The Search for the Next Platform

Given how corporate performance is often played out as a function of public perceptions, it is not surprising that innovation and new product development are sometimes like contemporary politics: who's winning the race is as important as the substance of the discovery.

Mobile is not the future. It is the present. Which is to say, in the language of the net present value of future cash flows, that it is already the past.

So the question is not just what's coming next, but why that will be and who will be the first to figure it out. Apple has led the parade for the past decade. It's conga line of mega-hits redefined how we think, communicate, listen and see the world around us. It also reimagined how money was to be made from the process of innovation.

Ownership of intellectual capital, now being fought in the courts is as important - if not more so - than who owns what piece of tangible territory. In this context, Russia's threats to the Ukraine feels like some 19th century cardboard board game rather than the latest online multiplayer version of Call of Duty Ghosts. You want the Ukraine with its ruined factories and its 45 million impoverished people? Thanks, but I think I'll focus on who owns the patents to the latest platform.

Google, Apple, Facebook and Amazon, the four horsemen of the technological apocalypse are dropping mind-numbing sums on obscure businesses whose founders must be pinching themselves and wondering when they will wake up. All manner of strategic objectives are ascribed to sundry acquisitions, but, as the following article explains, it sometimes feels like they are playing for position, or simply to deny a competitor something that might matter rather than a cleverly designed chess move that anticipates six steps into the future.

Napoleon once said, 'never ascribe to malice that which can best be described to incompetence.' Which is not to say that the managers of these companies are either malicious or incompetent. But they are probably wondering themselves what the new, new thing is going to be and doing whatever they can in order to assure that if they can't figure it out, there opponents will have a hard time doing so also. They are going to place many bets, some of them large. One may work out - or the answer may come out of nowhere. As observers, it more useful to try to understand the participants' motives, needs and desires than it is to try to handicap the winner or predict the outcome. JL

Fred Wilson comments in AVC:

It isn’t clear if the next thing is virtual reality, the internet of things, drones, machine learning, or something else. Larry doesn’t know. Zuck doesn’t know. I don’t know. But the race is on to figure it out.

I found this part of Mark Zuckerberg’s post on the Oculus acquisition most revealing:

We have a lot more to do on mobile, but at this point we feel we’re in a position where we can start focusing on what platforms will come next to enable even more useful, entertaining and personal experiences.

Facebook was a bit slow to get aboard the mobile train. Unlike Apple and Google, they do not have a mobile OS. And they were slow to evolve the core Facebook experience from web to mobile. But once they got religion about it, they moved very quickly to do that and now have an excellent mobile experience on both iOS and Android. And with Instagram and WhatsApp, they have three of the top ten third party mobile apps globally (Facebook, WhatsApp, Instagram). So they have gotten to a good place on mobile (and that’s what the $19bn WhatsApp buy was all about).
And now Zuck and his team are looking up and saying “what’s next?”. It’s not that different from what Larry Page and his team are doing at Google. The Charlie Rose interview with Larry that I made Video Of The Week last weekend was a bit of a review of all the things Google is doing to figure out what’s next (balloons, driverless cars, Nest, DeepMind, etc).
If you look at these big acquisitions like Nest and Oculus, you might scratch your head. What does a Apple-style proprietary closed thermostat have in common with Google’s mobile strategy? What does a Virtual Reality headset have to do with Facebook’s social graph? Nothing in both cases.
But the roadmap has been clear for the past seven years (maybe longer). The next thing was mobile. Mobile is now the last thing. And all of these big tech companies are looking for the next thing to make sure they don’t miss it.. And they will pay real money (to you and me) for a call option on the next thing.
It isn’t clear if the next thing is virtual reality, the internet of things, drones, machine learning, or something else. Larry doesn’t know. Zuck doesn’t know. I don’t know. But the race is on to figure it out. Trillions of dollars of collective market capitalizations are on the line. So a couple billion here or there is chump change. Except for the people who collect that chump change for selling them an option on the next thing. It’s real money to us.
So for the next few years (I have no idea how long this search for what’s next will go on), a game to be playing is building a platform that can plausibly be the next big thing. It’s a risky game. But the payoff can be large. And you can even start by crowdfunding your first round. Man I love this business.