March 21, 2018
There are two recognizable patterns of development for technology companies in 2018, with most corporations being a hybrid model of one or another. Nonetheless, some are closer in their approach to the ecosystem model, where technology giants aim to become an operating system of one’s life. Others are closer to the model of infrastructural dominance, building solutions that will thread the future of industries.
The ecosystem approach is a fairly straightforward one and leads to market consolidation and concentration of data, money, and market power within a closed loop of highly integrated, tightly connected platforms. Ecosystems tend to have a customer/user at the center while operating a tight ship of merchants/vendors at the back end to serve the customer within their ecosystem.
The barriers to entry into the ecosystem for the customer/user are virtually non-existent, while the cost of exit is often revolting enough to remain loyal. It is largely due to highly atomized competition that cannot offer a comprehensive enough solution in one place, inconveniencing the user to sign up for a disparity of unconnected services.
An overwhelming grip on user behavior in ecosystems is reached through having an answer to every question the user may have any moment – search for products/services, payment for a product/service online and offline, calendar, contacts book, P2P payments, recommendation engines, news feeds, social platforms, etc. Comprehensiveness and complete integration of the elements of the ecosystem keep competition outside while locking the user inside.
Amazon, Alibaba, and Apple are all close to the ecosystem end of the spectrum. Amazon, in particular, is one aggressive wave. The company wants to be everything for everyone, with its Prime program being a masterpiece of marketing and commerce. Amazon does have a business-focused side, but the company is more focused on wrapping its world of services around the user.
Facebook is more of a mixed case, containing hallmarks of the second model. While Facebook does operate a thought-through integrated network of social platforms, recently, the company started pivoting towards commercial focus, enabling businesses to reach their potential customers on the social network and interact with them through Messenger chatbots, for example.
It’s inevitable for ecosystems to collide in the long term because everyone runs to the point of having the same spectrum of solutions to empower an individual. Ecosystems aim to become the ultimate operating system of one’s life, touching and enabling a wide range of activities.
Another interesting strategy involves the ability to become a universal connective tissue across industries. IBM and Google are probably some of the most vivid examples, but UPI can also be seen using that strategy.
One of the most important hallmarks of the strategy involving an infrastructural dominance is the ability to cover every aspect of back-end operations for businesses – no matter the size.
Startup with Google and Google for Entrepreneurs perfectly exemplify this strategy, as well as the company’s latest announcement of a Shopping Actions, allowing retailers to list their products across Google Search, in its Google Express shopping service, and in the Google Assistant app for smartphones and on smart speakers, like the Google Home. The program offers online shoppers a universal cart whether they’re shopping on mobile, desktop or via a voice-powered device.
Google is working with a range of top retailers on the new effort, including Target, Walmart, Ulta Beauty, Costco, and Home Depot. The company reports that its retail partners saw the average size of a customer’s shopping basket increase by 30% after joining the program. Ulta, for example, saw average order values increase 35%. Target reported that its Google Express shopping baskets increased nearly 20%, on average.
While Google does invest in enabling technologies for businesses and individuals, IBM is a more enterprise-focused example following a similar strategy. Instead of hammering on the competition with marketing resources and brand name to promote a proprietary solution, IBM, for example, offers the toolbox for businesses to build their own virtual assistants. IBM’s clients can train their assistants using their own data sets, and IBM says it’s easier to add relevant actions and commands than with other assistant tech. Each integration of Watson Assistant keeps its data to itself, meaning big tech companies aren’t pooling information on users’ activities across multiple domains.
If we were to zoom out a bit on Google, Alphabet would become a mixed case. Alphabet itself would likely be a hybrid model, as certain elements of it are tightly integrated to serve the needs of the user, while others are built to underline business operations across industries. But let’s go back to IBM.
IBM has its own version of Google’s stack for entrepreneurs and startups – a portal called developerWorks – a source of how-tos, tools, code, and communities to help solve the complex problems that one faces as a developer in an enterprise organization. At developerWorks, developers can learn about, try, and quickly gain skills in the latest IBM products and open standards technologies.
Overall, both Google and IBM are quite similar in their approach to development – they focus on underlying technologies that will constitute the infrastructure of the future. Those businesses are gradually moving towards the dominance at the back-end. Google is not an e-commerce company, but the ability to leverage its solutions is vital for any e-commerce business. IBM is not a bank, not an insurer, and not a RegTech company, but it offers technology to power various aspects of business operations across those industries.
As companies pivot, merge and acquire, as well as develop new offerings, we’ll continue to observe the differences in success rates and long-term implications of each approach.