Please submit your memo in Word format.
Use 12 point Calibri (body) font with 1.15 spacing.
No reference is needed!!
Submit two pages essay with answers to these questions:
1) What is the simple businessstrategy of Zoom?
2) How are Zoom
positioning
its offerings and what trade
-offs
(if any) is it making?
3) What are the biggest issues Zoom show stays focused on?
4) What unique activities(these can be product features) are worth noting that draw customers into the platform?
5) Does its freemium business model make sense?
Case Memo 1 Please submit your memo in Word format. Use 12 point Calibri (body) font with 1.15 spacing. No reference needed!! Submit two pages essay with answers to these questions: 1) What is the simple business strategy of Zoom? 2) How is Zoom positioning its offerings and what trade-offs (if any) is it making? 3) What are the biggest issues Zoom show stay focused on? 4) What unique activities (these can be product features) are worth noting that draw customers into the platform? 5) Does its freemium business model make sense? Zoom Video Communications: Eric Yuan’s Leadership During COVID-19 9-821-014 A U G U S T 1 1 , 2 0 2 0 Professors Scott Duke Kominers, Christopher Stanton, and Andy Wu and Senior Researcher George Gonzalez (California Research Center) prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2020 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. S C O T T D U K E K O M I N E R S C H R I S T O P H E R S T A N T O N A N D Y W U G E O R G E G O N Z A L E Z Zoom Video Communications: Eric Yuan’s Leadership During COVID-19 I do not look at what we are doing from today’s perspective. If I fast forward 15-20 years and someone writes a story about what happened during the COVID-19 crisis, I want to make sure the story will be that Zoom did the right thing for the world. — Eric Yuan, founder and CEO, Zoom Video Communications It was 3:00 a.m. on a warm night in June 2020, in San Jose, California. Zoom founder and CEO Eric Yuan awoke—as he had most nights recently—and stared at the ceiling. The past several months had been a roller coaster: an unprecedented pandemic had led to extraordinary user growth for Zoom’s flagship videoconferencing application, thrusting the company into the limelight. At a head-spinning pace, Zoom went from an enterprise software provider with little media attention to one receiving nightly news coverage about its explosive ascent and associated growing pains. In the first six months of 2020, the novel coronavirus COVID-19 had spread to over 200 countries, infecting seven million people and killing over 400,000—leading the World Health Organization to declare a global pandemic.1 The hardest-hit countries closed their borders; and nations on every continent save Antarctica ordered residents to stay home except when accessing essential needs.2,3 As schools and businesses closed their doors, many turned to Zoom for online meetings and classes.4 And as the world adjusted to “social distancing” measures intended to slow the spread of the virus, Zoom’s ease of use led to massive consumer adoption—leading to new use cases such as Zoom exercise classes, religious services, birthday parties, and virtual dating. By June, Zoom Cloud Meetings was the most downloaded mobile application on Google Play and the Apple App Store, and the company’s stock had more than tripled since the beginning of the year.5 Yet the uptick in Zoom traffic also came with increased scrutiny, and some organizations banned Zoom due to security flaws. Yuan quickly took responsibility for these issues, and resolved that Zoom would become the world’s most frictionless and secure meeting service. He froze the development of new features and cleared three months of his calendar of any meetings not about security or capacity. For the exclusive use of L. Xu, 2021. This document is authorized for use only by Leyang Xu in FA21 - MIS375 Strategic Information Technology Management taught by Russ Finney, University of Texas at Austin from Aug 2021 to Dec 2021. 821-014 Zoom Video Communications: Eric Yuan’s Leadership During COVID-19 2 With all that was going on in his company, Yuan relished the quiet hours of the night, precious time away from a schedule stacked with consecutive Zoom meetings. His company was just one year past its IPO, and in many ways he still thought of it as a fast-growing start-up. Yet in the span of a few months, he had been forced to make internal changes to process, reporting, and product in hopes that the company could scale sustainably. In the morning, he would speak to a Wall Street analyst who would likely ask him what would happen to Zoom once in-person gatherings finally resumed—and prod him about how he might monetize the new consumer users. But Yuan was focused on issues he felt were more fundamental. He asked himself the same questions every day: Are Zoom employees happy? Are our customers happy? And am I doing the right thing for the world? An Overnight Success Nine Years in the Making Yuan was born in China’s Shandong Province, where he studied engineering with the goal of moving to Silicon Valley. The immigration process was difficult, but he never gave up. He recalled, “The first time I applied for a U.S. visa, I was rejected. I continued to apply again and again over the course of two years and finally received my visa on the ninth try.”6 Once in California, Yuan began his engineering career in 1997 as an early employee at video conferencing software maker Webex.7 In 2000, Webex raised $49 million in an initial public offering (IPO). Seven years later the company was acquired by Cisco for $3.2 billion.8 By then, Yuan had moved up the ranks to become the vice president of engineering, leading a department of over 800 employees.9 Despite his success at Webex, he felt the product had serious flaws. “Every morning when I woke up, I was not happy because when I visited a Webex customer, [. . .] I personally felt very embarrassed, because I did not see a single happy Webex customer.”10 Yuan added, “I was paid very well as a VP at Cisco. But Webex was my baby.”11 Former Webex CEO Subrah Iyar explained, “He was sincere, almost naïve in that he always cared about the WebEx customers and that they were not being attended to.”12 Finding it difficult to enact major changes within a large organization, Yuan left Cisco in 2011 and recruited 31 former Webex engineers to found Zoom in San Jose, California. His vision for Zoom was to become a video-first, cloud-native, user-friendly video collaboration solution. His early priority was to make video communications “frictionless.”13 From the beginning, Yuan established a team of engineers in the U.S. and China—just as he had done at Webex. After raising $3 million in seed money in 2011 from various investors including Iyar, Zoom launched its first offering in August 2012.14 The product was sold using a freemium model— Zoom’s free service allowed group video conference meetings (up to 15 participants) capped at 40 minutes. The company targeted small and medium businesses. By January 2017, Zoom reached one million daily participants with over 450,000 business customers, and was valued at $1 billion.15 Zoom expanded its product line to include group messaging, a webinar solution for up to 1,000 users, and other collaborative features.16 It also offered a developer portal that allowed third-party developers to embed video capabilities into business applications. The new Zoom App Marketplace included Microsoft, Slack, and HubSpot applications that integrated Zoom with assistants, scheduling, and productivity tools.17 In April 2019, Zoom raised over $350 million through an IPO.18 The company was profitable, with a net income of $7.6 million—rare for a technology IPO at that time.19 At the end of that fiscal year, Zoom reported annual revenues of $622 million and a net income of $21 million.20 The company had 2,500 employees, with roughly half in the U.S. For the exclusive use of L. Xu, 2021. This document is authorized for use only by Leyang Xu in FA21 - MIS375 Strategic Information Technology Management taught by Russ Finney, University of Texas at Austin from Aug 2021 to Dec 2021. Zoom Video Communications: Eric Yuan’s Leadership During COVID-19 821-014 3 Leading Happy Having spent unhappy years at Webex, Yuan sought to make the experience of working at Zoom as fulfilling as possible. He explained, “If I can make others happy, I am happy—and working hard is sustainable. I wish I knew this when I was young. Money or power bring you happiness, but only in the short term.” Driven by Yuan’s personal philosophy, Zoom maintained a self-proclaimed “culture of happiness.” Yuan continued, “I tell employees to ask themselves in the morning when they wake up, ‘Am I happy?’ If they are not, they should not come into work. Rather they should stay home and try to fix the root cause. Happiness is the most important thing. I want all Zoom employees to feel they are the best versions of themselves. That’s how I measure success.” Zoom had a mostly in-office company culture where employees interacted frequently, leading one to characterize the company “like a family.” Chief People Officer Lynne Oldham described how happiness permeated the organization, “We have a group of 175 employees, all grassroots volunteers called the ‘happy crew.’ They have a budget for things like the Friday coffee cart, and an executive sponsor that acts as an informal steering committee. But it’s important to Eric [Yuan] and me that no one on the executive team owns the culture—that’s for the employees and the happy crew to own.” Hiring was done mostly by line function managers, so Oldham introduced a hiring manager training dubbed “leading happy” to coach managers on how to assess a candidate’s culture fit. The company hired 60% of its employees through referrals—and once employees were on-boarded,