Volume 130: A YouTube Strategy Lesson.
1. End of An Era: A YouTube Strategy Lesson.
tl;dr: Susan Wojcicki retires from YouTube. Seriously impressive.
A superior strategy, you know, the full-fat business strategy stuff, as opposed to the fat-free version so often peddled by us brand strategy professionals, is one of the hardest things in the world to describe before the fact and one of the easiest after.
It truly has the quality of “I don’t know what it is, but I’ll know it when I see it (in hindsight).” Not that this stops oodles of talking heads, conference speakers, book authors, and newsletter monkeys like me from attempting to. And, let’s face it, there are screeds of academics and consultants who’ve turned the goal of defining a superior strategy into a full-time career.
But, in truth, the thing about great strategies is that they’re only really identifiable in hindsight. They need to deliver on their promise for us to see what was happening. We also need to see what might have happened had they pursued a different strategy.
If you’ve read the book Good Strategy, Bad Strategy (and you should), it makes some wonderful “in hindsight” observations. My favorite is the thought process that went into the iPod, which led directly to the iPhone, which transformed Apple from imminently bankrupt to the dominant global corporation it is today.
Here, so the story goes, when Steve Jobs returned to Apple, the first thing he did was cut the product portfolio by 70% and exit businesses where he didn’t think Apple could win. Why? So that he could focus management attention and financial resources on finding the next big thing. He didn’t yet know what this was, but he knew from experience that technology tends to operate in cycles, where being early to the party can reap big rewards. So he watched and waited, and what emerged was miniaturization.
Specifically, the miniaturization of the hard drive, which led to the MP3 player, a category Apple subsequently dominated with the iPod, which became the iPhone, and well…you know the rest.
Now, I’m deliberately paraphrasing here, but the strategic intent was clear:
Get out of businesses where we can’t win.
Focus resources on finding the next big thing.
Go all in on winning the emerging market that is subsequently identified.
And this is the rub. Truly great strategies are often profoundly transformative and exceptionally simple to explain. Unlike the screeds of content marketing masquerading as “thought leadership,” we like to pen on the subject.
This brings me neatly to Susan Wojcicki and the transformative strategy she put in place at YouTube that led to it becoming one of Silicon Valley’s most prodigious profit engines. (Not to say there isn’t legitimate criticism of YouTube on her watch, but making money isn’t one of them, and that’s what I want to focus on here).
When Susan started as CEO of YouTube in 2014, it was a profoundly different business operating in a very different competitive context. To illustrate, let’s look at three data points:
Netflix was a very different proposition. It had largely shifted emphasis from DVD by mail to online streaming, but its streaming portfolio was immature and pretty anemic. A huge stock-price runup in 2013 made others sit up and pay attention, and it looked ripe for the taking: its content library was weak, original production hadn’t really kicked in yet, and it was two years from expanding into non-English speaking countries.
In 2013, in response to the valuation opportunity afforded by streaming content, Amazon launched Prime Video as a direct effort to add a Netflix-like valuation atop that of Amazon, betting on its massive Prime subscriber base to spike usage.
In 2014, there were more video impressions on Facebook than on YouTube, and a view was fast forming that Facebook would be the king of social video, not YouTube.
As a result, YouTube, like Amazon, was taking a largely copycat strategy designed to attack Netflix directly, launching YouTube Red (Note the obvious competitive target in the name) as a subscription-driven alternative anchored by professionally produced original programming. A mission it largely failed at since today’s renamed successor, YouTube Premium, still only has 30m subscribers.
A huge challenge with this approach is that unimaginative copycat strategies like this tend to be competitive buzzsaws. It’s not that an unimaginative strategy will always fail; it’s that it’s often costly to win with. And, while YouTube may have found success down this path, what we now know about the sheer cost of original programming may have rendered any success somewhat moot, not to mention the fact that, as mentioned above, YouTube Premium only has 30m subscribers, against Netflix’s 230m, or YouTube’s prodigious 2bn users.
However, YouTube Red wouldn’t be the primary strategy for long, as Wojcicki had a very different business vision. Just like Steve Jobs strategically exited businesses he didn’t think Apple could win in, she chose a contrarian path to the conventional wisdom and chose to exit original content and instead place the weight of YouTube behind discovery algorithms and the “creators” who would deliver content that YouTube would then monetize with ads. Today, due to the success of this strategy, it seems utterly obvious. But it was far from obvious at a time when Hollywood production values were primarily viewed as the only path forward.
And boy, was this strategy successful. The YouTube of 2023 will generate roughly $30bn worth of revenue for parent company Google, which is almost exactly that of Netflix. The big difference? YouTube is vastly more profitable since it outsources the cost of content to its creator community. This is why estimates are that if YouTube were a publicly traded corporation rather than a division of Google, it would be worth between $180bn and $300bn, some 30%-100% more than Netflix at the time of writing.
So, yes. Susan Wojcicki. One of Silicon Valley’s most astute business people and former leader of a historically significant profit powerhouse. And she did it by pursuing a simple, contrarian, and profoundly transformative strategy.
We should all be impressed. She’s vastly more accomplished than the typical Silicon Valley attention seeker.
We’ve never met. But well done. I’m looking forward to seeing what you do next, and if you choose to hang out on the beach for the rest of your days, that’s cool too. It’s not like you have much left to prove.
2. Return to The Office Straightaway. And I Mean Immediately. No Exceptions.
tl;dr: Reflections on the return to office movement.
Of all the long-run societal changes caused by the pandemic, changes in how office work gets done might be one of the most profound. Over three years, we went from the vast majority of office work happening in offices to all of it being done remotely to where we are today, a bizarre mish-mash of some work happening remotely and some at the office. And, increasingly, corporations are dictating that workers who are happy and productive working remotely must now return to the office or risk losing their jobs.
What strikes me as odd are the tired arguments for this diktat. Senior executives almost universally cite collaboration, innovation, and culture building as the key reasons for this large-scale mobilization of their people back to…cubicle farms.
What’s particularly worrying is that I cannot find any meaningful evidence that isn’t sponsored by a commercial real estate company, to support the idea that we’re more collaborative or innovative in the office or even that there’s a meaningful improvement in culture. And plenty of evidence to suggest that office workers don’t want to return to the office, primarily but not exclusively, because it means a return to the soul-sucking reality of multi-hour commutes. And, I’d hazard a guess that for many, it’s because their employer was never very collaborative or innovative in the first place and doesn’t have a very distinctive culture, which means working from home provided a rather pleasant alternative.
So, what’s really going on? Well, if I were to hazard a guess, I’d say three underlying factors are driving this move:
Cynical CEOs are using back-to-office mandates to drive layoffs by proxy. Attrition serving the same goal as layoffs but without the cost of severance. So don’t be surprised if corporations follow today’s back-to-office mandates in the future by telling people to do more work remotely as they move to reduce real-estate costs rather than headcount.
Senior executives of a certain age are pining for a return to their status as minor deities. Worshipped by a steady stream of supplicants coming to their offices, seeking the executive’s blessing on some thing or another. Being waited on hand and foot by their executive assistants and hero-worshipped by the worker bees as they strut around the office, lords of all they survey. Being in charge is a drug, and you don’t get that same hit from Zoom or god help you, Teams.
Corporations are generally terrible at people management, and the shift to remote work has highlighted how bad this management really is. But rather than address it by reflecting and then thoughtfully developing new skills and disciplines, executives would rather ignore it and cover it up by insisting everyone return to the office instead.
I have no empirical evidence to support my supposition, so please take this with a hefty dose of salt, but I deeply suspect that bullet number 3 is a significant reason we are where we are.
Last year, I was part of a project with a large employer focused on the future of work. As we did our research, one of the most profound interviews we conducted was with the CEO of a company that’s always worked remotely, preceding the pandemic by several years.
During our call, the CEO was very direct about their actions, where they’d made mistakes, and what they’d figured out. And being ex-military, he wasn’t in the business of sugarcoating.
His perspective on the primary difference between an office environment and working remotely was twofold:
Culture in office environments doesn’t exist because of management action; it exists in spite of management inaction. Human beings in close proximity naturally forming cultural bonds. In a remote environment, these bonds don’t form by osmosis, so they must be managed. This requires a new management discipline focused on culture building, taking the soft side of work into account rather than ignoring it, and having leaders model the behavior they expect of others. It’s not that remote culture is impossible; it’s just a new discipline and management skillset that needs to be explicitly nurtured.
Micromanagement is fundamentally incompatible with remote working, which means the people who find the shift to remote work the most difficult are managers rather than workers. This is what he focused on most, pointing out that he’d found remote workers to be overwhelmingly productive, trustworthy, and diligent and that when problems occurred in his company, it was almost always due to a micromanager entering and wasting people’s time. Mainly because they didn’t trust people to get on with the work, instead seeing it as their job to constantly check and ensure that work was happening.
And there you have it. Obviously, some things are better done in person, and some prefer to work in an office environment rather than remotely. But, as I watch the executive classes overwhelmingly demand employees return to the office without exception, I can’t help but reflect on that conversation and think that a large part of the reason is simply poor, unimaginative management and a lack of curiosity about developing new skills, rather than the office being an intrinsically superior place to work.
3. Swapping Helvetica in Pastels For Angular Future Nostalgia.
tl;dr: Nokia, Netflix, Kia, Burberry, etc.
While I wouldn’t go so far as to call it a theme, a topic I’ve dedicated many Off Kilter column inches to is the commoditizing, value-destroying penchant for minimal reductivism in branding. Not just because it’s bland and boring and creatively bankrupt but because it runs contrary to everything the empirical evidence says about how the visual side of branding works, which means that any agency or designer engaging in the practice may as well be standing out on the street lighting their client’s money on fire. (As an aside, it’s shocking how few people in this business have bothered to put into place even the tiniest amount of empirically driven knowledge about how the branding arts create value. It’s not exactly complicated. Just design the brand so that it has distinctive elements that are memorable and can’t easily be copied while making sure that it isn’t mistaken for any other brand. And yet so many continue to fail this simple test).
So, it’s with great joy that 2023 has started with the green shoots of difference, as the pastel-hued reductivism of the past fourteen years has started giving way to something else that, for now, seems to be splitting into two paths. The first, espoused by Burberry and Netflix, reflects a healthy dose of highly crafted nostalgia, and the second, espoused by Kia and now Nokia, looks like abstract angular futurism.
And yet, while it’s delightful to see us move past what will likely go down in history as one of the direst periods in branding, I can’t help but think that it isn’t happening because we realized our error in not delivering sufficient distinctiveness, but rather that we simply got bored with minimalism, which means that what we’re really seeing is a shift toward another fad, or maybe more.
This is a direct reflection of one of the most disappointing aspects of the branding business, which is how risk-averse it tends to be. We’re vastly more comfortable hunting in packs around the fad du jour that gets euphemistically labeled “design trends” to justify the inherent commodification of playing follow the leader rather than seeking to create something truly different, distinctive, and original.
Some of this is due to the hero worship of a few self-anointed tastemakers, where we seek to be like them by copying them. Some is due to a fear of being called out and hauled over the coals by the comments section of Brand New. Some of it is because we don’t know any better, and some of it is simply because it’s easier to sell a fad to a client than it is to persuade them to do something meaningfully different. But, and I think this is important, there is another reason that matters. And that’s the linkage (or not) between strategy and design.
One of the defining factors of our business is that strategy and design operating in any kind of sympathetic, collaborative symbiosis is the exception rather than the rule. In many of the larger branding consultancies, designers and strategy consultants communicate at each other via briefs written by the strategy people and tossed over the wall to the designers (which, frankly, is insane), while in the smaller ones, if they do any strategy at all, it’s of the extremely lightweight variety undertaken by a token strategy consultant or two within an overwhelmingly design-driven culture.
Yet, when we do the work that we do, the strategy typically goes first. The client relationship is, then, built upon the platform created by this initial phase of work, and the people undertaking that work are the people setting the tone for what comes next. If the strategy explicitly makes the case for greater distinctiveness and differentiation, and if it analyses the design trends not as something to replicate but as something to stand aside from, and if it establishes bold and ambitious ideas for the brand, then it sets up a design expectation that isn’t small-c conservative but is instead expansive, and bold, and different.
I remember after I left Wolff Olins, having lunch with the CEO of another branding consulting firm, who asked how we “got away” with selling our clients on such “crazy design.” And to be honest, I was a bit nonplussed and didn’t know how to respond. Finally, I said that we didn’t get away with selling crazy design because nobody thought it was crazy. It was a natural outflow of the expectations set during the strategy phase of work. By the time they were looking at design, our clients would’ve been desperately disappointed to see something by the book and middle of the road because we’d just spent the past few months talking to them about how different and special they were.
So, when I look at brand design circling the drain of fitting in rather than standing out, first via minimalism and now through what looks like the next fad or two, my overwhelming thought is that it truly isn’t about the design.
It’s simply the predictable outcome of lightweight, unambitious, and disconnected approaches to the combination of strategy and design, where there’s no platform of expectations being set and thus no demand for designers to do something bold, and original, and different.