Facebook is in the midst of the biggest crisis it has faced in its fourteen-year history. Many users have lost trust in the company after learning that it failed to properly protect their data from unauthorized use. An estimated 87 million users have been impacted, and the events have caused stock prices to tumble, resulting in a valuation drop of $100 billion from February to March. In the past year, it has also faced intense criticism for its failure to rein in fake news and its effect on the social and emotional health of society.
Rewind to a few years ago: What decisions led to what we are seeing now? To what degree are the events unfolding today related to Facebook’s decisions to pursue the advertising-based business model that now drives its revenue? Is the openness of the platform to blame, or does it remain an agnostic player that was manipulated by sinister third party developers and users?
This line of examination points us to another question: Has Facebook prioritized “doing well” (making money) while sacrificing “doing good” (solving social and environmental problems)? Facebook is not alone in standing at the precipice of these two possibilities – many companies feel they must choose between the two. Though they may seem at odds with each other, Professor Rebecca Henderson makes a compelling case that both are possible in our newest course, Sustainable Business Strategy. Organizations do face enormous pressures to make their business model profitable for their shareholders, but there are many examples of companies that have been able to achieve that while also doing good.
Consider a scenario where Facebook took the question, “How can we make money?” and aligned it with the second half of the equation, which involves solving and preventing social problems. What if they had added to their question, “How can we make money while caring for our customers' privacy?” It may have meant less profit in the short run, but may mean more sustainability in the long run.
To do well and do good, a company needs more than a pithy values-driven mission statement – its values must live and breathe throughout the organization, the business model, and interactions with its employees, partners, and clients. We see efforts by Facebook to do good by updating its mission statement in 2017 to emphasize empowering its users to bring the world closer together. And earlier this year it changed its algorithm to focus more on community-building and engagement with family and friends.
Even so, their previous interactions with third party developers and lack of care for customer data reflects a different mission – one driven by the bottom line. Few, if any, could have fully grasped what could be the price of our "connection” to one another. Data breaches, fake news, and ideological polarization are the results.
Facebook pays a price for this. The Brand Bubble stated that 62% of the value of businesses worldwide is based in “intangibles,” including elements such as goodwill, company reputation, organizational models, and human capital. Trust falls among these intangibles. If consumers lose trust in a brand, it risks losing a significant portion of its value.
With more than 2 billion users, will Facebook even need to make real change? And if they do make a change, can they make it work financially for their business? In its attempt to do good by changing the News Feed to prioritize social interactions with friends and family and de-prioritize news and brand-created content, Facebook shares fell 4 percent the next morning. In the short-term, an effort to do good was not awarded by the market.
Hindsight is 20/20, but as we look back through the lens of the present, could Facebook have done well and done good? Moving forward, can it do the right thing, and make it work for the business?
Professor Henderson argues this is not only possible, but crucial to long-term success. “Holding these two goals in productive tension; that’s the secret for success,” she says.
But it is not easy to strike this balance. “Finding these opportunities and making them successful takes both real courage and grindingly hard work,” she continues.
Perhaps Facebook has occasionally left this hard work by the wayside, holding tight to one goal while letting go of the other. What may have been a short-term financial cost of protecting our data could potentially have paid long-term dividends in customer loyalty. They say trust cannot be bought; we learned from Facebook it doesn’t sell well either.