Back in May I read an article by Nicolas Colin, founder of The Family, a VC and PE firm. The article speaks about the five stages of denial that companies go through when their industry goes through disruption. The article is framed around big industries like Music, Film, Publishing and Retail, and how large companies in these industries become disrupted by tech upstarts. What I’ve realized, and what I’ve been thinking increasingly frequently, is that these tech upstarts have increasingly become Lazy Giants.
A Lazy Giant is a specific kind of giant. Every company, when it reaches a certain size, becomes a giant, and decisions that giants make have large ripples across entire industries. However a Lazy Giant is a company that loses track of it’s original goal, and starts to focus on being profitable at the cost of everything else, sometimes even eventually it’s own long term profitability.
The first company that I want to talk about is Facebook. I don’t like using Facebook. I occasionally open Facebook in a tab to check for any valuable notifications or any birthdays. Facebook, originally, was in the business of creating social networks. Helping people keep in touch with old friends and colleagues and for sharing photos of your family holiday. However the monetization of the platform comes from selling our attention to advertisers. Facebook have been optimizing their algorithms to keep users scrolling and to keep them looking at ads, rather than helping them to stay in touch with friends.
But, you might argue, Facebook has just pivoted. They are now an advertising company, and optimise for their advertising algorithm. They aren’t a Lazy Giant, they are just focusing on a different problem, how to get ads in front of the right people.
The issue with this is that Facebook admits that their advertising algorithm isn’t that good. Facebook isn’t optimizing their advertising algorithm to maximize utility to advertisers, they are optimizing their algorithm to maximize the amount of money that they can charge advertisers. Why would Facebook make their algorithm more efficient if they charge per view?
(This is where the anticompetitive argument against Facebook starts to hold water. If social networks were competing for advertising bucks they would be forced to show that their algorithm is more efficient than their competition. As it is, Facebook and Instagram have similar algorithms and aren’t forced to be better than anyone else, or even any good for that matter.)
The second giant that I think has gotten lazy is Amazon. I have a large amount of respect for Jeff Bezos, specifically the way that he runs meetings at Amazon. However, for a company that claims to be obsessively customer focused, they sure have had a lot of scandals around their product reviews. A FT investigation found suspicious behavior by 9 of top 10 UK contributors on feedback.
But the scandal that I only more recently became aware of is a bait and switch technique that some sellers are using, where they take a successful product listing with lots of positive reviews, and change the product to something else that isn’t as good. Customers see the positive reviews and assume that it is for the product listed, trusting the Amazon reviews.
In this article the author bought a mini drone, only to find out that most of the reviews on the product were for a jar of honey. This is an easy problem to solve. Just limit the amount of changes that can be made to a product while keeping the reviews. If Amazon was as obsessively customer focused as they say, this would have already been fixed. But is hasn’t, because positive reviews encourage people to spend more on Amazon, further lining the pockets of the company.
But the problem for Amazon isn’t just with reviews. Investigations by the Washington Post and the Wall Street Journal have found that Amazon promotes its own products, products that it makes and has a larger margin on, above products made by 3rd party sellers, even when the 3rd party seller’s product has better reviews. This isn’t the “customer obsession” that Bezos claims, this is profit obsession. Despite Amazon’s Day 1 mentality, Amazon is turning, in parts, into a Lazy Giant.
The final Lazy Giant I want to mention is Google. Google is a giant that operates in many industries, including entertainment (YouTube), advertising (AdWords), enterprise solutions (Gmail and Drive), and IoT hardware/software (Nest). I have mixed feelings on Google. On one hand, I love my Google Home devices. On the other hand, I’m using YouTube less because I’m finding the suggestions to be less intellectually stimulating than I would like and there are too many adverts.
But today I want to talk about Google Docs. I remember at school when people first started to use Google Docs. The idea that the documents were stored on the cloud, and that we could edit them simultaneously? That blew my mind. And then Google did the same thing with Slides and Sheets, replicating Microsoft’s PowerPoint and Excel. Both of these tools were good, but neither as smooth or powerful as the Microsoft original. But hey, it was only early days. Or so I thought.
Since then Google haven’t changed a thing. As this article explains lucidly, Google managed to blow a 10 year lead. Microsoft Word is now accessible online, and can auto-save online using OneDrive. Of the three giants that I mention here, Google is the one I am most disappointed in (especially since they removed “Don’t Be Evil” from their code of conduct).
Now, not all tech giants are destined to become Lazy Giants. Microsoft, for example, is still learning from it’s rivals, producing quality software and hardware, and generally doing good work. Netflix, a more recent giant, is still focusing on the goal of bringing entertainment to the world, and they are thriving.
Overall, I think that all companies, not just tech companies, should start to worry when they stop trying to solve problems, and start trying to make money. Making money is not a reason for a company to exist, nor is it a fulfilling reason to get up in the morning. Solving problems, however, is both.
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Callum Macdonald 