I read an article on Tech Crunch this morning, where the author made the point that Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.
Clearly, something interesting is happening with value chains, and it is that we finally see the internets breakthrough as the primary platform for commerce.
Since the Industrial Revolution, the world has developed complex supply chains, from designers to manufacturers, from distributors to importers, wholesalers and retailers. It is what allowed billions of products to be made, shipped, bought and enjoyed in all corners of the world. In recent times the power of the Internet, especially the mobile phone, has unleashed a movement that is rapidly destroying these layers and moving power to new places.
The article on Tech Crunch makes the point that the balance of power between the different service layers in the value chain is a battle for control. Price-comparison sites first seemed to provide welcome traffic to airlines before airlines tried and failed to starve them of their business and promoted their own apps and websites as the preferred route. Last week Lufthansa announced a new service charge for third party internet retailers of flight tickets, to try to get sales to return to their own website.
In this age, the customer interface is everything. The new breed of companies are the fastest-growing in history. Uber, Amazon, Alibaba, Airbnb, Twitter, WhatsApp, Facebook, Google and so on… These companies are independent, thin user interface layers that sit on top of vast and costly third party supply systems, and they interface with a huge number of people, channelling customers orders to suppliers for a margin or kick-back at close to zero cost per transaction.
There is no better business to be in. The user interface layer is today where all the value and profit is.