The Battle Is For The Customer Interface
In 2015 Uber, the world's largest taxi company owns no vehicles, Facebook the world’s most popular media owner creates no content, Alibaba, the most valuable retailer has no inventory and Airbnb the world's largest accommodation provider owns no real estate. Something interesting is happening........
The full post with pictures and comments and social sharing is here on TechCrunch. https://techcrunch.com/2015/03/03/in-the-age-of-disintermediation-the-battle-is-all-for-the-customer-interface/
Or carry on reading below.
......From Seamless to Task Rabbit, Sonos to Withings, Amazon Marketplace to Instacart, we’ see that profit lies from placing a thin software layer on top of service layer and that the fight is to own the customer interface. In the digital world the battle for real estate isn’t in malls or the high street, it’s for home page icons.
Since the industrial revolution the world has developed complex supply chains, from designers, manufacturers, distributors,wholesalers and retailers, for centuries it’s what allowed billions of products to be made, shipped, bought and enjoyed in all corners of the world. The internet has destroyed this, the most powerful mechanism we can imagine to match perfectly individuals that need something and people with something to offer.
The first form of disintermediation happened in the the late 1990’s, insurance providers, PC makers and travel agents blazed a trail with “ direct” as a new business proposition. Here by cutting out salespeople and retailers, savings could be realized and passed on. This period favored scale and efficiency over service or brand.
By 2015 things changed, smartphone penetration, trust in storing payment details, belief in eCommerce, scarcity of time and radically different behaviors have changed everything. The balance of power between the different service layers is a jostle for control. Price comparison sites first seemed to provide welcome traffic to airlines, before airlines tried and failed to starve them of their business and promoted their own apps and websites as the preferred options. Services like Ocado in the UK once offered a symbiotic relationship with grocery stores, yet now stores fear loser control over the customer. In this age the owner of the customer interface is everything.
Full Stack
One approach to owning the customer interface is the idea of what Chris Dixon coined, “Full stack” companies, a slight variation on the principle of vertical integration. Here companies like Tesla, Warby Parker, Buzzfeed, Nest or Harry’s seek to ensure control by owning all layers.
From R&D to marketing, from distribution to sales, these companies do it all. It’s a great way to keep profit in the family, creates total control and protects against competition, but it’s painfully slow to scale and requires incredible management.
The interface owners
The fastest growing and most valuable companies in history have gone the opposite route, they seek to own nothing, they merely gather as the thinnest of layers that force themselves between customers (where the profit and relationships are) and what the customers want ( where the cost and complexities lie).
Zipcar has had a slow and steady ascent to become a $500m dollar company over 14 hard years. They bought cars, installed equipment and now have a small role in the personal transportation market. Uber went the other way, merely writing code to become valued 80 times greater in less than 5 years.
Compare the arduousness and cost of the New York times writing, printing, distributing and selling news, compared with Facebook merely hosting user generated content on servers, or Twitter monetizing the interface with others’ content. Would you rather build a network of grocery stores, distribution systems and hold inventory, or make more margin sending leads to to them? From the vastness of Uber and Facebook to the burgeoning mass of startups like Minibar, Instacart, HomeJoy, Flycleaners or Handy, it’s appears that merchandising and marketing an app, is the way to easier profits. It’s happening in many other places too. Our mobile phones used to be about choosing an operator, yet now telecom companies become commodity providers where data is a big dumb pipe. The vast profits of SMS lost to WhatsApp who provides the services we value and can monetize our attention.
The interface is where all the profit is from Withings scales, to Phillips Hue, to Sonos, we’re finding that profit comes from the adding of a beautiful UI and owning the customer relationship, not in the act of making hardware. The single biggest advantage in the business world is the ability to charge a premium for your product, increasingly this value differentiator comes as a relationship, a UI and space on the Smartphone homepage, not product specifications.
Big Battles for the customer interface.
In internet age building things is nothing other than writing code, shops have infinite shelf space, Amazon can start selling any new product merely by pulling through others inventory and distribution. So in the near future we will see incredible power plays to jump in front of the customer,leverage trust and stored payment details. Uber could become a button all over the internet with buy and deliver now and pay with Uber account and dominate eCommerce, a play based on owning distribution. Google could use Google Maps to be the homepage to Uber, and relegate Uber to being an unremarkable service provider. IM apps like Line could become the gateway to home shopping.
We're seeing ever thinner interfaces, SnapChat becomes a thinner way to spread TV content, Yo ( which I hold disdain for) has opened and app store to allow content to be distributed directly to the Notification Layer. Thinner still is magic, a service so thin it's invisible and doesn't even exist as an app.
The next few years will see incredible power plays, company after company using code, API’s, payment details andcustomer relationships to battle to own the customer relationship. In the modern age icons on the homepage is the most valuable real estate in the world, trust is the most important asset, payment details become vital.
Any business that has these has a license to print money, until someone barges you out of the way. The question becomes, what are you going to do to get there and once there, how do you exploit it?
Senior Recruiter, Global Talent Acquisition, Electronic Arts| Passionate about 'Belonging'| Former Sony Music and Caldwell Partners
8 年Great Post!!
A SALES M A N
8 年Timing is also vert important regarding the issue. Nice post
Executive Director, Marketing at SAP, moving the world with stories
8 年Thanks, Tom, for sharing this fabulous insight of yours! As you so aptly pointed out in this post, customer interface is where all things and services come together to serve the needs and wants of a single person in a best possible way! I used to call it an All-for-One world where Perfect Supply (or Match) is the name of the game. Thanks again. Cheers!
A la recherche d'un nouveau challenge
9 年for my first reading this morning, it's one that opens the eyes ! to read and meditate ...
CXO @ IBM Quantum | Chief Experience Officer
9 年Very insightful. I feel we've been here before. It reminds me of something. Remember Naomi Klein's No Logo? 15 years ago it narrated the shift by companies like Nike who outsourced their manufacturing oversees, and focusing on simply branding and marketing. Everyone shook their heads in dismay. Nike don't 'make' anything here in the US - they simply brand what is made by the third world. They are adding an expensive but effective layer of 'brand marketing' to cheap rubber shoes and maintaining an enormous price premium. It felt, as it does with Uber now, that somehow these Nike guys were cheating. That they weren't 'making' anything or didn't own anything (at least in this country). They were simply adding enormous value to a generic product with very seductive and pervasive marketing. Well actually Nike did make something - they made incredibly compelling advertising which added enormous consumer value to a generic product. I think we're seeing a similar sentiment. 'Uber don't make or own anything'. Well they don't own the cars or the drivers (no cab company does either - they lease and hire respectively). But they do own the single most convenient form of transport in the world through interfaces and databases, and the enormously expensive legal IP and lawyers required to break the incumbent systems of cab companies, restrictive practices and bribes. All this adds enormous value to a generic offering. In this case it's not a rubber shoe, but a driver and his car.