More thoughts on Snap and digital strategy

I published a piece at HBR about Snap’s inability to keep Facebook/Instagram from copying its best features. It was pretty pessimistic about Snap’s “strategy” of building great, creative products. And I argued that CEO Evan Spiegel drew the wrong lessons from Google’s success in search.

That got me thinking about what the best strategic case for Snap would be. Before getting to that, here are a few other good reads on Snap and strategy. Joshua Gans on the tradeoffs between execution and control; Nathan Furr on turning products into platforms; and Ben Thompson on Snap and Apple.

So what would the best case be?

Architectural innovation

Here’s another quote from Spiegel on the first Snap earnings call:

“When Google came along, everyone really felt like they needed a search strategy. When Facebook came along, everyone felt they needed a social strategy. And now I think with Snap, with our company, we believe that everyone is going to develop a camera strategy.”

One (perhaps generous) reading of this would be that the shift to camera-based social applications represents a shift in the architecture of social products, not just in their components. In 1990, Rebecca Henderson (then of MIT now Harvard Business School) and Kim Clark (also HBS) published a key paper on innovation. In it, they suggested that “incremental” and “radical” innovation were insufficient categories. Instead, they differentiated between changes to the individual components of a product and changes to its architecture.

As they described it:

For example, a room fan’s major components include the blade, the motor that drives it, the blade guard, the control system, and the mechanical housing. The overall architecture of the product lays out how the components will work together. Taken together, a fan’s architecture and its components create a system for moving air in a room.

A component is defined here as a physically distinct portion of the product that embodies a core design concept (Clark, 1985) and performs a well-defined function. In the fan, a particular motor is a component of the design that delivers power to turn the fan. There are several design concepts one could use to deliver power. The choice of one of them-the decision to use an electric motor, for example, establishes a core concept of the design. The actual component-the electric motor-is then a physical implementation of this design concept.

The distinction between the product as a system and the product as a set of components underscores the idea that successful product development requires two types of knowledge. First, it requires component knowledge, or knowledge about each of the core design concepts and the way in which they are implemented in a particular component. Second, it requires architectural knowledge or knowledge about the ways in which the components are integrated and linked together into a coherent whole. The distinction between architectural and component knowledge, or between the components themselves and the links between them, is a source of insight into the ways in which innovations differ from each other.

In a recent book and HBR article, Joshua Gans of the University of Toronto has dubbed this theory of architectural innovation “supply-side disruption.”

Henderson and Clark argue that architectural innovation creates problems for established firms:

Architectural innovation presents established firms with a more subtle challenge. Much of what the firm knows is useful and needs to be applied in the new product, but some of what it knows is not only not useful but may actually handicap the firm. Recognizing what is useful and what is not, and acquiring and applying new knowledge when necessary, may be quite difficult for an established firm because of the way knowledge-particularly architectural knowledge-is organized and managed

Perhaps the move to make smartphone cameras the center of social applications represents such an architectural innovation. If that’s true, maybe it’s enough to trip up incumbent players, offering Snap the chance to become the market leader.

This doesn’t seem likely, for two reasons. First, Instagram is already a camera-first company. Second, Facebook showed with its shift to mobile that it’s committed to and quite good at adjusting to architectural innovation.

The Snap paradox

Another possibility, mentioned in my original piece, is segmentation. Maybe Snap can be the market leader among a subset of users. That’s totally plausible, but at odds with Spiegel’s view that “Longer term, obviously, we really believe that Snapchat is for everyone.” He could argue that buy-in from a certain segment will allow him to get there — maybe you win millennials first, and later everyone else follows them — but that argument is self-defeating. That’s what Facebook did, and if that advantage is so fleeting that Snap can come along and do the same thing a few years later, what does that say about the value of Snap?

That is the Snap paradox. If it shows it can beat Facebook, it shows that social networks aren’t as valuable as they might seem, because, as Thompson put it, “Snap is declaring that moats no longer exist.”

One final thought: there may still be room for Snap to follow in Apple’s footsteps. In my piece I wrote that:

Thompson has compared Snap favorably to Apple, an extremely successful company known for its hard-to-imitate product expertise. But Apple has benefited from controlling key ecosystems, like iTunes and iOS. And it has benefited from focusing on a particularly lucrative part of the hardware market: high-end, high-margin devices aimed at wealthier customers. It’s not clear what the equivalent is in Snap’s case.

Just because Spiegel isn’t fully articulating Apple’s actual strategy doesn’t necessarily mean Snap can’t get there. It may be that the combination of branding, constant attention to design and product innovation, and segmentation on the advertising side — some way to offer high-end ad experiences in a way that other firms find hard to imitate or otherwise unappealing — could work.

But that last part still requires some theory why Facebook can’t or won’t copy you. It still requires strategy.