How Can Facebook Be Successful Long-term When Its Predecessor Lasted Just Five Years?

Marcel Côté, Senior Partner and co-founder of SECOR, which was recently acquired by KPMG, recently published “Innovation Reinvented” along with Dr. Roger Miller. For 35 years, Côté has been an expert in strategic management for entrepreneurs, large corporations and governments. He has notably been the economic adviser of several prime ministers of Quebec and Canada.

SECOR sponsored the Managing Innovation in the New Economy study led by Dr. Miller, which lasted nearly 10 years and focused on the analysis of innovation practices in firms, and their performance. The book covers six major innovation games that affect most businesses. We talked about innovation in a particular sector: the information and communication technology industries.

According to Mr. Côté, the ICT sector has emerging systems with information-based platforms. The sector is characterized mostly by the innovation game “Battles of architecture.” For instance, in the smartphones sector new platforms offer a wide range of applications to new customers.

Eventually they will mature and move on to another innovation game, called “mass customization.” The sectors of ERP software and PC are actually in the mass customization game. Internet as a system is also stabilized: there are no more major changes. But the rest of the ICT sector still moves quickly.

Network effects bring fast failures and successes. Is it reasonable to believe that a platform like Facebook can be successful for a long time when its predecessor MySpace had been successful for less than 5 years? In smartphones platforms the fast demise of RIM is another example of intensive network effects, with Apple and Android winning quickly market shares.

Mr. Côté thinks that Facebook is probably on the decline. More and more users are becoming passive and a decreasing number are still active, at least in individuals. Facebook is also in the process of migrating to businesses.

Several game providers grow out of Facebook (i.e. Zynga), because they don’t like their business model which is too expensive. Facebook in its current form would not survive for a long time in his opinion, and its limitations are becoming more apparent. According to him, Facebook as we know it will not survive any longer than 10 years.

Microsoft was in a similar situation 20 years ago, with its operating system O/S, which dominated the personal computer. Today, this Windows is losing more market share, as their browser Explorer.

It is difficult to remain dominant in these battles of architecture. The wireless platform Nokia/Microsoft knows little success so far. There is only in consoles that Microsoft really has had success recently. Apart from the consoles, they have had very little success with their new products and services. It takes more than money to achieve success in innovation.

Google is another interesting case: its architecture is established in the search engines. Later, Google strategically acquired YouTube, improving its platform.

Google is actively seeking to diversify even if it dominates the search engines sector (Approximately 90% of its revenue came from Google online advertising, before the acquisition of Motorola this year). Android is not very profitable for Google, and currently its only other major products are Google Maps and YouTube.