What Tech Startups Can Learn From The FAANG Companies’ Best Business Practices

The FAANG companies may sound like a shadowy organization from a James Bond movie, but the acronym simply stands for Facebook, Apple, Amazon, Netflix, and Google — the leading tech companies of our time.

Together, the combined market capitalization of these five companies is over $3 trillion.

Extraordinary success in a competitive industry doesn’t just happen. It’s the product of good decision-making, great processes, strong teams, a strong culture and an ability to anticipate the future and adjust accordingly.

Your startup isn’t Google. It’s not Facebook. But you can still study how the FAANG companies operate and implement some of their business practices to be a better organization.

Here are the unique characteristics of each company:

Facebook

Facebook is the most successful example of the “network effect” being successfully achieved. As more people join a network, it becomes more useful for everyone on it — and that in turn drives greater adoption of the network.

One reason why Facebook managed to grow into the premier social network: they provide an excellent product and a beautiful interface that makes it easy for everyone to upload photos and stay in touch.

Facebook is also heavily personalized for each user, so two people usually see a different newsfeed, different updates, and a completely different view of the world. The company focuses on making the user experience highly personal.

But their growth was also a result of the decision to keep the platform free for the longest time — and stay true to that vision. Initially, Facebook didn’t have ads. It was only as the network grew and matured that they began monetizing the user base. And now, with 2 billion monthly users, Facebook’s network effects, and revenue, have grown tremendously.

Your tech company doesn’t have to be “the next Facebook” to follow in the social media giant’s footsteps and adopt a network strategy. As you build, understand that a network usually provides few benefits in the beginning. But as your network expands, the greater the opportunities it offers to its users — and the easier it is to attract even more users and drive growth.

And focusing on the user experience always has long-term benefits.

Apple

Most people think of Apple as a marketing-focused company. While they do an excellent job marketing their products, Apple is actually a very engineering-focused company. The engineers there have a lot of opportunity to make their voices and ideas heard — even though the company is run in a top-down manner.

Other practices that make Apple a great model for tech companies are their focus on design, attention to detail, and their consistency across the board.

Apple products are immediately recognizable. You see that sleek, uniform design when you use one of their operating systems. You see it when you pick up an iPhone or iPad. You even notice it when you walk into an Apple store.

The design is simple, refined, and exceptionally consistent across all products.

You may also notice that they don’t pack a bunch of features into their products and are often late to market. However, what they do, they do really well.

The lesson here is to focus on the design and minute details of your products. Build a culture of excellence in the company, and don’t be content with just a good offering.

Amazon

Amazon has a list of values called the “Leadership Principles” that define their culture.

The first one on the list is customer obsession.

And when they say obsession, they mean it. If you’ve ever reached out to them to return an item, you’ve probably noticed they always make it a good experience. They always honor your request if you’re not happy with something you bought from them. And that attitude permeates through the entire company.

Amazon is growing so fast that having business decisions always go through the entire leadership chain is just not an option. As a result, they give their employees a lot of ownership to experiment and come up with new ideas.

An employee can propose a plan, assemble a team and run with it — without having every single layer of management sign off on it.

But pitching an idea is very different at Amazon. No one uses PowerPoint because they feel it dilutes the nature of the message being presented. Instead, an employee has to create a six page word document to pitch their idea. They have a meeting with the necessary parties, the document is presented, and everyone spends the first 20 minutes reading it. After that, they have a discussion and make a decision on the proposal.

Another interesting leadership principle from Amazon is ‘bias to action.’ The company says that most decisions are reversible and don’t have large impact. So, there is no need to analyze and debate a solution to death. Just do an experiment, try out an option and see if it works.

That organic, fast-moving process is a large part of what’s enabled them to grow so quickly and begin offering services such as Prime and two-day shipping. And it’s a pace that tech startups should adopt when trying to be the most innovative in their industry.

Amazon’s leadership principles are good options for what a team can include in its core values and culture. While all of them may not fit your company, some of them will.

Netflix

I’ve heard people say that Reed Hastings, Netflix’s top executive, is the most underrated CEO in the US. That’s probably true because he seems to predict future trends really well.

Netflix is able to see trends much earlier and respond to them quickly when the time comes.

They began by mailing people DVDs, but they realized early on that video streaming was the future — and invested heavily in it. They were the first to market, had a compelling product, and won.

Other studios began to see Netflix’s power and started charging them more for content while starting their own services such as Hulu. So, Netflix began producing their own original, high-quality content in order to compete and reduce its dependence on studios.

Now they are in the midst of a major international expansion that includes original content for each market — a very ambitious endeavor.

Netflix also has a very interesting retention policy for employees.

Their stated goal is to always have a “dream team” working for them. As they say, we aren’t a ‘family’ but a ‘professional sports team’ where each person has an important role. At least once a year, they ask managers, “If this employee was going to leave for another company, would you fight to keep them?”

If the answer is yes, they check to see how much they would pay that employee to retain him/her and just offer that upfront. On the flip side, if the answer is no, that employee is released with a severance package. They only want to keep the high performers.

The “keeper test” ensures that even average employees don’t last long at Netflix. Only those who perform exceptionally well stay around and help move the company forward.

The company also prides itself on communicating openly and giving context of the company strategy and business decisions to employees. This helps employees understand how their work is part of the bigger picture.

The takeaway from Netflix is that it’s important to give your employees business context on the work that they do — and build a culture of excellence that works hard to retain A-players.

Google

Google began with employees who were mostly PhD students, who wanted to solve hard problems. That’s shaped their culture into something more like a university than a traditional corporation.

Their culture is geared around people coming together to do research and solve difficult, technical problems. They’ve often created great products based on the solutions to those problems. That’s how Google search, and later Google Ads, came to be.

At Google, everything is about scale. They want to know how the product works for a thousand users, for a million users, for a billion.

They are always trying to think big and solve problems at scale, and they’ve been very successful at doing so.

As you build your product and your company, you will initially focus on short-term problems. But it’s crucial to think big and understand how the company will work at scale.

The common thread among FAANG companies

All of these companies have a strong culture, uniquely suited for the product and business. And they have spent a lot of time and effort to maintain their cultures.

The other aspect is that every company (except Apple) still has the founder — or founders — running the company. Each leader has a clear vision for their company and an ability to motivate employees to see and implement that vision. Even though the founders have been leading these companies for decades, they are still motivated to grow the company after being publicly listed.

Another theme I’ve noticed among the companies is the relentless focus on the customer and personalization. While these factors are easier in the age of machine learning and big data, each company has established these as core values. And finally, they think big. They want to get every user on earth using their products.

Overall, studying these companies and noticing what they do well can provide any tech startup with a real advantage. Of course, it isn’t one-size-fits-all. Your company’s needs and goals may be very different than those of Apple or Netflix. But you can still take some of their best practices, and implement them according to your company’s situation.

Some of it may work, some of it may not. Over time, you will find which practices are best to build your own unique culture.

Thanks for reading!

Want to learn more? Get in touch with the Chronicled team here.