Technology companies; A cross-category cloudJainil Sanghvi
Technology companies with their disruptive business models are growing exponentially. Companies like Uber, Airbnb, Alibaba, Facebook etc. have Billion Dollar valuations in the nascent stages of their product life cycles.
What is sets these companies apart?
The improved technology standards set by the technology companies is killing capitalism. 90% of iOS apps are free today; these platforms that allow millions to connect and share assets with minimal expense are driving marginal costs for companies and consumers down to near zero, raising the prospect of capitalism as we know to become obsolete. They are enabling their users to share their assets and introduce them to a revenue stream that was an omnipresent blind spot. It presents consumers with an entrepreneurial opportunity with condensed risk. So in essence, it’s a virtual market that uses C2C selling approach. Traditionally, tangible assets have contributed to the high asset value on the balance sheet, but with this paradigm shift in business operations, having tangible assets is a liability in itself and companies are attempting to offload the tangibles to allow room for the intangibles like user generated content, Consumer data, patents etc. to contribute to the bigger long-term asset values.
With the growth of the technology companies, the traditional market mix of Product, Price, Place& Promotion has evolved. Place has moved onto the virtual space. For instance, Location has always been critical to any retail operations but now with integrating technology into the retail operations. Retailers are on your palm in your comfort zone and eagerly waiting to serve you on demand around the clock. This is true for almost all retail operations groceries, apparel, accessories, electronics etc. The traditional Brick and Motor model is superseded by the web and mobile-based virtual marketplace model with is driven by the increasing internet penetration across devices. 43% of the global population is connected via the World Wide Web today, which is ~3.8 billion people, Businesses in almost every industry throughout the world are realizing how they can leverage Internet of Things (IoT) devices to lower operating costs, increase productivity, expand to new markets, and develop new product offerings. Over the next five years, we can expect enterprise investments in IoT solutions to total over $3 trillion. We estimate those investments in IoT solutions will generate a nearly $8 trillion ROI by 2020. (Business Intelligence Report, 2016 by Business Insider)
Existing outside the Mainstream
Technology companies operate in an ambiguous space; they do not confine themselves in a particular category which enables them to expand the category. Let`s take Airbnb for example, is a website for people to rent, list and find accommodation. Its operational space is vague, it operates as;
Lodging Supplier (Venturing into Hotels area of operations)
Inventory Distributor (Acting as an Online Travel Agent)
Traffic website; a website that has a wide reach and charges for ad space (Websites like Facebook, YouTube, Google etc.)
Technology companies operating in this broad spectrum of categories is pushing the categories to evolve in order to compete in the marketplace and be the preferred choice for the same consumer. This enables them to branch out in the direction of choice which seems most lucrative at that point in time