App of Dreams – But Why Won’t They Come?

Have you seen a salesman who has to unsell? That’s a thing I end up doing most often in my new job.

I run a product design company and work to create very few products in a year. My clients tend to have corporate backgrounds (not IIT freshers). They’ve usually quit their jobs and want to build a digital lead business around a genuine insight. I’m happy to meet them till here.

It’s the elementary problem they’ve not considered. How will you drag the user on the app/website?

A lot of argument goes for them to unlearn the corporatese and realise that digitally onboarding a customer is a series of well linked hypothesis about the user and his psychology. Each hypothesis has a corresponding feature in the product and a corresponding marketing hook to get him inside the app. And all these finally hook the user to the app’s core value proposition. Each of these hypothesis further requires certain minimums in place, untill one final smallest logical unit of offering that needs to get out of the door is defined. Now the budgets are no longer ‘just for an app’. And not just budgets, the human energy, commitment and odds are now at another level. This is when the smart one’s will backoff. The ‘impossible is nothing’ crowd gambles on.

I’m happy to say in 2016, I convinced 3 people to not start a startup. That’s a lot of future unhappiness for a lot of people. Believe me, I know.

Platform As Product Strategy To Generate Outsized Economic Surplus

The digital armageddon disrupting the real world comes as ‘Platforms’. Platform for this, platform for that. OLX, Housing.com, TripAdvisor, whatever. And platforms come with a power to disrupt existing businesses.

What is the source of this power. Not just match making.

The power is the way they empower the end user. If they just acted as match makers, the only economic value is reduced transaction value. Instead the really good platforms provide multi-dimensional surplus, which means more value to sell for an OK amount. That offers so must to the users for so little that sticking forever is guaranteed.

We’re developing a platform for Location Managers & Film production houses to come together. The three choices we had were

  • Build all locations data and become subscription product

    Bring all location managers & production houses together and become transactional market place

    Add value added tools for both location managers and production houses to provide a surplus value that ensure transaction stickiness

By creating Location Manager portfolios and allowing them to bid on new shooting schedules coming up, we ensured their ambit of opportunities expanded drastically. The production houses, on the other hand running on tight budgets and tighter schedules, can now have a certainty about their shooting locations. Too much economic surplus through the value added tools to both parties. That’s user’s creating value for other users -essence of network effect.

And a core value addition is the identification of the risk that platform can absorb better than it’s user – by bringing all location managers on the platform we ensured they are on an industry standard, and because they’re on industry standard we expect zero defaults from them for the pure reputational risk and the risk of getting banned from a business generating platform. In turn, we use this leverage to get better & uniform terms for the production houses and thus provide them stability and predibictibility. Against this predictibility, the production houses must pay upfront to ensure quicker cash flow cycles for the LMs. All sides win.

A platform investment model is therefore different from the efficiency model. Not to have all players but to make them interact in ways where the net surplus benefits all. That’s the true platform strategy executed through a good product.

 

Marketplace Model vs Inventory Based Model

After a totally disastrous vacation, felt great returning to Mumbai. Sitting on my favorite wooden table, sweating off malarial fever, I’d a small discussion with a client. I thought it needed a note.

What should we build – an online market place for rented assets in a particular category or a platform to aggregate inventory and offer to customers?

Shallow analysis calls eComm portals as market models but I say it’s a closed integrated system customer is falling for. When buying –

  1. Customer needs price, product, substitute comparisons
  2. Transaction assurances – counter party guarantees, delivery time, returns, refunds etc

And the heart of buying is 2nd point- hence world got over eBay.

So, before a loose call to go for ‘asset light market model’ is taken, it’s important to understand what is at the heart of the problem you are solving. Most often it requires building integrated closed loop system to deliver that value – not just provide handshake with counter party. That time is gone.

Money Won’t Solve The Problem, Maths Will

All of us have heard of the Indian Foodtech meltdown & juicy stories of startup founder sieged by employees. And it’s some what fashionable to kick the investor’s teeth for being so stupid to throw all the money.

But trying to solve the same issue for a client who’s into deliveries on electric bikes, I formulated the problem somewhat differently.

What is the product that allows me to work with a team of ONE.

And, I think it’s this boundary condition for which product has to designed; at least in the imaginary story board.

If internet business are about creating new business categories where none existed earlier, and none existed because none was possible with that times technology or market, then why is the delivery problem still being solved with more people, capacity overhang, and traditional way of doing business where technology is just seen as enabler.

I believe when enough math is thrown at it, it’s possible to create a delivery business platform with dynamic routing algorithms & alignment of incentives where the ‘corporate’ team will be a team of 5. ceo, hr, ops, marketing & office boy.

And unless the delivery players operate on this razor’s edge, there’s no business to be created in delivery. We’re out to prove this with one of our client. We’ll share the results in time to come.