Read the case study, answer the following questions:

Using concepts and theories from Block 1, explain why Zoom places high importance on innovation. You should consider how the various business functions within Zoom integrate to facilitate innovation.

Using appropriate concepts and theories from Block 2, identify and discuss the main threats and main opportunities that should be considered by Zoom as it is pushed to undertake rapid expansion. Your answer should seek to integrate evidence from the different business functions.

Applying concepts from Block 3, explain how Zoom seeks to nurture long-term value creation.

CASE STUDY

ZoomIntroduction

Zoom Video Communications, Inc. (known simply as Zoom) is a US communications technology company. It was founded in 2011 by Eric Yuan. Today it provides a range of video and teleconferencing solutions, as well as cloud-based voice communications, to facilitate remote working. As the company is keen to stress, "Zoom is for you. We're here to help you connect, communicate, and express your ideas so you can get more done together. We're proud to be trusted by millions of enterprises, small businesses, and individuals, just like you" (Zoom, 2021).

The first version of Zoom was launched in August 2012. This first version allowed up to 15 people to participate for free in a video call from PCs or mobile devices, including smartphones and tablets. What made this initial product stand out from its competitors was, what Eric Yuan described as a "single-click solution" (Burt, 2012). This meant that users could get the product up and running in a matter of seconds with just a few simple downloads. Zoom also pioneered an innovative business model that utilised multiple pricing and support options. The three main business plans were Enterprise, Business and Freemium. Each offered different levels of functionality. Both the Business and Enterprise plans costs around $10 per month, whilst the Freemium plan was free for all users. Offering a freeservicewas a bold step for Zoom as no other company in this sector offered this. Over the next few years Zoom continued to improve the quality of its service by pushing the boundaries of the technology, with a clear focus on making thecustomerexperience as easy and enjoyable as possible.

As Zoom continued to grow, big investors took notice. Up to 2017, each new significant product development andmarketlaunch was supported by an injection of finance from a variety of venture capitalists. Finally, in April 2019, Zoom finally went public, launching on the New Yorkstockexchange with a valuation of $9.2 billion. Unlike other technology companies Zoom was already profitable with a net income of $7.6 million (Securities & Exchange Commission, 2019).

1 Culture of happiness

In January 2020, Zoom had over 2,500 employees, with 1,396 in the United States and 1,136 in international locations.

Since its founding, Zoom has strived for a 'culture of happiness'. This is driven by Yuan's personal philosophy. Part of this is reflected in their drive to make their customers happy and never frustrated with the technology. Of equal importance is a desire to deliver happiness to employees through fun events, surprise treats, book club, mentor program, and more; they have a Happy Crew comprised of 150 employees that volunteer to manage the happiness movement across Zoom's offices worldwide. Yuan states "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" (Kominers et al. 2020). Zoom was voted the second best place to work on Glassdoor, where overwhelming employee testimonials speak of the amazing company culture (Glassdoor, 2020).

2 Challenging times

From March 2020, use of the hugely popular video conferencing platform has skyrocketed as millions work from home and try to stay in touch with friends and family during the global COVID-19 crisis. Zoom became the most downloaded non-game app worldwide, with 27.8 million downloads, an astonishing 2,680% increase from the previous year (Dormehl, 2020).

While Zoom was well regarded in tech and business circles (and floated on the US stock exchange in 2019), it was a marginal force in the world in January 2020. This wasn't Apple. This wasn't Uber. Then that strange cluster of Wuhan cases began its unstoppable global spread, and by the end of March about half the planet's governments had locked their citizens indoors, leaving them to figure out how to work and socialise from home.

Worldwide, Zoom saw a thirtyfold increase in usage. In the UK, according to recent Ofcom figures, its 650,000 users in January were up to 13 million by April. With startling rapidity we learned to take meetings with colleagues over Zoom, and afterwards take tea with Mum. When we think back on the age of coronavirus, it will be with feelings of grief, foremost, and not a little political fury. But I'm sure that some memories of this strange and sad period will be coloured by the aesthetics and quirks of the video chat. All those pixelated 2D faces. The joke-crushing audio delays. In-conversation nervousness about Zoom's unimpressive record on security and the company's potential misuse of data (Zoom apologised for having sent data to Facebook without the permission of users). Post-conversation cringes about having to stiffly wave goodbye, to cover those dreadful hanging seconds between pressing to leave a meeting and actually going.

We have learned to celebrate and commiserate, propose and divorce, adopt children and dogs, keep therapy appointments, keep fit, date people, dump people- all of this remotely, and while squinting into a low-angled webcam. And if the pace of change has felt a touch brisk for the average user (Zoom moving from irrelevance in most of our lives last winter to a lockdown crutch), then the pace of change as felt inside the company has been knockout fast. Thrilling at times, according to company insider Magnus Falk, but unnerving as well.

Falk, who is British and an adviser to Zoom's chief information officer, Harry Moseley, first noticed something was up in February when shares in the company suddenly jumped by 10%. "What's going on?" he texted Moseley, who replied: "There's a pandemic coming." Until that moment, Falk admitted, he was among those inside Zoom HQ who "hadn't connected the dots". Derek Pando, who works from the company's California office to cultivate customers abroad, started to notice unprecedented usage in south-east Asia, with the numbers spiking in tandem with headlines about where the virus was heading: China, the Philippines, Thailand, Italy, and wider in Europe. "Countries we hadn't been popular in," Pando says, "or hadn't had a presence in, or who spoke languages we didn't support yet. All of a sudden, there was a massive amount of use."

Phil Perry, the head of Zoom's UK office, had only just established the British arm of the company when the virus hit Europe. According to Ofcom, a quarter of the UK population has tried Zoom at least once during lockdown. "We've been delighted and humbled, and are proud in terms of how people have used the platform," Perry says, pointing out, however, that all this came with new pressures. Pando says the same. He has worked at Zoom since it was "super-below-the-radar", when people's eyes glazed over at any mention of video conferencing. Now Pando's mum regularly calls him to say how proud she is of him, as if he were manning the frontlines. "All of a sudden we entered a place on the world stage that we were not used to," he says. "It was a pressure cooker - increasing users, but also increasing attention now that so much of the world's economic and social life relies on Zoom."

"Zoom was built for businesses to adopt," Falk explains, "so most of our customers up to this point had been businesses. Suddenly we saw a whole bunch of users using the freemium version to host a religious meeting, or to have piano lessons, or a quiz night, or choir practice. These were uses that were totally unfamiliar to us."

The company was no longer below anybody's radar. "People didn't used to care whether Eric [Yuan, the CEO] took Zoom this way or that way," Falk says. "The only thing that mattered was: were the customers happy? Now we go this way or that way, and suddenly large groups have opinions. And will publish those opinions. All of a sudden he became the CEO of a public good [and] everyone felt they owned a little bit of Zoom."

Nobody wanted to own any of Zoom a decade ago. "Just about everyone in Silicon Valley thought it was a terrible idea and passed... oops," says Jim Scheinman, a close friend of Yuan, who witnessed the founder's early struggles. Scheinman's cousin, Dan Scheinman, an early believer who did sign a cheque and who accompanied Yuan to meetings with other potential investors, has spoken of how they were often hustled away within minutes. At the time, in 2011, the video-conferencing market was seen as overcrowded and stale. Perhaps as importantly, Yuan did not conform to the Mark Zuckerberg ideal of a founder (dear to Silicon Valley's notion of itself at the time), in that he wasn't a twentysomething graduate fresh out of Stanford or Harvard. Yuan was an experienced engineer. Born and educated in China, he had the temerity to try to found a Silicon Valley startup at the advanced age of 40.

Yuan grew up in Shandong, on China's east coast. He first became interested in the potential of computer-enabled chatter when travelling for hours to visit a girlfriend studying at a distant university. What if they could open some software and talk from their dorms? Most of the big American tech firms had hopes of hitting on a video-conferencing breakthrough that would be taken up by the mass market, but progress was slow and frustrating.

Yuan had moved to California in the mid-1990s, and wound up working for Cisco as a lead engineer on its video-chat application, WebEx. Jim Scheinman says that, by the later noughties, it was clear to Yuan that WebEx "simply was not good". At that stage (despite almost two decades of consistent effort by the industry) few of the existing options were good. Skype, once a fashionable brand in online voice calling, had been bought by eBay and then flipped to Microsoft, getting lost in big-corp murk. Microsoft had an alternative in the works, later branding it Microsoft Teams. Google had launched a service called Hangouts, later changing this to Meet. Adobe had something called Connect. AT&T also had a Connect, while IBM was mixing things up with its own offering, Connections. There was also an iMeet, a GoToMeeting, a Vidyo, a LogMeIn.

One day in 2011, Yuan visited his bosses and told them that WebEx was ill-suited to the coming age of iPhones and cloud computing, and that it should be rebuilt with mobile in mind. Falk picks up the story: "Eric went to the Cisco executive board and tried to persuade them to re-engineer the product from the ground up. And the way I've heard it, Eric was told: 'Back to the day job.'" Instead, he went off and founded a limited company, taking 40 of Cisco's engineers with him. According to Scheinman, the company name Zoom was chosen "because it was easy to say, easy to spell and it could be used as a verb".

Zoom signed up universities and hospitals as clients, and became a dependable name in comms in Silicon Valley. Benedict Evans, an industry analyst, says Zoom's market gains were the result of gentle and discrete innovations, mostly involving engineering and interface tweaks that made joining a video call frictionless: "You didn't have to do anything." Unlike rival offerings, Evans explains, which tended to operate more like phones or social networks, in that you had to have an account to attend, and you had to know exactly who you were trying to communicate with, joining a meeting over Zoom was as simple as tapping a link. "It removed all the little bits of friction that nobody had really noticed before," Evans says. It also opened itself up to all sorts of security vulnerabilities.

Come lockdown, and enforced dependency on video chat, Zoom found itself the overnight winner in a global popularity contest it hardly knew it had entered. The site just worked a little better already, and in the end that was all it took to capture the zeitgeist. In terms of meeting minutes clocked, Microsoft still has a larger share of the world's video-conferencing market than Zoom. Many employers, whether for reasons of taste, or the needs of IT departments, or squeamishness around security, prefer their staff to steer clear of Zoom altogether.

Many of the world's new Zoomers have learned that all manner of human interactions are possible by video. They are just not very nourishing, not as much fun, and leave you feeling weirdly short-changed, as though the human animal inside is aware it has been tricked. Perry says these last few months will lead to changes to office culture in the UK, with more companies willing to trust their employees to work from home. "But we're social animals," he adds, "and there's a need for human connection that's irreplaceable."

This extract was adapted from Lamont (2020)

3 Pioneering user experience and technology

But why Zoom? Why not Skype, which has been around since 2003? Or Google Hangouts or Facebook Messenger or Apple's FaceTime? A key component of Zoom's appeal is its simplicity. Zoom state that they have "a relentless focus on making the best product with the best user experience. This is ultimately what everycustomerwants. Toward this end, we spend much of our time listening to customers and fine-tuning our software to fit their needs." ... "We also keep every employee close to our customers by having an open feedback channel through our Feedback Portal and Support Center." (Zoom, 2014).

Lorenz et al. (2020) argue that this is because "Zoom is baked into many colleges and schools already that use it. The product's layout makes it easy to talk with multiple people at once. And Zoom has some features that mirror social media apps. A button called Touch Up My Appearance casts a soft focus over the video display, smoothing out the skin tone of the presenter like an Instagram filter. Custom backdrops can hide messy bedrooms. Zoom has a "hotterbrand" association and younger people don't want to use the older technology" (Lorenz et al. 2020).

An example of a Zoom meeting

A key component of Zoom'scompetitive advantageis its patented video-centric technology architecture. Zoom's competitors have all attempted to retrofit video capability to their existing telecommunications products. Zoom's Group Product Manager, Nitasha Walia states that "Zoom can support increased video participation capacity without degradation in quality because we're the onlyservicebuilt from the ground up for video"... "Delivering reliable video at scale is complex, and retrofitting it for a legacy solution results in a clunky experience. Those vendors that decided to bolt on video after the fact, then, have severely limited reliability, functionality, and quality, and it's clear in the performance of their video meetings" (Zoom, 2019).

Unlike its rivals, Zoom's technology has been optimised to exploit both the cloud network and the video architecture. Zoom has built a system of data centres, interlinked through private connections that are closely maintained. This network provides global connectivity and enables users around the world, joining from different types of networks, to reliably meet with the highest quality of experience. The global network of data centres means that Zoom can exploit 'distributed architecture' and they believe that this gives their platform "scalability, so we can provide a reliable video experience for up to thousands of people in a single meeting" (Zoom, 2019). It is this innovative use of distributed architecture combined with their cutting-edge video technology that allows Zoom to keep scaling up their products, and gain competitive advantage over their rivals.

4 Security issues

Privacy and security are crucial to any video conferencing solution. Companies and individual users don't want others to be able to access their meetings. However, Zoom has encountered several major security issues. Several vulnerabilities have been reported whereby a hacker can access zoom meetings, generate active meeting ID numbers, kick people out of meetings, access their webcams, take control of users' computers, making them highly vulnerable to a range of malware.

During 2020 a number of these security issues have been magnified as the scale of operations have exponentially increased.

Zoom is being sued in California for improperly sharing personal data of its millions of users with Facebook. The shared information includes the user's mobile operating system type and version, the device time zone, model and unique advertising identifier that allows companies to target the user with specific advertising. The legal case alleges that users have been "left vulnerable to voter fraud, medical fraud, phishing and other identity-based harms. But most importantly the ability to de-anonymise and analyse user data allows parties to personally and psychologically target Zoom customers with great precision" (Collins, 2020).

The phenomenon of Zoom-bombing has also emerged. This is where online trolls exploit the security vulnerabilities to disrupt other people's meetings. This has included Online Zoom classes that have been disrupted by individuals using racist, misogynistic or vulgar content (Redden, 2020) or attacks on charity and welfare organisations, such as addiction support groups and children's agencies (New York Times, 2020).

Zoom falsely advertised itself as using end-to-end encryption, a system that secures communication so that it can only be read by the users involved. This has led many experts to describe Zoom as a 'privacy disaster' (Paul, 2020).

On the spate of Zoom-bombings that were so damaging to Zoom's reputation, Falk admitted that it was Zoom's fault and stated "That outsiders with malicious intent could enter meetings that had no waiting room facility or no password well that's really worrying. Clearly, we got it wrong to allow people to do that, or not to have a default insistence on security. That kind of exploded. And the only thing we could do was put it right". Announcing a paid three-month security improvement programme, including the eventual introduction of end-to-end encryption for some calls, Yuan issued a public apology in April, pointing out that "we did not design the product with the foresight that every person in the world would suddenly be working, studying and socialising from home" (Lamont, 2020).

Looking to the future

With the massive changes that societies all over the world have experienced as a result of the pandemic, many organisations are now questioning what the impact will be on the future of work and how we might best reshape our ways of working.

"We're not going back to the same economy," U.S. Federal Reserve Chairman Jerome Powell cautioned. "We're recovering, but to a different economy. That new economy means people will continue working more from home, traveling less, and staying in to binge on digital programming" (Randall & Warren, 2020).

Covid-19 not only sent millions of employees home to work, it may have transformed the traditional work environment forever. Employers wondered even when governments relaxed pandemic measures and employees were allowed to return to the office, would work ever be the same? Remote work and video conferencing had been integrated within business operations during the crisis, with employers learning what keeps their employees productive and their work culture intact.

"There's a lot of data showing employees are actually more productive when you take away their commute. Busines leaders are finding new ways to keep productivity up and business moving forward. Post Covid-19, everybody's going to be more comfortable working from home so you're going to see more pressure from talent saying you can work anywhere in the world as long as you get your work done", said Jason Lee (Zoom's chief information security officer).

With remote work a likely fixture in future work arrangements, Zoom published a guide on how to adapt company culture to the new normal. The first in Zoom's five-step plan is to revisit company mission, culture and core values to determine if they are still relevant. Second was to adjust to monitoring culture in an online environment. Next was updating leaderships' mindset and designing a virtual workplace that fits the 'vibe' of the company. The last recommendation is to make culture sustainable by articulating success metrics. As Zoom put it, the key lesson of the remote work experiment of 2020 was "we learned that work is something that we do, not somewhere that we go".

Zoom must continue to navigate through a greatly altered work environment without knowing the future influence of the work-at-home phenomenon brought on by Covid-19. With so many global workers zooming from home, it has impacted other sectors including office space and business travel. Many companies have been re-thinking the role of location in the future of work. A survey of tech workers and business leaders in the UK showed that sector was "embracing and identifying clear benefits from remote work and rebelling against the idea that location should define access to career opportunity." Switching to Zoom to conduct business instead of travelling is expected to reduce oil demand by 2 to 3 million barrels per day. In a post pandemic world, demand may not resume since companies will have adapted to meeting via Zoom. So airlines may not return all their former routes. Also, due to reduced commuting, people are re-thinking reliance on their cars, with some insurance companies giving refunds thanks to fewer accident claims.

A perhaps unexpected industry impacted by Covid-19 was apparel. With the majority of people zooming from home, there was less need for a large professional wardrobe. Participants controlled what was seen on their screen, usually head-and-shoulders view. During the pandemic, clothes retailers reported an increase in sales of tops but not trousers.

This extract was adapted from Isaacs and Chan (2020)