Facebook is currently the darling of tech stocks. The company has evolved and matured its business offering to keep pace with rapidly changing user dynamics and appears to be surprisingly nimble for a company of its size. This in part is due to its recognition that being a successful technology company requires more than a static product (even if that is initially a great product). It also requires a canny ability to adapt quickly to ever-changing market forces and – where necessary – make rapid wholesale changes to the business. Game changers in the technology sector today are defined primarily by this ability.

Compare market perception and the strength of brands such as Facebook, Google, Apple, Twitter and LinkedIn versus the not-so-old guard of Microsoft and Nokia for example, the latter of which are generally perceived as somewhat outdated.

It may be a generalisation, but the innovation lead times in traditional sectors such as utilities, engineering and transport are substantially longer than in the technology sector, which means that businesses can plan for longer and refine strategy where necessary. Take finite natural energy resources for example. For a number of years, vehicle manufacturers and energy companies have invested in alternative means of producing energy meaning that it is only a matter of time before electric cars become the norm.

Not so with technology. Tech businesses have to be much lighter on their feet. Take advertising; Facebook’s primary source of revenue. When Facebook floated in 2012, smartphone market penetration was far less advanced than today. Facebook could rely on advertising revenue largely derived from PC advertising. To hold on to this strategy would arguably have seen Facebook fall to the tech scrapyard well before 2014. Instead, it has for the first time in its history, announced that mobile advertising revenues are the primary source of revenue (53%).

It may not have everything right, but Facebook is a good role model for technology wannabes.

 

By Sam Jardine, partner at Watson Burton.

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