Even as the goal of building the ecosystem stays that is the only way for long-term growth of the new industry, in the early days, it is very important for a single entity to provide the whole solution. This is because of two reasons: the customers want a whole solution (the assembled car, and not the sum of the parts), and trying to co-ordinate and convince various other players and making them see the future through the eyes of the entrepreneur can be extremely difficult.
So, even as the entrepreneurial firm is trying to build an ecosystem, its strategy needs to consist of two stages: the first, in which it leads the way through pilots or prototypes to show how the whole solution can open up the new, invisible markets; and later, by allowing specialised service providers to offer specific parts of the solution as the industry modularises, since that is the only way to achieve rapid scale and growth.
Putting the whole solution together may seem like a bad idea, because it calls for the firm to do things it is not necessarily good at. But there is no choice at the outset. Customers need a solution that is complete, even though it is much easier to delight them because they are nonconsumers at this point of time, and thus their expectations from the product are not very high. So, a good-enough whole solution is the need, rather than a perfect sub-system. Over time, as others start seeing the new markets being created, they will start coming into the market with their expertise, and that is the time when the innovator needs to be focus on its core strengths and working to build out the ecosystem.
Let me give two examples in the context of SMEs and rural markets. In the case of SMEs, it is my belief that the need is for an IBM-type organisation which can be the single interface to the end customers. Be it hardware, software, support or services, this firm should be able to offer all the services that the SME wants, and not require the SME to assemble the services from a multitude of options. This is because the channel which should be playing the role of aggregating the services is not doing it it is stuck in a low-equilibrium situation. As the channel starts seeing the customer demand, it will rise to the occasion, driven purely by a profit motive, which is when the innovating firm should step back and leverage the channel to multiply reach. The key point to remember here is that the channel will not help the firm become successful, but will want to ride on the coattails of the success.
It is much the same with the rural market as we seek to propagate the idea of RISC. I have reached the conclusion that we will have to build, own and operate a few centres to demonstrate to the various entities who should be joining that there is money to be made. The upfront costs of co-ordination and convincing, in terms of time and effort, are simply too high. Once the RISC centres are built, then we will have multiple players who will be interested. But if we do not take up the initial role of creating the solution in an integrated manner, the idea will remain just that.
Tomorrow: with Local Distribution