Dropbox: History, SWOT and Management Analysis

History, Development, and Growth

History

Dropbox was formed in June 2007 by two students from MIT, Arash Ferdowsi and Drew Houston (About Dropbox).  Their idea was funded as a startup by an accelerator company called Y Combinator. With an initial idea to develop a way for people and organizations to easily share files electronically from multiple platforms, Dropbox has grown from a concept to  one of the largest file sharing platforms in the world in just over ten years. The founders landed on a growing need for people to be able to access files from multiple locations without carrying portable drives, and for the ability to share files with people who were with different organizations or who used different technology. Their recognition of the potential for this type of platform, based on their own personal experience, helped them sell the idea and secure the initial funding they needed to fully develop the concept.

Development

Dropbox went from a concept to a fully operational platform in less than one year.  As the company continued to expand, it purchased several smaller startups, increased its employee based and developed a platform focused on business users to complement its primary platform which was designed for personal use. This was key to the success of the company as Dropbox was an early entrant into both the personal and business file-sharing arenas.

Growth

In March 2008 the company released a demonstration video of the product which moved it from 5,000 to 75,000 interested users (Houston, 2012).  By 2012, Dropbox had 100 million users, and increased to 200 million users by the end of 2013 (Barrett, 2013). Dropbox currently has over 500 users.  In terms of financial growth, Dropbox also raised an initial $1.2 million from Sequoia Capital as start-up support in 2007 (Barret, 2013).  In 2018, Dropbox filed an IPO, reporting over a billion dollars in annual revenue, and is now traded publicly (Balakrishnan, 2018).

Environmental Scan

Strategy Management Approach

The mission of Dropbox is “Our mission is to design a more enlightened way of working”.  According to the Dropbox website, “Dropbox is a leading global collaboration platform that’s transforming the way people work together, from the smallest business to the largest enterprise. With more than 500 million registered users across 180 countries, our products are designed to establish a more enlightened way of working” (dropbox.com).

Distinctive Competence

The driving force behind Dropbox is to provide a platform to help people organize, focus and get in sync with their teams (Dropbox.com). Their distinct competence is in the file-sharing space, with cloud-based technology to provide access to shared files across platforms and locations. The Dropbox technology connects content (documents, apps, etc.) in one place and allows for communication within the platform. This singular focus, along with ongoing efforts to acquire other tools, resources and applications that support the mission, set the company apart. Competence also comes in the form of the team members the company hires to help continue its innovative focus.

Business/Corporate Level Strategy

In September 2019, Dropbox announced its newest plans – Dropbox Spaces. The next iteration of the platform will integrate new applications, file organizing technology, Zoom meetings, Slack channel mapping, Trello integration, electronic document signing, a desktop application and IT administrator tools, among other updates and new offerings. This strategy of on-going, forward thinking innovation keeps the company at the forefront of the file-sharing space and competitive in the cloud-storage technology arena (Dropbox.com).

SWOT Analysis

Assessing the strengths, weaknesses, opportunities and threats of Dropbox offers a view that is consistent with how the company communicates its purpose and how it is strategically growing its services and platform (Marketing91, n.d.).

Table 1 – SWOT Analysis Summary

Organization

Organization Structure

Dropbox has a Board of Directors that provides overall guidance for the company. Drew Houston, one of the founders, is the CEO and a member of the board, along with four other directors. At the management (Sub-division) level is where all key leaders are located. As shown in the Figure 1 – Dropbox Organization Chart, all key functions are at this level of the organization chart. Under this level are the key functions associated with the management level.  Within this functional structure, Dropbox actually operates in more of a matrix function, encouraging bottom-up innovation. In this model, all employees are encouraged to come up with innovations that support growth and address customer requests. Dropbox prides itself on its approach to employee engagement, which is best highlighted through its ‘Hack Week’, which is an annual event in which teams from all over the world are given the opportunity to work on a project of their own choosing. The idea is to encourage new innovations. Daniel Iverson, Dropbox’s Solutions Architect announced that half of the new developments have come from ‘Hack Week’. Employees engagement and commitment to the company is strengthened through this process because there is a clear link between employee ideas and company innovation.

Figure 1 – Dropbox Organization Chart

Control Systems

At Dropbox control systems are embedded in the organization chart, with a flow of information across divisions and an on-going focus on innovation. Control is less about a structural hierarchy, though a hierarchy does exist, and more about assuring customer information is secure (i.e. controlled) and that there is a mechanism that supports employee innovation while also maintaining system integrity (O,Raghalliaigh, 2016). The company values innovation, and encourages employees to engage in developing new ideas and solutions to help the company improve. As previously mentioned, the annual ‘Hack Week’ is one way that employees are given the opportunity to work across divisions and locations to develop new ideas. Promising developments are presented to senior leadership and teams are recognized for their innovation. Dropbox calls this “controlled creativity” (O’Raghalliaigh, 2016). Basically, the system is set up to promote bottom-up innovation, while setting corporate strategy through a top-down approach. This approach helps assure financial boundaries remain firm relative to expenditures, but creates a culture of innovation that rewards new ideas. While the company is strong, it has yet to turn a significant profit. As noted in Figure 2 – Financial Highlights (Dropbox, 2019), between 2016 and 2018, revenue grew by 26% and their operating margin remained consistent with income (Olive Tree Investment, 2019).

Figure 2 – Financial Highlights

Essentially, Dropbox is spending its earned revenue on continued innovation as opposed to generating a significant profit margin. This approach seems to have been a calculated decision, focused on growth relative to customer services and new business opportunities.  From an outsider’s perspective, this approach, which they call “go-to-market” is working. They invest only 25% of their budget into marketing, relying on existing customers to introduce the product to others and invite them to join. In terms of risk, the primary thing Dropbox has to pay attention to is its competitors in the file-sharing market. Keeping watch, while continuing to listen to its customers and develop new tools, Dropbox should remain a strong presence in its market (Olive Tree Investment, 2019). In a presentation to its investors (Figure 2 – Growth Plan), Dropbox noted its goal of leveraging its existing users to bring in an additional cohort of high-value targets as a mechanism for continuing to increase the number of paying users

Figure 3 – Growth Plan

Recommendations

In terms of recommendations, it is difficult to come up with a new idea that Dropbox hasn’t already deployed. Looking back at the SWOT analysis, and reviewing the literature, it is clear that the founders, once they developed their concept, spent time and energy looking at their internal and external environments with an eye for being successful. Their approach to company growth seems to have been focused on addressing their weaknesses, keeping an eye on threats and innovating to address both of those areas while continuing to build on their strengths and working to find new opportunities.  Considering the multiple management theories, I would suggest Dropbox is mostly closely aligned with Human Relations and McGregor’s Theory Y because the company focuses on employee engagement and bottom-up innovation. Placing focus in these areas a recognition of employees as valuable assets and critical to organization success. However, I would also say that there is a balance of Fayol’s Principles of Administrative Management simply because of how the corporate organization chart is presented. Overall, I believe leadership is focused on assuring a strong financial business model through assuring an engaged and satisfied team working environment.  This model has been effective, and I would recommend maintaining it as the company continues to grow. Their approach to generating profit margin, which is to maximize their existing customer networks, is valid and has proven successful to date. It is worth maintaining. I would suggest a continued focus on growing the business side of the platform by offering new tools and resources for that customer base.  Looking at their future plans, this does seem to be on the horizon.

Ultimately, staying current and relevant in the market will determine Dropbox’s ongoing success. If their first ten years is any indication, I would say they have a bright future ahead of them and investors will find their shares valuable.

References

• Balakrishnan, Anita (February 23, 2018). “Dropbox files to go public with over $1.1 billion in annual revenue”. CNBC. Retrieved September 10, 2019.
• Barret, V. (2013). Dropbox hits 100 million users says Drew Houston. Forbes. Retrieved September 10, 2019 from https://www.forbes.com/sites/victoriabarret/2012/11/13/dropbox-hits-100-million-users-says-drew-houston/.
• Dropbox.com (n.d.). www.dropbox.com/about. Retrieved September 10, 2019.
• Fernandez, P. (2018). Management theories every small business owner should know. Business News Daily. Retrieved October 4, 2019 from https://www.businessnewsdaily.com/10626-management-theories-for-smbs.html
• Houston, D. (2012). Finding your way as an entrepreneur. Stanford eCorner. Retrieved September 10, 2019 from https://ecorner.stanford.edu/podcasts/finding-your-way-as-an-entrepreneur/
• Marketing91 (2019). SWOT analysis of DropBox – DropBox SWOT analysis. Retrieved September 20, 2019 from https://www.marketing91.com/swot-analysis-dropbox/.
• Olive Tree Investment (2019). Dropbox: A broken box or a magic box? Seeking Alpha. Retrieved October 1, 2019 from https://seekingalpha.com/article/4248089-dropbox-broken-box-magic-box.
• O’Raghaillaigh, B. (2016). Opinion: lessons from Dropbox in employee-led innovation. Retrieved September 20, 2019 from https://www.hcamag.com/au/specialisation/leadership/opinion-lessons-from-dropbox-in-emploee-led-innovation/146991
• Orgcharting (2018). Dropbox Business Org Chart: Check the Magic Figures. Retrieved October 1, 2019 from https://www.orgcharting.com/dropbox-business-org-chart/.