Booster Analytics

This article is written in conjunction with a class assignment for the MADT8103 class at NIDA, which I am teaching this semester. I have seen so many failed social applications in Asia, mostly due to the lack of business due diligence.

The rise and fall of social applications over the past two decades have been a fascinating study at the intersection of technology, business strategy, and market dynamics. While some social applications have achieved unprecedented success, others have faltered, often spectacularly.

Understanding the reasons behind these failures is crucial for both managers and technical teams to avoid repeating past mistakes. In this article, I examine why social applications fail, focusing on four critical aspects: the importance of a robust business case, the use of decision tools, risk assessment, and the pursuit of return on investment (ROI).

1. The Importance of a Robust Business Case

The business case serves as the foundation for any project, including the development of social applications. A well-defined business case outlines the rationale for the project, its objectives, and the expected benefits. It provides a roadmap for decision-making and resource allocation.

Why Social Applications Failed:

Many social applications failed because they were launched without a solid business case. Often, companies were caught up in the hype of social media without fully understanding the market needs or the potential for differentiation. A weak business case typically leads to poor strategic alignment, where the application’s objectives do not align with the broader goals of the organization. For instance, some applications were developed with the sole aim of gaining user numbers without a clear plan for monetization or long-term sustainability. As a result, these applications struggled to generate revenue and eventually collapsed.

Management Implications:

Managers need to ensure that the business case for any social application is grounded in reality. This involves conducting thorough market research, understanding the competitive landscape, and clearly defining the value proposition. The business case should also outline the key performance indicators (KPIs) that will measure success and justify the investment. Without this solid foundation, even the most technically advanced application is likely to fail.

2. Decision Tools and Their Role in Project Success

Decision-making tools are essential in guiding the development and deployment of social applications. These tools help organizations evaluate options, prioritize features, and allocate resources effectively.

Why Social Applications Failed:

Many social applications fail due to poor decision-making during critical phases of development. This often stemmed from a lack of effective decision tools or the failure to use them properly. For example, some companies relied too heavily on gut instinct or the opinions of a few key stakeholders rather than data-driven analysis. This led to misaligned priorities, such as over-investing in features that users did not find valuable or under-investing in essential infrastructure that could support growth.

Management Implications:

To avoid these pitfalls, managers should leverage decision tools such as SWOT analysis, cost-benefit analysis, and portfolio management. These tools help in making informed choices by considering various factors like market demand, technical feasibility, and resource availability. By systematically evaluating options, companies can better align their development efforts with user needs and business objectives, increasing the likelihood of success.

3. Risk Assessment: Navigating the Unknowns

Risk assessment is a crucial component of project management, especially in the dynamic and unpredictable world of social applications. Identifying, analyzing, and mitigating risks can mean the difference between success and failure.

Why Social Applications Failed:

Many social applications failed because companies underestimated or ignored the risks involved in their development and deployment. Common risks include technological challenges, user adoption hurdles, security vulnerabilities, and rapid changes in the competitive landscape. For example, several social platforms failed to anticipate privacy concerns, leading to data breaches that eroded user trust and drove them away.

Management Implications:

Managers must incorporate comprehensive risk assessments into their project planning. This includes identifying potential risks early, analyzing their impact, and developing mitigation strategies. Regularly revisiting and updating the risk assessment throughout the project lifecycle is also essential, as new risks can emerge at any time. By proactively managing risks, companies can better navigate the uncertainties inherent in the social application space.

4. Return on Investment (ROI): The Ultimate Measure of Success

ROI is the ultimate metric for determining the success of any investment, including social applications. It measures the financial returns generated by the application relative to its costs.

Why Social Applications Failed:

Many social applications failed because they could not achieve a satisfactory ROI. This often occurred because companies did not have a clear plan for monetization or failed to scale their user base to a profitable level. In some cases, applications were launched with unsustainable business models, such as relying solely on advertising revenue without considering alternative revenue streams like subscriptions or premium features.

Management Implications:

Managers must prioritize ROI from the outset by integrating it into the business case and decision-making process. This involves setting realistic financial goals, monitoring performance against these goals, and being willing to pivot or abandon projects that do not show signs of profitability. Additionally, technical teams should be aware of the financial constraints and work to develop solutions that are both innovative and cost-effective.

The failure of social applications often results from a combination of factors, including a weak business case, poor decision-making, inadequate risk assessment, and an inability to achieve a positive ROI. For managers and technical teams, understanding these pitfalls is crucial for future success. By focusing on these four key areas, organizations can improve their chances of developing social applications that not only attract users but also deliver sustainable business value.