Platform Innovation // Blog

An Interview with Akshay Patil: Why Small Companies Sometimes Build the Biggest Platforms

Alex Moazed: Thank you Akshay for joining us today. Akshay Patil is the former head of platform at Foursquare and is today heading up a super stealth incubator/lab at Samsung, doing some cool stuff here in New York City and building on his experience at Foursquare.

To start off, Foursquare was launched as part of the big wave of social platforms at the end of 2000ish era. In a recent interview, Union Square Ventures’ Fred Wilson talked about social networking was big for the last five years. What do you think is the next big category where platforms will play a major role?

Akshay Patil : The most obvious one would be in this idea of the Internet of Things, where we’re increasingly bringing devices online – and we need a system for those things to be able to talk to each other. All of these devices are going to need to be able to find each other and communicate with each other. There’s a lot of the same economics that have driven software platforms in the past that are going to be applied to an Internet of Things. Multiple manufacturers are going to want a common, uniform way that will integrate with a series of services built on top of their products and that will make all of those things easily accessible to end consumers.

AM: We call that kind of a platform a controlled development platform – where the platform owners really truly controlling the ecosystem by essentially having created and owning the underlying operating system.

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We’re starting to see that happen with an Apple watch or Samsung Gear, or in the car or living room with new players like Google with Dropcam and Amazon. What would you say qualifies whether or not an operating system is appropriate for a given use case or environment?

AP: I think if we have the right rubric it would be pretty obvious. Any platform is a slave to many masters – so, in order to succeed your platform needs to solve real problems for all sides.

So to use Nintendo as an example, Nintendo basically has two sides to it – game creators and game players. That platform needed to solve real problems for the game creators, which meant addressing things like reach – are consumers going to be able to download those games, are the developers going to make enough money? Are they going to be able to create the games that they need to be able to create? And for a consumer, are they getting the best experience? Is there ease of use? Is there a marketplace for things that they can find?

So the first step for any platform is identifying the components of your platform – what are the different groups of people that you’re connecting? And how are you solving their problems? And then the second part is doing a good job at solving those problems and helping each part, each group of users connect with the other group in a way that’s mutually beneficial – rather than keeping them isolated.

AM: The ‘watch’ as the next big development platform. Do you think it will be a success or a bust?

AP: What we’re seeing with hardware is an interesting evolution.

I think we’ve seen a lot of success with small companies creating these software platforms, and I think that’s just because there are multiple consumers for these Internet of Things platforms. There are the device makers, the software creators and then the consumers. When you have a company like Samsung, a company like Microsoft, a company like Google creating the underlying operating system, there’s a worry from other device manufactures that they’re going to have a smaller chunk, or less influence on how these systems evolve.

So these bigger companies are going to have an unfair advantage, which then becomes almost a disadvantage because it’s harder to form an alliance to support this very important component of the platform. And that’s why you actually see that it’s easier for smaller companies to gain traction in building these platforms. They’re able to create a pitch for each one of those user groups that resonates. These platforms aren’t hampered by a parent company that people then assume will mean there’s no more room for them to play at that plate.

Still, there are companies that are able to drive something that’s just too appealing not to join. I think for Google and Apple with mobile phones, they were able to drive so many consumers that developers and hardware manufacturers had no choice but to sort of pin their nose and dive right in because there were no other opportunities of that magnitude. But for the Internet of Things, there isn’t that yet.

There’s no single manufacturer that has so many devices in every consumer’s household that you have to deal with them in order to reach that market. It’s still pretty open and it’s a relatively balanced playing field between established manufacturers and startups.

AM: Going back to your Foursquare days, Foursquare had a couple different platform dynamics going for it.

You had the initial, primary platform between places and locations and then people going to those places and checking in. That created a social networking dynamic. Then Foursquare evolved to open up its APIs and create what we call a closed development platform, by which I mean not an operating system but rather opening up APIs and working to engender a development community to build into and integrate with those APIs. What would you say were some of the wins and major difficulties in getting traction?

AP: Speaking of the dynamics that helped Foursquare, a core one was that our biggest competitor, Google, was in the mobile space. But because we are platform agnostic, we were appealing to a lot of small developer shops that were wary of alienating either side of the two most powerful mobile developer platforms.

Foursquare was able to win in part because no one was tied in, and the quality of the data that came back, the richness of the data that came back, all of those things tilted in Fourquare’s favor. We were able to reach developers and become integrated into those systems because of that dynamic. We also were very clear about what a successful strategy needed to be in this space – one of the things you quickly realize is that no one really switches platforms. It’s rare for a company to switch.

If you’ve got something that works, even if you have something that’s 20%, 30%, maybe even 50% better, the cost of switching for a smaller company or a growing company that’s already strapped for resources is very high. We emphasized reaching and evangelizing our API and our products so that we were an option that developers considered early on. We became the option that people went with early on rather than hoping for some sort of business development conversation later on. Those conversations did happen with some of our partners, but a number of major integrations that happened with Foursquare happened without ever talking to the company involved.

AM: Particularly with these development platforms that makes a lot of sense. They can have much higher switching costs than other types of platforms.

AP: Inertia is very powerful, I guess is another way to put that.

AM: Exactly. So we’ve been talking a lot about the API platform in which we’re trying to have people build on top or integrate with it. Are there any other platform types like you’re seeing a lot of activity and hearing a lot about?

AP: I think there’s just an absolute boom in specialized marketplaces right now. Two great examples are Uber and Airbnb.

And this is perhaps a little dated because it’s been a while since these guys have been in the news but I think one of the most interesting platform evolutions we’ve seen as of late was the evolution of Yo. Yo started off as a consumer-to-consumer network application, but quickly they opened up an API and they started pushing a user model where people would connect with services on Yo. Yo became a notification platform.

We increasingly rely on our mobile phones to notify us when things happen, but you basically can’t send a notification without having an application installed on the users phone. You could also get the user’s phone number and send a text message but that seems very heavyweight and inappropriate. Application notifications are the right fit for where we are now – but getting an application installed on a users’ phone is prohibitively expensive for lots of services. Yo basically created a system where if you want to get a notification every time your favorite baseball team scores a run – great! – connect with this address on Yo and you’ll get a Yo every time that happens. I thought that that was actually a very clever evolution of the product, to evolve from just a one-to-one messaging platform into something much more powerful in my mind, which is a notifications platform.

AM: Well I think that really wraps up what we wanted to go over today. Thanks for talking with us, Akshay.

AP: Good to talk to you as well. I encourage anyone who’s interested in learning about platforms to understand the nuances between the different types of systems that exist and how they work so that you don’t get sucked into specific dreams, a specific sort of way of doing things that may not actually be the right fit for what you’re trying to accomplish.

AM: That’s a great point, Akshay. Thank you for your time.

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