Glossier glosses over product strategy in favor of tech investments
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Glossier founder and CEO Emily Weiss stepped down from her role as chief executive of the buzzy cosmetics brand on Tuesday this week, in the wake of huge layoffs impacting their technology team, and failed launches of in-store shopping experiences.
Glossier was the breakout success of the direct-to-consumer digital marketplace, with several lucrative rounds of funding fueling the growth of the brand. Their early ability to tap into the word-of-mouth buzz and social media influencer space was built on the foundation of a highly influential media organization Into the Gloss.
However, in 2018 the brand pivoted their focus away from their cult products to building their technology platform. Former CTO Bryan Mahoney “set out to build a great technology company”, per an article posted on AWS in September of that year. Mahoney led the team to big investments in a proprietary point-of-sale system and built commerce APIs in-house. This did allow for a unique customer experience, where shoppers could begin a transaction online and complete it in-store. Retail associates could also track the customers’ previous online and in-store purchases, allowing them to make product recommendations and increase personalization of the store experience.
“Creating a beauty brand was of course also necessary, but that almost seemed like table stakes,” Mahoney told the AWS team.
“What would set them apart was their ability to build and leverage tech to create a new customer experience centered around community discussion and discovery of products.”
These bragging rights came at a big cost for the brand, and one that will take many months or years to recover from. When Glossier went “all in” on technology strategy, the goal was to create a differentiated online platform for the Glossier community, and top talent from Facebook and other large tech companies flocked to the company to work on the product. The resulting layoff, which occurred before the platform could be completed, showed that the focus on tech was coming at a cost to the core business: Their products.
Customer satisfaction had taken a hit as a result of the executive focus on tech differentiation, and the early shine the brand had built on social media had started to fade as the crowded beauty industry competed for their slice of the pie.
The reality is that the Glossier leadership team had made a core mistake that many product companies do when planning and executing technology strategy: They treated it as separate from their core business strategy. Technology and business strategy must be intertwined and equal, so that one does not mistakenly become more important than the other, but every initiative takes its proper place in priority. For a product company, your product is your point of differentiation, not your tech. You can (and should) create differentiation with technology where needed, but only as a support to great product strategy, not in place of it.
Missing the customer focus
In a mistaken effort to become a technology company, Glossier lost sight of its core differentiator: its products. A recent Techcrunch article outlined why Glossier went down the wrong path, and a fundamental error: “Software-enabled businesses don’t necessarily monetize the same way that software-based businesses do.”
Glossier chased funding like a technology company, which looks good on paper. As noted in the article, “Technology companies get the richest valuations and are endowed with the highest multiples of any sector … For a firm like Glossier, looking like a tech company is the difference between having a price-to-sales ratio of 5.44, like Estée Lauder, or 31.6, like MongoDB.”
However, a product company like Glossier can’t be a technology company. Without their cosmetics, their technology platforms, their unique POS system, and their proprietary APIs have no value — and really, no point.
Choosing the top priority
In Ask Your Developer, Jeff Lawson, CEO of Twilio wrote, “You can’t buy differentiation. You can only build it.” While Lawson was writing about software, his philosophy extends to physical products. You must prioritize your differentiation where it’s of highest value to your customer, not where it’s easiest to find top-notch investor funding.
As Glossier focused on tech, product woes including low customer satisfaction and fewer new product drops began to eat away at their customer base. Glossier also missed out on a key strategic play for growth, as their distribution channels continued to be limited to their own e-commerce website and their physical stores. The brand reports they will now be seeking distribution deals with third-party vendors, but it may be too late to fuel healthy growth, as the excitement around the brand has waned.
So how can a company be sure of its top priority? There’s a simple rule — If you could only choose one initiative to work on, what would it be? This helps a company decide on the one activity that creates the most value for customers.
If you could only choose one initiative to work on, what would it be? This helps a company decide on the one activity that creates the most value for customers.
In Glossier’s case, it’s their beauty products. If your company is an e-commerce player that distributes products that you don’t create (such as a department store, for example) then heavy investment in your digital experience makes sense, as your point of differentiation is the service you provide to your customers. In the case of Nike, their strong product offering was ready to be matched by a strong digital experience, which is why they invested heavily in digital experience and pulled their products out of the stores of their distribution partners.
A leaked email that circulated during Glossier’s layoffs admitted that their technology efforts “ ‘distracted’ the company from its core beauty business and that executives ‘got ahead of ourselves on hiring’.” It’s common for executives to get distracted by growth strategies that look good on paper, but pull the focus away from the core value offering that customers need. Putting the customer first is easy to say, but hard to do when action plans that offer add-on benefits the customer masquerade as core value creators.
If you’re interested in product strategy and want to learn more about marrying technology and business strategic focus, check out the first blog in our product strategy series.