When a platform becomes an operating system

In the last post Paul wrote about Bosch, and its focus on the industrial internet of things (IIoT).  Bosch, GE and other industrial companies are attempting to create industry leading or at a minimum industry standard platforms to link industrial organizations and create standards, with the hope that new ecosystems and new solutions are built on top of those platforms.

Each of their goals is to capture, manage and exploit information generated from thousands of activities and sensors throughout the industrial platform.

Here we can the see opportunity and the challenges associated with an IIoT play:  building a platform and managing the data of an industrial giant means managing (and harvesting) a tremendous amount of data.

But it also means plugging into or interfacing with other systems and platforms, as none of these companies can create a holistic platform or replace all of the platforms and systems in a large company.  Bosch, GE and others can create really powerful and important platforms in sections or functions, but must integrate and share data with other platforms.  While they can create really powerful and compelling platforms, these platforms are by necessity limited to specific capabilities or functions.

Now for something completely different

Let’s examine then, the power and flexibility that an Amazon, for example has in its quest to build platforms through its AWS offerings.  First, it is focusing on business to consumer (b2c) or in many cases a category that Paul has coined:  consumer to consumer (c2c).

This means there’s less existing infrastructure and more flexibility than in a large corporation, where many systems and platforms already exist.  It also means that small business and consumers are more likely to adopt one prevalent platform and rely on it, as opposed to simply integrating yet another platform as the industrial giants do.

Second, Amazon and others in the b2c or c2c community have the opportunity to become the one holistic solution or platform, the “mega ERP” if you will.  Rather than have to compete for functions or sections of a business, eventually Amazon or others like it could be “the” platform for a small business, and this has great promise.  Let’s examine why.

Imagine a company that can 1) provide the systems and software to establish your business (and run much of your IT virtually) on the internet and provide great scalability at low cost and 2) help built the front end and establish your products, services and brand on the web and 3) link you to powerful distribution systems and 4) help you manage your reporting and analytics.  If this sounds like it covers a lot of the basics of a startup company or small business, you’d be correct.  And Amazon is positioned to do all of this, and if they are smart, a lot more.

Through web services and cloud computing Amazon can provide the backbone of your business, scale IT and systems.  Through their web development capability they can get your business online.  Through their traditional Amazon website or partner model they can promote your products and help sell them, as well as assist with order taking and billing.  Let’s not even go into distribution or “big data” analytics capability.  So, if you are a startup, do you try to cobble together various offerings from different competitors where your data will be distributed and not scalable, or do you accept that Amazon has a platform you can build on?  This will rapidly become a “no brainer”.

What’s missing?

The piece that’s missing right now is the financials: the balance sheet, the income statement and so forth.  If Amazon could create (and it wouldn’t be hard) an integrated SaaS financials package they could become an almost definitive one-stop shop for entrepreneurs and small businesses. With the financials package offering they could provide much of the basics necessary to provide small business a platform, and then they could spawn an entire ecosystem of other companies, other services, other channels on top of the Amazon platform to sustain and grow small businesses.  I don’t know if this is in their growth strategy, but they could basically create a “small business solutions” as a service capability that is exceptionally easy to use and get started, very scalable and very powerful on the back end, and that leverages existing data models and distribution channels, and would simply expand on what they already offer.

One other item that is missing but easily developed is a currency or payments mechanism.  Amazon already provides payments mechanisms through MasterCard, Visa and so forth, but we can easily imagine Amazon creating and validating a new form of currency that exists between Amazon and its customers, and between customers and partners within the Amazon platform. Only Amazon has the breadth and perhaps the trust of consumers and producers to create something like this:  a trusted, independent currency.  This suggested currency may not extend beyond Amazon transactions, but when you consider the size and number of potential transactions Amazon creates, you can imagine a sizable currency of its own.  With a currency Amazon could lock its customers and partners more tightly into its platform, and with a currency comes the whole realm of financial services, transactions and so forth that other companies would provide within an extended ecosystem.

Differences between B2B (Industrial) and B2C (Consumer)

Between Bosch and Amazon we can see the relative importance of developing a platform and encouraging the growth of an ecosystem, and we can also see the stark differences.  Established large industrial companies have to interact with other companies in a tight web of transactions and rely heavily on integration and shared platforms.  In almost every case there is a large existing investment in platforms, systems and standards.  Large industrial concerns won’t allow another company to fully dominate these platforms and there are so many other systems and platforms that even IBM or GE will only establish “platforms” in specific functions or market segments.  Amazon, with a focus on B2B and the consumer or small business, faces far less resistance and far fewer established platforms.  Given its breadth of services and transactions, it could become a de facto platform for small business development if it chooses to.  Small businesses and entrepreneurs lack infrastructure and in many cases the IT and business operations Amazon could provide are at best secondary to what they are trying to achieve.  While large corporations led the drive initially to outsource “back office” capabilities, in the long run it could be small businesses that fully capitalize on the offering.

What’s an innovator to do?

We’ve advocated throughout these posts that the real innovation opportunity going forward is in platforms and ecosystems.  Paying attention to what’s happening with both platforms and ecosystems may signal interesting innovation opportunities. Paul has provided insight into innovation opportunities as large companies compete to offer IIoT.  In this post I’ve tried to suggest that Amazon is building a B2C platform, and smart innovators will notice this trend and capitalize on the opportunities to build on top of the platform and to extend the platform or provide services and solutions that Amazon doesn’t offer.  Or, other innovators may reject the Amazon platform and attempt to create one of their own.  The opportunities to innovate, to either catalyze, build or join a platform (in the soon to be immortal words of Stephen Elop) are out there.  As Bosch and GE demonstrate, you can own a sizable portion of a company’s interaction through dominance in a functional platform, but can’t acquire or control the entire infrastructure.  Amazon’s model suggests that a ubiquitous platform could in fact become a operating system for entrepreneurs and small businesses.

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