Tuesday, September 28, 2010

Facebook's "revenue model"

A really interesting article from Businessweek on the purported revenue model behind Facebook. One of the more insightful articles I have read recently.

Statistical models and ivory towers

Increasingly, business analytics and the use of advanced statistics in business decision making is making big surges. Companies from WalMart to FedEx to Netflix have demonstrated how they can build a sustainable business model on the foundations of good data and solid analysis of that data. To analyze the data, people with both the right statistical background and training as well as the required business acumen are critical. In other words, smart people. And this is usually one of the barriers to organizations making the transition from the pre-analytics to the post-analytics space.

Ever so often, the people who push analytics within an organization come from an angle of intellectual superiority. "I can do math better than you and therefore I am right and better than you" is the mindset that many such practitioners bring to the field. This often results in resistance and sometimes, downright hostility to what the "statistical ones" are recommending, from the rest of the organization. Statistical practitioners often end up plowing a lonely furrow in organizations. And then one day, when the implicit sponsorship that got them into that position goes away, so follow the statistical modelers out of the organization. The feeling when they leave is one of profound disappointment and disillusionment on the side of the modelers, and profound relief and also some good old schadenfreude on the side of the old organization hands. How can this situation be averted? How can people who are obviously so intelligent and well-educated prevent making fools of themselves because they failed to fit into an organization?

A few pieces of advice:
1. Be there to "solve the problem" vs "showcase your smarts"
It is important to keep in mind why smart people are hired by organizations. It is usually to solve some business problem or the other. It is not because the organization suddenly discovered that they needed show ponies to come out and parade their smarts. So the first advice to the smart ones is to focus on fixing organizational challenges, i.e. focus on what they are hired for and build their credibility. Once credibility is built up, it becomes infinitely easier to take on work that is more intellectually stimulating and challenging.

2. Simplify your communication around the solution
Smart people often have the ability to get into really deep thinking about the work that they are involved in. Deep thinking indeed is required to fix many of the more difficult problems that companies and society is faced with. However deep thinking around communications is counter-productive. Human beings are simple creatures and usually favour clean narratives over complex ones. Keep the communication around the solution simple and crisp - you may need to get rid of some of the fancy footwork to get there but the trade-off is usually worth it.

3. Be open to idea "give and take"
Finally, approach idea sharing with positive intent. Ideas usually get better when they are critiqued by other people. Valuable perspectives come to light and unrecognized (by the idea creator) weaknesses are called out. Smart people tend to have a bias towards thinking "my way or the highway". This not only prevents ideas from realizing their full potential but also destroy the buy-in that is required from stakeholders. Buy-in is the oxygen that ideas need to survive and grow and developing the political savvy and getting that buy-in is always critical.