launching a hyper scalable platform business by praxent

Launching a hyper-scalable platform business8 P R O V E N L A U N C H S T R A T E G I E S F O R S T A R T U P S & E S T A B L I S H E D F I R M S

Hi! We’re Praxent.com! F I N D U S AT @ P R A X E N T S O F T WA R E

http://praxent.com

[email protected] @PraxentSoftware

SERVICE ENABLEMENT & DIFFERENTIATION

VIA DATA

SAASPRODUCT DESIGN &

DEVELOPMENT

PLATFORM STRATEGY &

BUSINESS MODELS

Custom software & technology solutionsdesigned to make your competition irrelevant.

W E B M O B I L E D E S K T O P I N T E R N E T O F T H I N G S

mailto:[email protected]?subject=


W H A T W E W I L L F O C U S O N T O D A Y :

What is a Platform?3 Essential Ingredients

8 Launch Strategies5 design characteristics

3 parts of the core interaction 4 ways to monetize



Source MaterialO V E R 3 0 Y E A R S O F C O M B I N E D E X P E R I E N C E S E R V I N G O V E R 3 0 0 C L I E N T S I N A U S T I N , T X

Tim HamiltonF O U N D E R & C E O

Kevin HurwitzM A N A G I N G PA R T N E R


VS

Founded 1927200,000 employees$26.4B market cap

Founded 20085,000 employees

Est. $24B market cap


0

7.5

15

22.5

30

5 10 20 40 60 90

T I M E ( I N Y E A R S )

Same valuation in one-tenth the time V

AL

UA

TIO

N I

N B

ILL

ION

$


Founded 1916116,000 employees$53B market cap

Founded 20097,000 employees$66B market cap

VS


0

17.5

35

52.5

70

3 6 12 24 48 100

T I M E ( I N Y E A R S )

Same valuation in one-tenth the time V

AL

UA

TIO

N I

N B

ILL

ION

$



Platforms

Pipeline

VS

creates value by orchestrating interactions between external producers and consumers

Source: Platform Revolution: How Networked Markets Are Transforming the Economy

creates value in a linear fashion with centrally employed staff and owned assets

Platform



There are three essential ingredients:

INFORMATION ENABLED

LEVERAGED OUTSIDE ASSETS & TALENTS

Source: Exponential Organizations

SOCIAL SHARING & FEEDBACK



Information enabled: Improves experience

I N F O R M AT I O N E N A B L E D M E A N S :

• Smarter products • Contextual awareness • Personalization • Better search

T R E N D S A S A R E S U LT:

• The connected home • Self-driving cars • Artificial intelligence



Information enabled: Improves experience



Information enabled & the customer experienceR E D U C E S T H E D I S TA N C E B E T W E E N

A N Dwhere the customer is where they want to go

Eliminates: Time, distance, work, customer borne risk



How can information enabling your product or service create value for your customers?

How can it strengthen your value proposition?

A S K Y O U R S E L F :

S O M E C O M PA N I E S E M P L O Y I N G I N F O R M AT I O N E N A B L E D P R O D U C T S & S E R V I C E S W E L L :



VS

Owns 5,700 properties in over 110 countries

T H E I R F O C U S :

Scouting, acquiring, building, marketing and managing resort properties

Owns 0 properties

T H E I R F O C U S :

Building a platform that enables hoststo list their unused guest rooms for rent

Leveraged assets It’s not about owning the resources, it’s about having access to them. ( )



51% of Uber drivers were not driving professionally

B E N E F I T S F O R E C O N O M Y:

• Supply of rides increases • Availability increases • Wait time decreases • Price decreases

B E N E F I T S F O R D R I V E R :

• Get to be own boss • Manage own schedule • Supplement income • Earn more money

T H E A V E R A G E C A R S I T S I D L E 9 5 % O F I T ' S L I F E

It’s not about owning the resources, it’s about having access to them. Leveraged talents

18% Pros - been on the Uber platform for more than 6 months

18% Crossovers - previously drove taxis or black cars, but have been active on the Uber platform for less than 6 months

12% New Enthusiasts - New to the platform, and have taken up driving with uberX consistently

52% Part-timers - The largest group of partners on the uberX platform and most likely to be seeking a flexible earning opportunity. 75% of this group hold other jobs besides Uber.

( )

Good for rider + driver + economy



What dormant assets or talents do your customers, employees, partners, suppliers,

distributors, and investors own and how could they be leveraged?


S O M E C O M PA N I E S L E V E R A G I N G O U T S I D E R E S O U R C E S W E L L :



G OA L S :

• He/she enables you to leverage their social network of relationships because you provide value in exchange

• E.g. social currency (reputation) and/or social feedback

• The customer and his connections become your product

Social sharing & feedback

Customers promote Warby Parker products because they get fashion feedback from their network of friends

Create a symbiotic relationship with the customer

Willing to give LinkedIn access to his network of contacts because his social reputation increases with

the number of established connections



Airplane sharing app?

How could you entice a customer to share his/her network with you by providing a benefit for doing so?


S O M E C O M PA N I E S E M P L O Y I N G S O C I A L S H A R I N G & F E E D B A C K W E L L :



What’s enabling the shift?

Source: Exponential Organizations

UBIQUITOUS INTERNET

CONNECTIVITY

CHEAP COMPUTE

POWERMOBILE

SOCIAL ERA }R E D U C E S T R A N S AC T I O N F R I C T I O N S :

• Central curation • Slow certification • Costly gatekeepers • Inefficient search • Gap between supply

and demand



How to launch a platform



Which came first?

OR THE

H O W T O S E C U R E E N O U G H U S E R S O N O N E S I D E O F T H E N E T W O R K T O A T T R A C T U S E R S O N T H E O T H E R S I D E ?



Staging value creation The platform managers arrange for the creation of value units that will attract one or more sets of users and demonstrate the potential benefits of participating in the platform. E.g. Huffington Post

3 General TechniquesI N G E N E R A L , T H E S E S T R AT E G I E S I N V O LV E 3 T E C H N I Q U E S

Designing the platform to attract one set of users The platform is designed to provide tools, products, services, or other benefits that will attract one set of users— either consumers or producers. E.g. OpenTable

Simultaneous on-boarding To start, the platform creates conditions such that value units can be created that are relevant to users even when the overall size of the network is small. E.g. Facebook



8 Launch Strategies

F O L L O W - T H E - R A B B I T

Open your existing business to external suppliers

P I G G Y B A C K

Build off of another platform

S E E D L I N G

Produce your own value units first

M A R Q U E E

Initial members that will attract others & encourage core interaction

S I N G L E - S I D E

Start with a one-sided product business

P R O D U C E R E V A N G E L I S M

Create a platform for producers that will bring their customers

T H E B I G B A N G

Attract both at once with traditional marketing

M I C R O M A R K E T

Target a tiny market consisting of members already engaging

in interactions

Source: Platform Revolution: How Networked Markets Are Transforming the Economy



O P E N Y O U R E X I S T I N G B U S I N E S S T O E X T E R N A L S U P P L I E R S

Follow-the-rabbit

• Leveraged by many of the largest platform companies• Network effects can be added without risking core business• Avoids the chicken-and-egg problem entirely

• Requires careful consideration of how open to make the platform• May introduce reputation risks• Could require reset of consumer expectations

P R O S :

C O N S :

C A S E S T U D I E S :



B U I L D O F F O F A N O T H E R P L AT F O R M

Piggyback

• Gain access to content that would make the platform valuable

• Leverage an existing network to grow virally

• Some platforms may have legal restrictions on how its content is repurposed

• There may be stiff competition from others leveraging the platform for the same purpose

P R O S : C O N S : C A S E S T U D Y:



P R O D U C E Y O U R O W N VA L U E U N I T S F I R S T

Seedling

• Cost effective solution• Allows platform to be vetted• Models good content for other producers

• Could be difficult to produce enough content• May generate ethical issues

P R O S :

C O N S :




I N C E N T I N I T I A L M E M B E R S T H AT W I L L AT T R A C T O T H E R S I N W AY S T H AT W I L L E N C O U R A G E T H E C O R E I N T E R A C T I O N

Marquee

• Generate interest on a large scale quickly• Can crack a difficult chick-and-egg problem

• Could be cost prohibitive• Must be carefully designed to create intended effect

P R O S :

C O N S :




S TA R T W I T H A O N E - S I D E D P R O D U C T B U S I N E S S

Single-Side

• Enables traditional business launch strategies• Allows for additional time to learn about the industry

• May calcify before becoming a platform• Requires single-side value proposition

P R O S :

C O N S :




D E S I G N Y O U R P L AT F O R M T O AT T R A C T P R O D U C E R S

Producer Evangelism

• Incentivizes producers to market the platform on your behalf• Allows invited consumers to become producers

• May require strong connection to influential producers• Could be unworkable if there are no well-known producers in

the market

P R O S :

C O N S :




U S E T R A D I T I O N A L P U S H M A R K E T I N G S T R AT E G I E S

Big Bang

• Can get to market quickly• Leverages core strengths

of traditional marketing strategies and executives

• Difficult to be heard over the noise• Can be cost prohibitive• Must attract a sufficient number of

producers and consumers

P R O S : C O N S : C A S E S T U D Y:



TA R G E T A S M A L L , C O N C E N T R AT E D C O M M U N I T Y

Micromarket

• Enables marketing to be done in-person or through existing networks

• May be time-consuming or cost-prohibitive if there are no overlaps in micromarkets

P R O S :

C O N S :




Platforms accelerate the creation of value



$19 billion valuation20X revenueAfter 5 years






0

2.25

4.5

6.75

9

2 2.6

4.8

8.4

2X

4.8X

8.2X

ASSET BUILDERS

Develop physical assets that they use to deliver

physical goods, like Ford and Walmart

SERVICE PROVIDERS

Employ workers who provide services to

customers, like Accenture and UnitedHealthcare

TECHNOLOGY CREATORS

Develop and sell forms of intellectual property, such as software and biotechnology,

like Microsoft and Amgen

NETWORK ORCHESTRATORS

Develop networks in which people and companies

create value together— in effect, platform businesses

2.6X

Four Business Models

Source: HBR

W H AT I S Y O U R C H I E F E C O N O M I C A C T I V I T Y ?

PR

ICE

TO

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VE

NU

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IO



Greater revenue and profitability



Platforms have displaced

energy and banking

Source: Visual Capitalist


1000

2000

3000

4000

1900 1920 1940 1960 1980 2000 2020 2040

IBM SSEC, BINAC

1

10 26

10 20

10 15

10,000,000,000

100,000

HollerithTabulator

E L E C T R O M E C H A N I C A L R E L AY S VA C U U M T U B E S T R A N S I S T O R S I N T E G R AT E D C I R C U I T S

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Zuse 2 & 3

ColossusThe electric computerwith 1,500 vacuum tubeshelped the British crack German codes in WWIIAnalytical engine

Never fully built, Charles Babbage’sinvention was designed to solve computational & logical problems

UNIVAC IThe first commerciallymarketed computer usedto tabulate the US Censusoccupied 943 cu. ft.

Power Mac G4The first personal computer todeliver more than 1 billion floating-point operations per secondApple II

The first compact personal machinefor $1,298

Nvidia Tesla GPU

& PC

Mac Pro

Dell Dimension

8400

Pentium II PCIBM

PC

Compac Deskpro

386

Datamatic 1000

IBM 1620

DEC PDP-10

Intellec-8

Surpasses brainpower of

human in 2023 Surpasses brainpower of mousein 2015

2045 - Surpasses brainpower of all human combined

The exponential growth in computing power

Source: Singularity University


The rate of value creation is accelerating

Agricultural Revolution

8,000 years

Industrial Revolution

120 years

Light- bulb

90 years

Moon Landing

22 years

The Internet

9 years

Human genome

sequenced

And it’s because we have transitioned from an economy based on physical materials and assets

into an increasingly virtual economy

Source: Exponential Organizations: Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it)



We can help take you thereO U R C L I E N T S U C C E S S S T O R I E S

300% increase in sales* for First Crush Tastings

$80 millionin new revenue

for NRG Home Solar$40M in savings for the City of Houston

(*without hiring)



Wondering how these ideas could apply to your business?

Email Kevin at [email protected] and we’ll setup a free consult

Would you like to learn more?

Subscribe to our podcast about platform innovation called:

(available on iTunes and

Stitcher Radio)

Sign up to attend our next webinars (all at 12pm CST)

10/13: Launch Strategies http://bit.ly/launch_strategies

10/27: Monetization http://bit.ly/monetize_platform

11/10: Platform Design http://bit.ly/platform_design

C O N TA C T U S L I S T E N I N J O I N U S L I V E



https://itunes.apple.com/us/podcast/commanding-business/id1009894575?mt=2

http://www.stitcher.com/podcast/commanding-business

http://bit.ly/launch_strategies

http://bit.ly/monetize_platform

http://bit.ly/platform_design

http://praxent.com/commanding-business

launching a hyper scalable platform business by praxent

Small Business & Entrepreneurship