg. But he notes “one of the great conundrums about Facebook” is that “they’re so good at taking feedback internally.” He continues: “They do say that he [Zuckerberg] listens….They’re taught there to give and receive feedback.” But the reason it’s hard to understand is that nonetheless, Zuckerberg has so consistently failed to listen to outside feedback, including even from the board of directors. “They view these people as outsiders,” explains Kantrowitz. Such critics, he says, are “just not taken with the same degree of credulity as they would be if they were inside.” Because of this, he said, “Facebook kind of broke itself.”
Frier explained how pernicious distrust at its new owner doomed Instagram’s previously-vital unique internal and product culture. The purchase was, at least in part, she acknowledged, an effort to suppress competition. “It’s absolutely true that Facebook purchased Instagram as a competitive hedge,” she said. “They knew they were bad at mobile…that they were bad at photography, and Instagram…was catching on.”
She says the “number one clue” that purchasing the company was not just about nurturing it and helping it grow was the attitude displayed by Facebook’s notorious and all-powerful “growth team” at a meeting Instagram’s leaders had with them shortly after the purchase. “They said ‘Listen we would love to help you grow. Unfortunately, we cannot do that until we figure out if people posting photos on Instagram will make them less likely to post photos on Facebook.’” She continued: “They agreed to spend a billion dollars on something. And then once it was part of their company, they’re really ‘Okay. Well, mission accomplished. We got you guys off the market.’”
“We can now see the consequences of Facebook deciding that Instagram is a secondary priority,” Frier said. Even though the photo-sharing service has grown to well over one billion generally-happy users, as a consequence of Facebook’s ambivalence, today the services are converging, she explained: “You’re seeing more of a recommendation algorithm, more personalization on Instagram, and certainly more notifications and more directions to Instagram users to go over to Facebook. It is becoming a way to funnel people into the main property.” What ultimately most led to the departure of Instagram’s two founders, Frier writes in her book, is the jealousy displayed by Zuckerberg, who worried that their service might become more popular than his, even though he owned it.
By contrast, the secrets Kantrowitz aims to reveal about the tech giants are ones he believes should be emulated by other companies, as the world turns ever more digital and innovation-driven. After studying these five giants he concluded they embody something he calls “the engineer’s mindset.” “These CEOs have created systems inside the organization to take ideas from wherever they may exist inside the company–lowest rung on the totem pole; doesn’t matter what division. Most traditional companies do whatever they can to build barriers, to make sure those ideas don’t get too serious…What the tech giants have done really well is take down the barriers and create cultures that allow for democratic invention.” They have also found ways, often using automation and outsourcing, to radically reduce uncreative “execution work,” and keep the vast majority of employees focused on ideas.
Of the five, he says Amazon has “the best process to enable itself to invent.” “It’s all cultural,” he said. “That’s why they’ve been able to go from an online bookstore to a clearinghouse for every product you would want…a massive third party marketplace, a logistics and fulfillment company, a cloud services operation, a hardware manufacturer, not to mention an Academy-Award-winning movie studio and a grocer.”
“Google’s probably in pretty good shape,” he continued, explaining how that company, thanks frequently to the leadership of an ever-rising Sundar Pichai, now CEO, evolved its product from toolbar to web browser to mobile operating system to, now, smart voice assistant. His summary: “They can collaborate really well.”
Microsoft, too, he said, is “in good shape,” thanks to the open-mindedness and flexibility of CEO Satya Nadella.
Kantrowitz opened eyes and ears with his disturbing diagnosis of Apple. While this company is excellent at refining existing products and is good at technology per se, it has failed in telling ways. “Their culture has so many silos and is so filled with secrecy,” he said. For example, “Apple had a six-year head start with Siri” on voice assistants, he said. So why has it fallen so far behind Alexa and Google Assistant? “It’s totally cultural,” he explained. “The divisions can’t speak with each other. They don’t know how to integrate. They viewed Siri as an iPhone feature, not as a voice computing platform.”
By contrast, when Google set out to build its own assistant, it recognized it would have to draw expertise and capabilities from all its divisions. Pichai ensured strong systems were in place for cross-company collaboration.
Apple “has a good flagship product,” Kantrowitz said, “which will last maybe 15 years.” But “as long as they keep milking that asset…they won’t be able to make it through to the next reinvention.” Some investors on the call gulped.
Kantrowitz is optimistic companies throughout the economy will start to see the virtues of the engineer’s mindset. Both he and Frier emphasized that for all their strengths, none of these companies are impregnable. There remains huge room for innovation throughout the rest of the economy.