Facebook will surpass 1 billion members in early 2012. If it were a country it would be the third largest in the world. It may soon be the largest, beating India and China, in a few more years. The social network is fueled by information exchange technology designed for consumer (or friend) networks which could not have existed before there was an Internet. The Internet, now just fifteen or so years into broad acceptance, was key to enabling these kinds of collaboration systems.
What’s the value of Facebook’s core intellectual property — it’s software and technology — today? If you were handed the source code to the most powerful social network on the planet, what could you do with it? The answer might surprise a lot of people who’ve spent their lives building and selling commercial software systems. Software has for some time now has been about the innovations and inventions that brilliant architects and engineers could capture and protect. The product was their angle. But Facebook’s biggest value is not its technology, it is its network. It’s the community of nearly 1 billion members who GO to Facebook. Even superior IT platforms cannot compete with the overwhelming advantage of a 1 billion member community. You don’t go where the great functionality is, you go where your friends are. You go where the party is.
What’s happening today in the consumer world is going to be the same in the business-to-business world. You need great innovation and invention to penetrate the market, to get started. And then you need a great strategy to drive adoption in the market, to build the community. But you can’t lose sight of the ultimate prize, which is to build community. It’s a race to critical mass in the market in which you compete.
For example, the world of global commerce and supply chain — the sourcing, ordering, shipping, receiving and paying for product, for every company on the planet is a huge space. It’s also highly fragmented, inefficient, uncontrolled, and unmonitored. Even the biggest companies run their global operations in a state of “blindness” because they cannot efficiently and cost-effectively share information with their trading partners. There is no B2B community platform leader in the market today. It’s wide open. All the big software players who’ve dominated the industry for the past 30 years are focused on “old guard” software – the software of record keeping within a single company. But to get your entire trade network on the same page you need software and systems that go beyond your single company. You need systems that can connect you with your community. In commerce and supply chain, these systems are network systems, and they are transformative. They are code breakers. They enable, for the first time in history, massively scalable information sharing across entire trade networks.
But the key to their power is the breadth and depth of their communities. Just as in social networks, you’ll go where the action is. It doesn’t matter how much better MySpace’s technology is now, they don’t have the community. And it’s over for MySpace.
Here’s the way that companies in this space should be valued: they are more like real estate than software. They get more valuable over time, as they become more populated. They deliver more value to everyone, over time, as they grow. When your neighbor improves his asset, the value of the neighborhood goes up for everyone in the neighborhood. There is a reason why the rent in New York City is more than the rent in Anchorage, Alaska.
When customers evaluate systems for monitoring and controlling and improving commerce and supply chain today, they are still thinking about it as a feature/function solve. It isn’t. They need to be thinking about it as a network solve. Which network is likely to be a New York City kind of network? Which of these systems is most likely to give me the scale and reach and “fast-connect” I need to be truly agile when the world is changing so quickly? Who is on the right track?
These are still early days. The market does not yet understand how to evaluate and choose these emerging systems. There are no break-away critical mass leaders yet, but there are at least a few who’ve got the right models. They’re Cloud-based and collaborative. They’re multi-tenant. They have to be! And they are busy building their networks to tipping point status.
