Marketing Hypermetropia Part-2


[Update: I'm going to keep updating this post with links that deal with similar ideas:
1. Jeff Jarvis - New rule: Cover what you do best. Link to the rest]


It’s perfectly understandable that if a company doesn’t move in horizontal or vertical spaces surrounding its current business, then somebody else will seize that space. I’m not debating that question here.  What I’m trying to do here is – see if I can come up with some creative ways of making the expansion process more fruitful (and let me restrict myself to tech companies only). Essentially, I’m trying to answer 2 questions:

  1. Of all the tech companies that are trying to move in horizontal/vertical spaces, is there an underlying force that’s common to all of them? and,
  2. Can I use/adapt any contemporary frameworks/theories to help me make such decisions?

These are difficult questions, to say the least and I could be entirely wrong in my assessment. Let’s see:  While researching for the second question, I came across Alan’s categorization of companies and it stuck me that maybe we could use it for this purpose. Though Alan has used his categorization to explain a different context (buyer-centricity) and there’s also an element of moving-up-the-value-chain among those 4 categories (infrastructure provider -> connector -> intellectual property creator -> passion partner); nevertheless, as I’ll explain below, this categorization can be very useful for setting vertical/horizontal expansion goals for companies.

Let me start by explaining what these 4 new categories of business are:
Infrastructure provider:  a business that specializes in the automation of matter or information processes and provides the infrastructure for everything else

Connector: a business that unleashes the value that comes from connecting people to people in new and different ways

Intellectual property creator: a business powered by people’s ability to create, imagine and innovate

Passion partner: someone who’s in the business of organizing, expressing and enhancing people’s feelings, emotions, goals and values.

Example cases:
Apple is a passion partner but they are also a closed door company. They thrive by surprising people with their innovative products and not by connecting with them and taking their inputs in product innovation. When Apple launched Ping (a social network), they tried to become a connector and since they lacked the culture to become a connector, they failed at it.

Amazon has become a true infrastructure provider and if we ignore Kindle for a moment, they are following this path religiously with massive investments in cloud. Amazon is not trying to be all things to all people.

Google, in my opinion is also an infrastructure provider.  Google Adwords provides the infrastructure to connect long-tail advertisers with long-tail publishers and it’s exceptionally successful at it. Google search provides an infrastructure for random users to connect with random sources. Google apps provide great infrastructure for SMEs to build robust and scalable web applications. Google is not a connector in the sense that Facebook is. It’s not surprising that most of their connector (social) acquisitions are failures.

High profile consulting companies are intellectual property creator, so, when an IT services factory (essentially an infrastructure provider) tries to move to this space, they need to understand what they are doing. Applying the mass production logic doesn’t help. This is perhaps the reason why they haven’t done anything exceptionally great in the business. To be successful they’d have to first move beyond their infrastructure-mindset or maybe choose to expand where their strengths lie.

I’m not saying it’s not possible to move from one category other, but the roots of these categories go deep inside the culture of companies and knowing what they are getting into could make a lot of difference in how they pursue their expansion strategies.

To the first question, I think the underlying force here is “what else can I do with the data that I own and what can I do to own more and more data?”  

What else you can do with the data that you own depends on who you are. An infrastructure provider cannot transform the data that it owns to become a connector overnight. If you are Google and you think just because half of the world’s population is on gmail, you can insert social features in gmail and you’ll become social, then maybe you are not entirely right.

Of course, Google is fighting another war with Facebook, which is that of search. Since, a significant part of Google’s revenue comes from SERP display ads, they want to own all sources of search (social or otherwise (vark.com)). However, there’s an important piece of display ad puzzle that’s missing in this debate - mobile. Where’s the real estate to display sponsored ads on mobile phones? As more and more people continue to use smart phones to access internet, the revenue from display ads (search and social both) will plunge. Also, when people use phones, they prefer using apps; so, the single source to web (whether Google or Facebook) philosophy is anyways going away. In future, Facebook is not going make too much money from display ads, they’ll probably make money from the network insights. Considering its history and strength, IMHO, I think Google should continue on infrastructure provider path, especially focusing on long-tailers rather than trying to become a connector.

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