Once on the far side of yesterday, 1989 to be precise, a company called Nintendo commercialised a product called the Power Glove. Not even the storytellers at Back to the Future predicted it. By fusing the on-screen action with a wearable technology, Nintendo created a new medium for their games to be delivered. The product failed for a variety reasons but succeeded in one key area. It made the unreal, real and in doing so the game was played through a new reality. For that short lived moment Nintendo was at the centre of a technological eclipse.
This is a story about how once SaaS companies reach unimaginable scale they evolve out of the conduit of the screen pixel and into a new extended reality of our lives.
To achieve this scale and further evolution a number of milestones or patterns must occur. One of these key milestones, as outlined in Bessemer Venture Partners’ Top 10 Laws of SaaS is Leverage and Monetize the Data Asset or #LaMtDA if you are a fan of the twitter machine.
Sounding like an impenetrable financial services product dreamt up by some prodigious child actuary, Leverage and Monetize the Data Asset is easily summed up when we consider Salesforce Wave, New Relic Insights, Linkedin Sales Navigator, NewsWhip Spike, Google Analytics and Facebook Advertising. #LaMtDA is a key step on the SaaS evolutionary scale which moves an app from being something that you populate with data to an app that you ask questions of. In an increasingly crowded app market place this can be a major advancement in terms of repositioning and the delivery of new value. The obvious next question, after the free upgrades, the realised value and the extensive API, is how do SaaS companies evolve further into the new extended reality of our lives?
Driverless cars are the new oil derricks
The answer to this lies in an analogy that may seem peculiar at first…
In the movie ‘There Will Be Blood’ the Daniel Day Lewis character builds an oil empire from nothing but hard labour and determination. The opening scene depicts a loner hacking away at the face of mineshaft wall. After successfully finding oil, his team go onto build an oil derrick and a mini-power station to help extract the oil efficiently.
By comparison Google, a.k.a. Alphabet, shifted from being just a search engine app, and monetizing that data set several times over to more recently acquiring Waze, a traffic navigation app. See where this is going? Driverless cars are the new oil derricks and software is the new oil.
Similar logic applies to Facebooks’ Oculus Rift product where they are attempting to move their social experience off the screen and into a new reality. That’s punny. Or Amazons play with drones, you could argue it’s just a delivery system, but then again, so are driverless cars.
Evolving out of Software as a Service pond and into a tangible productised world, SaaS companies have the opportunity to turn new hardware products into services and by extension the festishisation of delivering value continues. Hardware ownership or Hardware as a Service is the final destination of fully evolved SaaS companies. And this makes perfect sense if the hardware acts as a gateway to the internet. Will Googles’ driverless car use Internet Explorer? [Insert sarcastic answer here]. Put another way, the company that owns the device that you use to access the internet will control how you use the internet. Think Apples’ app store as the stand out, but not the only example.
The pursuit of monopoly
You may be familiar with the popular internet message in this image,
This message has a fallacy at its core. The fallacy or myth positions the companies as regular successful web based businesses when in reality the pursuit and maintenance of a monopolistic position is one of, if not, their only purpose. The creation of hardware products for these companies could simultaneously unlock their ability to scale further while copper fastening a dominant position. Imagine Airbnb rented rooms having a 1984 style sensor, sorry beacon, to deliver information and discounts or how Uber users could very feasibly end up in Ubers driverless cars. Or how perhaps Alibaba could offer Facebooks’ Oculus Rift users a drone’s eye view of their home delivery purchase.
Something interesting is happening. By making the unreal, real, SaaS companies are pivoting beyond the medium of the screen and into reality. This is their Power Glove moment.
by Mark Power