Social Media

Long-term goals may mean short-term costs

“If I had asked my customers what they wanted,” the great car making pioneer Henry Ford once said, “they would have said a faster horse.”

Kevin Gamble points to Twitter’s recent decision to cut outgoing SMS for UK clients:

On Wednesday, we announced that Twitter has suspended outgoing SMS to our UK number. The blue in the chart above illustrates the percent of outgoing SMS we stopped sending. 2% of our user base consumed 4% of our outbound SMS over the UK number at a price which disproportionately impacted overall operational cost.

Kevin concurs with this decision, writing:

Twitter has been taking a bit of a beating over this, but when you examine the metrics it makes sense. Every feature consumes time, money and resources. Twitter is making a conscious decision to remove a costly feature that is used by a small number of users.
… I can think of tons of things that if you really examined your customer’s behavior you would deep-six. This should happen a lot more.

I don’t agree and I point to the recent discussions on broadband capping as an example where basing a decision on “typical” customer behavior doesn’t necessarily lead to good decisions for long-term growth.

The broadband companies want to add caps so that heavier users are “blocked” from using more of the service. They give as an excuse that 5% of the people use 90% of the service, and thus feel justified by caps.

The problem with this approach, though, is that it’s providing a short-term solution for a short-term problem. People’s habits change, and though only a percentage of people watch video over the internet today that number will eventually increase, generating more demand, as well as increasing dissatisfaction with draconian bandwidth caps. Additionally, schools and colleges are now offering long-distance teaching for rural communities, leading to a very real possibility that these same communities will legislate against such caps—not to mention the possibility of anti-trust actions if such capping is seen as anti-competitive.

If people’s usage really is impacting on the whole, the companies could implement throttling during busy times, while working to improve the infrastructure. Another approach would be to use tiers, but they have to be reasonable, not the obscenely small caps I’ve seen bandied about. If tiers are used, the excess bandwidth fees, in addition to other profits, should go into improving the infrastructure— not into shareholder pockets. Infrastructure improvement funds should never be diverted to profit sharing.

The companies could also work with communities to see if they would buy into effort where the cost is distributed between companies and community, though in this case, any infrastructure improvements should be accessible by all broadband providers.

The point is that companies should look to make a long-term strategic decision even if it might cost more in the short term. This applies to broadband companies, and also applies to a company like Twitter.

Unfortunately, the problem with Twitter is that it doesn’t know what it wants to be when it grows up, so all the strategic and management decisions are reactive—hit-or-miss changes based on immediate short term cost cutting or performance goals, rather than based on long-term plans and interests.

If Twitter sees SMS as an integral part of its service, cutting SMS for part of its customer base is only going to create a level of uncertainty that not only will impact the UK customers, but all customers.

An alternative approach could have been to begin to talk with its customer base about premium memberships, which may include services such as outgoing SMS. Outgoing SMS is not an integral component of Twitter, and therefore people won’t be deprived of any essential Twitter service. By making a long-term strategic decision—yes, we’ll support outgoing SMS, but you’ll _all_ need to pay a tiny premium for this service— the company may risk grumbles across the entire customer base, but it will also have made a long-term sustainable decision that won’t leave customers in a continuous state of alt.

Adding service, removing service, adding service, removing service…This is the hallmark of a company that isn’t keeping its eye on the horizon.

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