Reading through the success stories of some internet bubble start-ups it became apparent why some of their fellow start-ups went down. Some of these businesses had greatly leveraged on other larger business on their business model and a simple change in policy for the big guys saw the start-ups take a beating with some falling along the way and others adapting and surviving.
This is the issue that may plague many entrepreneurs today: dependence on platforms. The international example that I will use is PayPal’s whose rise was built on top of eBay as the preferred method of receiving payment for both buyers and sellers. Yet their success was completely dependent on eBay. eBay constantly changed policies which completely disrupted PayPal’s service and caused them to endlessly be scrambling to maintain share. The situation got monumentally worse when eBay acquired PayPal’s competitor Billpoint and made it the default payment method on their service. Many would have assumed PayPal was dead at that point. Yet PayPal was able to survive, through a variety of tactics.
The most important tactic that I think is a key lesson for today’s entrepreneurs was building a consumer brand and strong customer affinity towards it. When eBay made changes which threatened PayPal’s position, PayPal often appealed to their own users, who flooded the eBay forums with complaints. This strong customer affinity eventually forced eBay to have no choice but to buy PayPal if they were going to keep their customers happy.
On the local scene it would be wonderful to be placed on the portal of any leading mobile network provider, as this would afford traffic to services and content that would have cost millions in advertising shillings. But what if after some time an executive at the network looked at your numbers and said “Shit…these buggers are making too much color (aka scrilla, greens, chumes, dosh,money)” and had you bundled out? The knock in revenue would certainly be a shocker especially if you didn’t see it coming and had not actively sought direct to consumer models for your business. Such is the reality…
While platforms like Facebook and Twitter internationally and Mpesa and Zap locally have created huge opportunities for entrepreneurs, it may cause many of the companies leveraging these platforms to be at risk due to the whims of the platform owners. I believe that start-ups and fully fledged companies with a strong independent brand and consumer affinity have the highest likelihood of survival…be your own platform, create your own ecosystem…having your own ecosystem means that you can interact with others on the outside but should they leave, you remain strong.
If someone pulls the plug on you…are you gon die!?