Climb the Waterline: HuddleChat Hubub’s Lessons on Platform Strategy

TC reported: Google Rips Down HuddleChat and bloggers jumped in with both feet.  Was Google censoring apps built by their own developers? was 37Signals’ response appropriate or effective?

These are decent questions.  To me, though, the more interesting discussion is this: what do utility computing platforms (broadly defining offerings such as Google’s App Engine and Amazon’s AWS) mean for companies, particularly startups. 

To quote Bill Cosby’s impersonation in of the Almighty in his Noah routine: “How long can you tread water?”  Put another way, here’s how I thought about this during my time at Microsoft in Windows and Windows Server: “the waterline is going up, and it’s time to climb.” 

Waterline

Popular platforms that have the capacity to impact or run-over small firms tend to be owned and driven by well-capitalized, leading firms.   Think Google, Amazon or Microsoft.  There very size makes them scary.

Through no desire to “do evil,” these platform companies have a responsibility to customers and shareholders to innovate.  Windows Server’s engineers strive to make their platform more manageable, more robust, more secure, etc.  I know this directly.  While I don’t know the engineers at AWS or at Google App Engine, I would posit that most likely as they listen to customers, they’ll learn that they need their products to be more manageable, more robust, and more secure, etc. 

So as they make these platforms mo’better, what happens?  The companies that have built a customer base by making say Windows Servers more manageable find the waterline rising on them.  They have to respond–they climb the waterline or they drown. 

In the old days of server infrastructure, the rising waterline problem was a pretty straightforward competitive strategy problem.  The server infra apps had (and still have to) climb the waterline as the platform evolves and munches away at the ‘core’ functionality that some of those apps do.  Painful, but straightforward. 

But in the new world of AWS and GAE, what’s the story?  My sense is that the rising waterline is a bigger problem, impacting more firms. 

With AWS & GAE, and with more robust rapid prototyping and development tools, the waterline is rising ever faster…  With 37Signals case, 3 Googlers basically rebuilt the app in their spare time and foul was cried.  I’m less interested in the foul than I am in the fact that apps are so easily rebuilt.

What’s a start-up to do? 

First, it’s all about innovation, as always.  Spend time building conversations with customers and do things they value.  Little innovations count here IMHO–depth of product, cleanliness of functions–these things matter.  Do them. 

Second, I think the value of having a network and building loyalty is never higher.  If the app can be copied instantly by someone else, then you need to have other tangible benefits, a network of other people that makes your real estate more interesting than a clone. Note that this requires a bunch of marketing work–it comes down to building converstaions with customers and giving them tangible benefits to get involved.

Third, think about and have a competitive strategy.  What is it that’s going to differentiate you when the app itself can be copied?  You’d better have an answer to that–hand-waving here is unattractive. 

Fourth, and probably most useful over time, choose a good market.  At the end of the day, this might be a cop out statement, as it’s kind of saying there’s only so much you can do with the first three above.  I’d say that the first three are all necessary and may be sufficient.  It sure would help though if despite the competitiev entry, you had the ability to be digging in a rich mine.  All things being equal, most firms should choose to work to enter a rich mine versus a spent one.  Choose wisely.

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1 Comment

Filed under entrepreneurship, internet, technology

One response to “Climb the Waterline: HuddleChat Hubub’s Lessons on Platform Strategy

  1. Good Layout and design. I like your blog. I just added your RSS feed to my Google News Reader. .

    Jason Rakowski

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