Platform enterprises are already dominating and will further dominate over what people call linear businesses these days. Linear stands for the conventional way of running a company, as in it produces something, warehouses it, and then sells it to a mostly specified customer audience. The rise of platforms has changed this equation forever. They offer a vast multitude of producers to connect with a near-infinite amount of consumers. The platform company typically runs no inventory and makes its cut being in the middle.
We are all too well aware of the giants in this field. Amazon, Alibaba, JD and others form a wider group of product platforms. The likes of Alphabet and Salesforce are software platforms. Apple and Microsoft also fall into this camp but rely on their own hardware. And the Facebooks and Tencents including the sea of social media providers cover the area of content platforms. Many have morphed into entire ecosystems in their own right, where they provide the market place and make the rules of conduct within it.
When we frequently speak about China and the expansion of its ecosystem along the Belt and Road, it implies that the country in itself is a rule-based sphere that is to be laid out beyond its borders. On the back of Huawei’s 5G expertise and its mushrooming broadband network, Chinese companies from bellwethers like Alibaba and Tencent down to small providers of e-commerce, logistics, and financial and professional services are meant to excel outside their domestic market.
An ecosystem in a corporate sense, however, is designed not to know any geographical boundaries, except the government of its home or host country, thinks otherwise. I am obviously alluding to American companies that have had a hard time selling their products and services, from semiconductors and equipment to software, to China. One prominent example has been Alphabet recently being banned to licence its Android software and ancillary services to Huawei in order to weaken a strategic competitor.
Android is the dominant provider of operating systems in handheld devices, commanding a market share that is pushing 90%. Washington’s ban to licence Android to Huawei has not only made life harder for Huawei but put a dent into Google’s nature of being a true platform business and has narrowed down the ecosystem the company has been striving to build across the globe. Huawei has no choice but to mitigate the loss of Android by accelerating its own open-source OS called Harmony.
Google may run into similar conflicts down the road due to an intensifying clash of the opposing trade blocs. Waymo, the self-driving division of Alphabet, just announced that for the first time it will raise 2.25 billion dollars via external investors. By this move, I believe it has become crystal-clear that Alphabet perceives itself to become a true incubator of tech businesses and give Waymo a chance to eventually be listed and become an independent company.
The question of what Waymo’s business model will look like has been a matter of heated speculation, though. Some still claim that Waymo will eventually either acquire an OEM to manufacture its own vehicles that will be self-driving and become a competitor to traditional carmakers. And so will Apple, they say. Others, who understand the company and its nature much better, see Waymo taking a markedly different approach that reminds of its Android business.
Why not forget the idea of becoming an OEM and make all of them out there your customers? Waymo’s software can be licensed like Android, and to everybody who is in the motion business. We all need to understand that Waymo is the world’s most advanced enterprise in self-driving technology. Imagine its software being the dominant operating system for vehicles. Google can make a ton more money from owning and controlling that ecosystem than running their own cars from an assembly line.
There is no reason to deviate from the platform concept and add a linear business that is likely not to be compatible with the company’s culture. Open source will provide infinite feeds into the improvement of the software on one end, and the licensing business will reach every one of the existing and future OEMs, on the other. Waymo would position itself to capitalise from the gargantuan amount of data that it would collect and take a cut from every single transaction related to commandeering a vehicle.
Sounds awesome, doesn’t it? Like with Huawei, however, it all boils down to whether the Trump or next incoming administration views it to be a strategic challenge to America if China sports the largest automobile market in the world. If Google’s technology could not be licensed to Chinese carmakers as a result of this, Baidu and others would have to step up to develop their own version and eventually compete, making it harder for Waymo to grab future market share within the Belt and Road universe.
In this desperate effort to contain China’s rise no one knows what political burdens are being shouldered onto those platform businesses that have no preconception of strategic competition between superpowers and trade blocs. Their business is to innovate and do business on the largest scale possible. Geopolitics of late is foiling their efforts.
