Can firms challenge critical mass in multi-sided platform markets?

I came across this nicely written piece about platform markets – “From Netscape to eHarmony: The High Risks and Big Rewards of Platform Markets” on http://strategy-business.com

Technology eco-systems are common in markets with multi-sided business models – For e.g the smartphone app-store connecting developers & phone-users, online-marketplace & storefronts connecting buyers & sellers.

The article introduces the term ‘tipping point’ – an alternate representation of a critical mass of users needed to create positive network effects. An interesting question raised herein is: How can you identify a platform market that is attractive to enter, and under which conditions is it appealing? Defining the granularity of the market & bringing in the right competitive advantage is one route to answering this.

Firms looking to displace dominant incumbents – be it in the smart phone industry, television industry, eCommerce industry or others – must think through the value proposition to switch current users.

Click Here for the original and complete article

The 50th entry – a collated list …

It has been a while since I have started this blog. It has been enriching being more disciplined in creating original content (while curating some). Looking back over these 49 blog post entries, I thought it might be a good time to take a pause – and collate in the 50th entry some of the original content I created in the process. So here it follows …

1. Smart e-Governance – An entry strategy for Smart Cities
2. mPOS: Addressing new customer segments! A case of blue-ocean strategy!
3. Yahoo acquires Tumblr – a move towards competitive parity?
4. A case for new market entry – is this the right diversification?
5. Business Model Canvas – validating a reading – DxOLabs.com
6. Are you happy with your LinkedIn account?
7. Market sizing, product strategy … dealing with a shrinking 2D printing market..
8. The Perpetual Learner – where should he go?
9. The Fit for Growth℠ approach & Business Model Innovation

The central theme inter-twined among these has been technology – that is what I am passionate about. Hope you find them interesting.

Smart e-Governance – An entry strategy for Smart Cities

There is a lot of discussion and hype around Smart Cities. Analysts use different criteria to define Smart Cities as an aggregation of different types of services. While the obvious Smart Players exist, several companies also aspire to grab a big chunk of this pie. With this mind, they are all busy charting out plans to be Smart City players – trying to tie together individual services & technologies under their umbrella and assessing what more can be done to close the gap.

Typically ‘Smart’ Transportation vendors are looking to fill the gaps and hoping to be a dominant player. I decided to take an alternate view to this approach. Trying to map out the value curve of what I believe are the main factors of competition in the industry and then reversing this value curve to explore other opportunities. The merits of the approach may be questioned; nevertheless it was an interesting exercise to delve in.

Resorting once again to the value curve, I have attempted to devise an alternate entry strategy into the Smart Cities. Being aware that Blue Ocean Strategy creates uncontested market space, this one is an attempt to create a sneak-in-entry strategy.

Your thoughts are more than welcome.

Helping the cities, service providers assist smart city adoption

A report on Forrester by Jennifer Belissent indicates that local governments are increasingly investing in technology – with the intent of sustainably transforming various City functions and reaching the eventual objective of  building Smart Cities. Here’s a glimpse of the report through a blog by Ms. Belissent.

Cities, don’t go it alone. Service providers accelerate smart city projects. (via Forrester Research)

mPOS: Addressing new customer segments! A case of blue-ocean strategy!

In an attempt to better understand and apply the blue-ocean strategy, I decided to test the framework on a rapidly evolving market – the payment’s industry.

The solutions in the payments industry can be broadly classified into categories: those addressing emerging economies and those addressing developed economies. It naturally follows that the value propositions of the payments solutions in these two segments are quite apart and hence the associated value networks differ as well.

Here, I take a look at the developed economy market and specifically into a trend that has attracted several firms – mobile point of sale (mPOS).

In its simplest form, mPOS can be described as a payment-terminal (like the traditional credit card terminal) on your phone! Well it literally is that – pay using a mobile device (Smartphone/Tablet) and use funds from the traditional card accounts (magnetic stripe cards and the chip & pin EMV cards). Vendors like SumUp and Square Inc. are good examples.

The surge of companies in this space indicate a rapidly evolving technology area wherein there is yet to be a dominant technology. But it has seen innovative business models and new value propositions.

The key elements of the traditional credit card terminal used at retail outlets have the following characteristics:

Key elements

Value to customer

Upfront cost A significant fixed cost is involved to procure such a device (Anything between $150 to $1000 per terminal depending on product specifications)
Enrollment processing time This involves enrolling with payment solution providers and fulfilling a barrage of legal requirements to get the process started.
Pricing structure complexity In addition to an initial fixed cost, there are monthly maintenance charges that could be accompanied with long term agreement charges and other complex pricing structure.
Transaction volumes The high fixed cost and complex pricing structure necessitate a certain number of transactions to break even.
Payment authorization End users that swipe their cards through these terminals feel secure due to pin-entry provision.
Fraud prevention It follows that both front-end and back-end systems must complement to avoid fraudster from abusing the payment systems.
CRM information CRM software and other middleware solutions can enable merchants to pull out relevant sales information transacted through the payment terminal

The value curve for the traditional credit-card terminal industry would look as below:

Traditional Credit Card Terminals - Key Elements and its relative offering level
Traditional Credit Card Terminals – Key Elements and its relative offering level

Vendors likes SumUp and Square Inc. have however reversed this curve, and brought to the fore the mPOS dongle that extends the ubiquitous Smartphone (& tablet) into a payment terminal. Taking advantage of the app-store eco-system it provides merchants with a basic application for usage and also allows merchants to create customized apps to exploit the backend services. Merchants can take this a step ahead to analyze the sales data & customer preferences and thus derive business intelligence. All this comes at zero additional charges – the dongle comes for free – and in short turnaround time.

The grid below indicates the application of the Four-Action Framework (ERRC) – depicting a change in priorities of the key elements identified before, in addition to additional elements provided by the new offering.

Four Action Grid - mPOS
Four Action Grid – mPOS

Eliminating the high fixed investment and cutting down the enrolment process drastically, these vendors have been able to attract a new customer segment – micro-merchants – those that traditionally stayed away from the card-terminal and primarily dealt in cash.

mPOS vendors maintain a simple revenue model – charging a fixed percentage of sales revenue (typically 2.75% as of today). mPOS thus met the unmet need of a previously ignored segment of customer. An analogy I can think of here is text-based mobile banking (like M-PESA) in emerging economies – it met the banking needs of the un-banked customers in such geographies.

The value curve of the mPOS solution is overlay-ed on the previous chart as shown below:

mPOS vs. Traditonal Payment Terminal value curve
mPOS vs. Traditonal Payment Terminal value curve

Clearly mPOS is an interesting proposition for the payments industry. While the use of this ‘cool’ gadget may sync with the brand image of some merchants, there is need for caution. mPOS vendors must seek to address concerns, if any, of consumers reluctant to type in their PINS into a merchant’s phone or tablet!

Product Manager: The messenger of the market!

I came across this presentation on the Pragmatic Marketing website about a year back and thought of sharing this on the blog here.

The author, Steve Johnson, presents an extremely interesting articulation of the Product Management role in technology companies – “A product manager is a messenger of the market”.

He also presents interesting insights into the role of product managers accelerating the adoption of agile methodologies. A must read for those interested in career options in product management.