What makes the Technology Business Model so Attractive?
The top 10 ranking from the Financial Times for the most valuable companies we find three firms from the TMT sector; Apple, Microsoft y Google. http://www.ft.com/intl/indepth/ft500. If we we fast forward to 2015, we need to include Alibaba, who with the largest IPO in history went on to occupy third place after Apple and Exxon, but above giants such as Berkshire, Walmart, GE y Nestle.
How to create Success with the Technology Ecosystems?
Part of the success can be explained by the ecosystem, a grouping of firms who bring benefits to their clients. Good examples of technology ecosystems include Windows with PCs. ERPs such as SAP and Oracle in Enterprise Software, well known smart phone platforms, such as Apple iOS and Google Android, but they are also common in industrial sectors, such as manufacturing or machinery. The complete ecosystem works together to solve all the important business and technical problems within in an industry.
The Technology Platform
If we look at ecosystems from a product perspective, they are defined by a platform of core components provided by the owner and complemented by applications developed by an extended community of third party developers, value-added resellers and service organizations. The size of the ecosystem size such as Apple iTunes and iOSApp Stores creates barriers to entry and switching costs for rivals.
In successful technology ecosystems it is easy to connect to or build upon the core as the solution is adopted across adjacent categories, discovering new and even unanticipated end uses. This gives Tech the ability to drive fast incremental customer growth, even more so in the digital domain. Amazon proved this first with books, CD and DVD medias, One Day Shipping, Prime, and now Digital Streaming.
Why is this Important? The Ecosystems benefits apply to most industries with platforms.
- The success with Ecosystem and Platforms are not just limited to TMT. The latest trend is B2B2C. In financial services, firms like Bloomberg are providing a competitive niche product based on open architecture to banks, brokers and advisory firms as a strategy for increasing access to a greater number of clients. A similar ecosystem is emerging around Apple Pay or solutions like Amazon e commerce for Storefronts.
- White-label offerings are rebranded to make it appear as if they offered by the customer owning business. Credit Cards from Stores or Airlines are good examples.
- One downside is that Tech’s star can burn brightly, but just as quickly fade away as disruptive innovation displaces the old ecosystem. Think of Sun Microsystems who came to prominance in the Internet and Enterprise Software era but were comoditized by the cloud.
The top 10 ranking from the Financial Times for the most valuable companies
|Global rank 2014||Global rank 2013||Company||Country||Sector||Market value $m||Turnover $m||Net income $m||Total assets $m||Employees|
|1||1||Apple||US||Technology hardware & equipment||478,766.1||170,910.0||37,037.0||207,000.0||80,300|
|2||2||Exxon Mobil||US||Oil & gas producers||422,098.3||390,247.0||32,580.0||346,808.0||75,000|
|3||7||Microsoft||US||Software & computer services||340,216.8||77,849.0||21,863.0||142,431.0||99,000|
|4||15||US||Software & computer services||313,003.9||59,825.0||12,920.0||110,920.0||47,756|
|5||3||Berkshire Hathaway||US||Nonlife insurance||308,090.6||N/R||19,476.0||484,931.0||302,000|
|6||12||Johnson & Johnson||US||Pharmaceuticals & biotechnology||277,826.2||71,312.0||13,831.0||128,811.0||128,100|
|8||6||General Electric||US||General industrials||259,547.3||146,045.0||13,040.0||656,285.0||307,000|
|9||20||Roche||Switzerland||Pharmaceuticals & biotechnology||258,542.1||52,385.2||12,501.7||64,344.9||86,858|
|10||5||Wal-Mart Stores||US||General retailers||246,805.7||476,294.0||16,022.0||204,751.0||2,200,000|