Zoom Video Communications Inc.’s Innovative Performance Case Study

Zoom Video Communications, Inc. is an American company that develops software for online communications (audio-video conferences, online meetings, and collaboration tools). The COVID-19 pandemic caused the introduction of a self-isolation regime to stop the spread of the coronavirus. This fact was the reason for the active growth of online platforms: Zoom correspondingly became such a service. For this company, a real explosion occurred in 2020 – Zoom used to gain momentum gradually, and today it is the leading platform for videoconferencing, which is used by small and large companies that have switched to remote work.

Existing Capabilities

Zoom has become widespread among all employees of remote companies, as well as schoolchildren who had to study remotely during the pandemic. Last year, the company actively developed a plan to ensure good communication and interaction between employees and students placed in self-isolation. Since the beginning of the pandemic, the company’s shares have grown by 125%, and Zoom has become a tool without which it is simply impossible to imagine remote work (Team, 2022). The Zoom platform is characterized by high-quality communication, which increases productivity, sociability, and trust among those who use it. It is capable of providing an acceptable level of conference communication even with the loss of 40% of packets in network traffic (Morris, 2022). The platform optimized for working in the cloud has been designed in such a way as to be able to scale according to the needs of customers.

It should be noted that the percentage of revenue from existing customers is one of the critical indicators of the company’s growth. If the total annual revenue growth exceeds 100%, it means that Zoom not only does not lose existing customers but also forces them to spend more every year: strengthens ties, and releases more and more products that customers are interested in (Team, 2022). Another reason for the stable growth of Zoom is the trend towards remote and decentralized work of companies. If an enterprise has several offices in different cities and countries, it is interested in tools for optimizing business processes and high-quality employee interaction, including video calls (Geller, 2022). According to Zoom, after introducing their video platform, companies pay for it very quickly and have a very high ROI (return on investment) when subscribing. This indicates that the company is constantly expanding its capabilities toward innovation and maintaining the existing management model.

How The Organization is Structured for Entrepreneurship

One of the main aspects of company’s operation is that Zoom follows the Freemium business model. Zoom offers four different tariff plans, one of which is free. The free Zoom plan offers unlimited 1-on-1 video communication time and up to 40 minutes of a group meeting with up to 100 participants at a time (Pereira, 2022). The free plan is more than enough for regular users and those looking for a temporary service until the situation normalizes during the pandemic. The free Zoom plan offers the same features as the paid plans of their competitors (Pereira, 2022). The Zoom model is focused on making free users become paid. The freemium model has helped to increase the adoption rate among users and increase the application’s popularity by sharing it by word of mouth.

How People are Recruited and Rewarded for Entrepreneurship

The company’s platform is easily integrated with other systems and tools. Zoom enables developers to implement its platform into their own offerings through an open API and a cross-platform SDK. The company has partnerships with several conference equipment and software suppliers, including Atlassian and Dropbox (Geller, 2022). The branded App Marketplace has attracted more than 1 thousand third-party developers, who, as the company believes, will increase the useful Zoom functionality. Now ZOOM developers are launching new communication tools to replace stationary office phones and messengers, new artificial intelligence functions designed to improve the efficiency of meetings and are also developing ways to use advanced technologies that allow employees to feel closer to each other (Geller, 2022). In this case, it is worth noticing the study of VR capabilities that may well appear in ZOOM. In other words, while other companies want to rethink the office as a workplace, the specialists from ZOOM want to rethink the office as a place in general.

Processes That Support or Constrain Entrepreneurship

Zoom plans to expand the scope of its platform’s applicability in the organizations of existing customers. As organizations gain experience using the platform and become more familiar with its benefits, an increasing number of teams and departments within these organizations are implementing Zoom (Kapil, 2022). The use of the platform can begin within one segment of the organization and then organically spread across all its divisions. The company allocates approximately 20% of all the efforts of technical specialists for on-demand development and the evolution of functions at the request of customers (Kapil, 2022). The company’s technical specialists are focused on staying at the forefront of progress in the field of video communication technologies and collaboration techniques, and in a year, they produce more than 200 new and improved functional elements.

It is worth pointing out that the company’s business model is based on attracting a sufficiently large number of talented and young specialists. One of the key factors of Zoom’s profitability is that a large team of engineers and developers is located in China, where staff costs are lower than in many other countries, Zoom points out in documents for the US Securities Commission (United States securities and exchange commission, 2022). For the 2018 fiscal year, the company spent $33 million on development and research — this is 10% of all revenue. Zoom’s costs are significantly less than those of other business software developers: Atlassian’s development costs accounted for more than 40% of revenue, while smaller Zendesk and Hubspot spent more than 20 percent of their revenue on research and development, CNBC calculated (Kim, 2022). However, Zoom understands that placing engineers in China can provoke increased attention to security and leaks of confidential data due to working with large business clients.

How Innovation Challenges are Identified

It is worth noting that the company has one rather significant problem — privacy. Recently, there have been many scandals related to security on the platform. Even when making private conferences, absolutely outsiders could join people in some incomprehensible way (Johnston, 2022). Consequently, the company mainly faces problems that arise from the outside (Kapil, 2022). A significant part of the company’s business model is based on the use of existing technological solutions in the field of communication (Pereira, 2022). However, its feature is the introduction of various solutions that simplify user interaction with the interface and functionality of the program. Thus, the company identifies its innovative challenges through customer feedback.

The problems that arise are mainly related to Zoom’s desire to organize a simple and effective solution for the organizers and participants of video conferences. However, in order to do this, it had to make some concessions, which were reflected in the problems of security and confidentiality (Reiff, 2022). The main result was the ban on the use of the program by many companies and countries. Accordingly, the priority innovation challenge for the company is the creation of a system that will preserve the comfort of users and their safety.

A new video calling app side platform, On Zoom, is launching in beta with live events dedicated to fitness, music, and art. Zoom stated that the company had added event detection and monetization features for online versions of traditionally face-to-face events. Tickets can be sold for events with up to 1,000 participants (Swerdlow, 2022). This innovation will allow Zoom to enter the streaming market, starting to compete with such major platforms as Twitch and YouTube. Zoom stated that the side platform could facilitate the transition to online and other, traditionally face-to-face events – concerts, comedy performances, various shows, as well as music lessons (Swerdlow, 2022). The creation of a trading platform means that Zoom can simplify the lives of those who provide services by centralizing booking and payment systems and shortening the sales chain.

How Entrepreneurship is Practiced with External Stakeholders

During the pandemic, the CEO of Zoom made an unprecedented gesture – he personally registered several free profiles for schools that switched to a distance learning system. One of the first was an institution in Silicon Valley – a little later, other educational institutions in the United States joined it (Pereira, 2022). The staff offered to take over the project, but Yuan insisted on doing it manually on his own. More than 90 thousand educational institutions in more than 20 countries of the world are connected to Zoom (Pereira, 2022). The company has shown indisputable help in creating a remote space for continuous learning in schools and universities.

The dual structure of Zoom’s share capital leads to a concentration of votes in the hands of the shareholders who received them before the start of the current placement. Such shareholders include the top management of the company, its directors and employees, as well as persons affiliated with them (Reiff, 2022). The concentration of votes guaranteed by ordinary shares in the hands of such shareholders may negatively affect the ability of new shareholders to influence corporate decision-making. In addition, it should be noted the approach to communicating with various interested parties of the head of the company. Eric Yuan conducts the meeting mainly through the Zoom application, so he seeks to draw the attention of potential customers to the effectiveness and convenience of the program.

How the Organization Manages Uncertainty and Failure

Cisco, which has restarted the video conferencing service, as well as Google, Microsoft, and maybe Apple with Amazon, are again jeopardizing the prosperity of Zoom, as it was in the early years of the company’s existence. Zoom management claims to cooperate with at least 90 of the top 100 cloud companies from the Forbes rating (Konrad, 2022). Nevertheless, some corporations (for example, Sony) never switched to Zoom due to the fact that it was too difficult to integrate the system into such a large-scale business. Other companies, including GM and Verizon, use completely different services. Moreover, in Ford, for example, only a few uses Zoom (Kent, 2022). Even Qualcomm, which owns a small stake in Zoom, uses services from Cisco and Microsoft (Johnston, 2022). New features are gradually being added to the Zoom service, and the number of accounts in the system is constantly increasing since thousands of employees simultaneously use several work chats for internal communications in some large companies.

Despite the obvious security problems, people continue to favor Zoom over third-party competitor services. Users of the service say that they mainly love Zoom because the maximum delay during a conversation does not exceed 150 ms (Kent, 2022). The management of Zoom notes that people like their application simply because it works: no one has to ensure that all users who have joined the meeting can hear each speaker well. In addition, the application functions effectively on a mobile phone and allows users to demonstrate the screen for all conversation participants conveniently.

How the Organization Reconciles Exploratory and Exploitative Learning

The active role of a leader is another essential element in the personnel development system. Like the other elements (working conditions, principles of respect for staff, a clear strategy, a culture of problem-solving, and a system of continuous improvement), an active leader is a mandatory development factor (Ali, 2021). After all, if the head of the company or the manager is not interested in changes, is not interested in improvements, in staff training, then employees develop only those skills and knowledge that they consider helpful for themselves personally (Ali, 2021). Moreover, if these skills are not needed in a company, they will go to another one. Accordingly, Zoom Communication Video focuses on the organization of an understandable and accessible communication process in the company structure. The main advantage is the example set by the head of the company – Eric Yuan. The fact is that he spends almost all his time at work. In addition, under his leadership, the company strives to provide its employees with the necessary conditions for development (Kent, 2022). This is reflected in the fact that Zoom offers solutions for independent programmers who help improve the technical aspects of the application.

Innovation Management Change Programme

At the same time, in cases where the organization as a whole is the object of design, the project is considered as a time-limited, specially organized, purposeful change of a separate system within the planned resources and established requirements for the quality of its results. The main problem of the innovative management of Zoom Communication Video company is the lack of a security system for users (Wagenseil, 2022). This leads to quite reputational severe damage to the company. Therefore, it is necessary to pay attention to this particular activity and application management area. In many ways, the projects created by Zoom are relatively simple but, at the same time, technological. This allows the company to maintain the status of a leader in the field of video communication (Wagenseil, 2022). However, it is necessary to reconsider innovation management issues to achieve tremendous success and retain the audience in the kidney-shaped time.

By their very nature, any strategic measures taken by an enterprise are innovative since they are somehow based on innovations in its economic, production, or marketing potential. The innovation strategy (innovation policy) involves combining the goals of technical policy and investment policy and is aimed at introducing new technologies and types of products (Wagenseil, 2022). It provides for the selection of particular research objects, with the help of which the enterprise primarily carries out a systematic search for new technological opportunities.

Strategic innovation management affects conceptual, organizational, and procedural aspects of the enterprise’s strategic development and, therefore, implements its function through subsystems of general and functional management. Zoom acquired Keybase — a startup specializing in encryption — in May, saying at the time that the company aimed to develop the most widely used enterprise offering for end-to-end encryption (Wagenseil, 2022). However, the company’s CEO, Eric Yuan, initially stated that this level of encryption would be reserved only for paid Zoom users. Thus, faced with a barrage of criticism from users, the company abruptly changed its policy, stating in June that all users will be provided with the highest level of security, regardless of whether they pay for using the platform’s services.

The application uses TLS, the standard used in browsers for HTTPS sites. In other words, data transmitted between users and Zoom servers is encrypted like Gmail and Facebook traffic. In turn, the term “end-to-end encryption,” as a rule, means complete protection of traffic between two users without access to it by the company. Zoom does not use this approach, so the statement about end-to-end encryption is misleading. Consequently, the company should direct the basis of its activities to meet Internet users’ basic security needs. Zoom is used by many people, which leads to the fact that many video-calls can be intimate or private. The company’s innovative activity does not meet the requirements at this stage. To retain the interest of investors, Zoom Communication Video should direct more funds to developments in this area. Project management of the development of an organization requires its head not only to have a high level of professional competence but also to possess the skills of organizing project activities.

The main problem of innovative project management is applying traditional approaches to the organization’s current activities to fundamentally new project technologies. This is also manifested in the weak methodological support of innovative project activities (the absence of uniform templates, procedures, techniques, and algorithms of actions) (Montgomery, 2022). This is reflected in the low level of development of project competencies of specialists and the lack of purposeful work on the formation and development of missing project competencies. The approbation and replication of the innovative project management model in an organization are determined by the need to improve the project competencies of its employees.

In order to overcome cognitive barriers, it is recommended to build remarkable work on the formation of professional competencies in the field of project activities among employees of the organization and the formation of project management skills. First of all, it is recommended to solve this problem through training and certification of the employees involved (across the entire management vertical), using additional education tools (course training, professional retraining, master’s degree) (Riad Shams et al., 2020). To increase practice-oriented training, it is necessary to provide training on specific case examples with access to the best templates, procedures, methods, and algorithms of actions in a given situation of innovative project management (Montgomery, 2022). Along with the use of interactive forms of training, it is adequate to include specialists in project activities immediately, already at the initial stages of training. It should be done with a gradual complication of the role performed: from a member of the project team to a member of the project management team. The structure expands from the head of small and uncomplicated project elements to independent project management.

Reference List

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