Turning a Cool Feature into a Real Business
Google just acquired another company: Bump, whose software lets mobile devices share data wirelessly. Instead of using Bluetooth or near-field communications (NFC), Bump's client software sends information up through a cellular or Wi-Fi connection and matches up the right exchanges.
Bump is responsible for the Samsung S-Beam feature. Now a distinguishing feature of one vendor will either become a standard offering on all Android devices or something available specifically on Motorola handsets. And whether anyone will do something with Flock, Bump's photo-sharing service, is yet to be seen.
Among some, the story of Bump raised the question of whether the company was really structured as a complete business or if it offered no more than a few features and therefore needed to be acquired. But history shows that even what seems to be a limited company can, in fact, represent a full business, if entrepreneurs are cognizant of the potential dangers.
Being a Feature Isn't a Bad Thing--If You Do It Right
As I've written before, leveraging the platform of a larger company can be a great tool for entrepreneurs. Rather than build an entire concept from scratch, you can look for holes left by some groundbreaker and exploit a market gap.
This works in many industries, including technology, particularly when the groundbreaking product is still relatively new and immature and in need of significant additions or improvements. An example would have been the many vendors that provided utilitarian add-ons to Microsoft DOS and a number of versions of Windows in the 1980s and 1990s. But there are some problems with that approach:
- You often need a good working relationship with the owner of the base product. Fail to maintain it and they can throw blockades into your path and even freeze you out.
- There is the danger of being a one-off company, in which you have one basic offering that people like but not much in the way of complementary products or services. That limits the business relationship you can have with customers and the lifetime value they can offer as a result.
- The main business may, as companies like Twitter have done, to bring popular third-party capabilities and features into its products, quickly reducing the potential market for an entrepreneur to nearly nothing.
Any business or industry will have inherent risks. So do particular business models. Intelligently managing the balance between opportunity and risk is something any entrepreneur must do. For what is basically an add-on to something else, it's important to use the product only as a way to start the business. But almost immediately--preferably from the time you first decide to commercially sell the idea--be sure there are reasonable chances for expansion.
What's Your Post-Launch Plan?
Bump, for example, certainly had an interesting idea for a first product. The photo-sharing system Flock was a variation: a way to easily share group photos with the people that appeared in them. But was it enough to sustain the next stage of the company's growth? Maybe not.
You need something that is compelling but harder to duplicate than it might seem. Behind the automatic matching of Bump were some clearly powerful systems and algorithms that could take masses of nearly simultaneous bumps and sort out what should be shared and where. That's the sort of thing that is more efficiently bought rather than duplicated. If the feature is too easily duplicated, you can find yourself quickly pushed out of the way.
Also understand how you will market your addition. Some companies like Salesforce.com create channels for complementary products and services. Others will ignore third parties and let them find their own way to customers. The more cooperation you can get, the more likely that the main company is interested in sustaining a rich environment of choices for customers and so less inclined to push others out of the way.
Finally, do some practical market research. Talk to non-competing third parties in the space. Ask them what it's like to do business with the platform owner and what some of the dynamics of that particular market are (including whether customers expect to get most everything for nothing). The more preparation you do, the more likely it is that you'll see whether you have a shot at a real business with an add-on.
ERIK SHERMAN | Columnist
Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.