Editor’s note: This is the first write-up in the series called Platformania, a guest column by Pavan Govindan, an intrapreneur at the CTO Office of Bosch India. This column deals with platforms of the future. Moving forward, Pavan also plans to have podcasts and thought leadership views on the same.
The average life of a failed platform is 4.9 years, and many gig economy platforms fail within 2-3 years because they don’t have enough users or funding.
It’s important to validate the “market timing” apart from problems and needs. Take the classic example below:
Back in 2000, several automakers including Daimler-Chrysler, Ford, GM, Nissan, and others invested in Covisint, an online marketplace intended to match buyers and suppliers of auto parts. Unfortunately, Covisint’s ownership structure and auction format heavily favored auto companies (the consumers on the platform) while forcing suppliers into fierce price competition, leaving them with little or no residual value. As a result, parts suppliers left the platform and the market never became sustainably profitable. In 2004, the residual assets were sold off for a mere $7 million, a tiny fraction of the $500 million auto manufacturers had invested.
The creation of the multi-sided platform is again based on need which has to be validated–say in a financial services product that has become a commodity the financial service providers might make this shift to facilitate value as part of the larger ecosystem.
Now, this is where the problem starts for other people who try to emulate this model. It is definitely not a “one model fits all” case and it’s even harder to monetize the disruptive potential of platforms.
An example: The future of mobility
Let’s take the example of the future of mobility. Do we really see an independent domain play going forward, or are we looking at platforms at the intersection of domains? And who is your customer or consumer in the long run? Which part of the value chain needs to be addressed to make the platform play a success?
If there is an intermediate marketplace and you are a B2B service provider and then how do you look at the future? Are these digital middlemen of the future a threat?
The way consumption would happen in the future, and who is your consumer or customer, is something that will evolve based on how the platforms shape up. It will also be very much dependent on how the dominant players in the market start defining the trends–mainly the big conglomerates and the top platform players.
Sustainability of platforms
Now going back to sustainability of the platforms, which is the most important factor, who should do it, and what should be the focus?
Corporates building platforms would have a different focus than startups, which is usually the next round of funding and the valuation game (we will come to this point as well shortly). The focus is mostly on building a platform for the future and understanding your customer and minimizing the risk of dependency on 3rd party platforms for corporates.
Just imagine a major chunk of your business being dependent on 3rd party platforms. Will it be a sales channel or displacement of your customer one layer beyond you?
Now coming back to the disruptors for the future–the startups. Their success rate is small but few that make the cut disrupt the existing players. Again, this is like your real estate industry. First movers until now have the advantage. Will it be the case in the future? Is the valuation game post-COVID a thing of the past? Even VCs and startups themselves need to play the longer-term strategy?
This is where incumbent players will play a role in grooming the startups of the future. Unless they see some of them as threats (then hostile takeovers can happen!).
How venture capital will shape the future of platforms
We now look at how VCs shape the future in this space with views from Raghuram Madabushi, an Investor and Director at National Grids in the Bay Area:
- Startups (at least the early stage ones) need to (at least from the investor PoV) focus on narrow problems early on, which is contrary to what a platform needs are. Said another way, a startup needs to earn the right to be a platform–that almost comes as an act II. Act I is still what core problems, what set of product features, and what product-market-fit they can aspire to in the next 6-12 month time-period.
- Broad investment themes currently center around decarbonization, decentralization, digitization, and others (I’ve seen work on de-regulation). This is in a sense a second coming for clean-tech (at least from an energy generation/mix PoV).
- Transportation is still relatively early in the build-out so there will still be opportunities for entrepreneurs to pursue. What sub-categories within the broader electrification of transportation – that is indeed a green-field to explore.
- Personally, I think the stack (at least the EV stack) has been if not commoditized, standardized enough for large incumbent OEMs to step in with platforms that other (startups, hint hint) can build on. Borrowing (maybe wrongly) from the enterprise infrastructure stack, maybe it’s time to find the Intel/AMD type processor/motherboard makers who can be the bedrock on which companies like Dell, HP, Lenovo got built. I don’t know if that’s taking the analogy too far, but what innovation from the last 10 years around EVs is standardized/commoditized so differentiation now moves up the value chain.
So, think product-centric teams, design-centric teams, more customer-focused teams now that some of the tech risks have been de-risked. These would be my areas where I’d bet.
But for India and the world, it’s about access to the consumers in tier-2 and tier-3 cities that will drive the evolution and revolution of Platformania!
The impact of geopolitical dynamics and pandemics like COVID will be there, but can you shift and adapt your strategy.
How technologies like the impact of blockchain on platforms and disruption are something we will look into in future writeups.
So what do you think would be the major platform trends of the future and what do you want to hear about?
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Pavan Govindan is an intrapreneur at the CTO Office in Bosch India. The opinions and views expressed in this article are that of the individuals and in no way represent the views of the company they represent.
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