Cambrian Explosion

The Economist this week released a 16 page special report (PDF directly here) on the extraordinary boom in startups around the globe. The article is excellent and well worth reading as a overview of many of the building blocks of the startup ecosystems (Techcrunch’s Ryan Lawler covers the article here).

The interesting thing about the article is however, not only how technology (and particularly software) is changing many business work – rewriting the rules and inventing entirely new ones, but that it doesn’t just apply to startups:

It applies to almost all business…

The forces and building blocks in the article are perhaps most recognizable for startup companies, but we see these trends all across the spectrum of company sizes. Taking just some of the items from the article:

  • Accelerators: The startup accelerators covered in the article are primarily a startup focused phenomenon. However, the ideas behind such processes often benefit enterprise also – with large companies pitching participants to work on problems they care about and funding some of those closest to their areas of business. Some companies have taken this concept even further and run their own platform specific incubators – ATT Foundry and the Nike Accelerator Program are great examples.

  • Business Ecosystems: businesses are becoming ever more interconnected – organizations from Ford and Walgreens, to Jonhson Controls and The City of New York are working hard to nurture ecosystems of developers, customers, 3rd parties and in some cases even competitors that they can interact with. Large companies have often had supplier and customer ecosystems, however this trend is accelerating rapidly as commerce becomes more integrated: large companies often provide distribution, components or infrastructure for smaller players.

  • Lean Startup Methodology: while this is taking longer in some industries, the idea of lightweight pilots and products to explore what customers want is catching hold. Starbucks is well know for its retail experimentation for example, and the media/content business is a continuous flux of testing of shows and content – a process which is being accelerated by the availability of platforms such as youtube.

In all this however, the most pivotal element is the one covered in the closing section:

All in all, the platformization of everything will be monumental. Those who see the current entrepreneurial explosion as merely another dotcom bubble should think again. Today’s digital primordial soup contains the makings of the economy and perhaps the government of tomorrow.

The Platformization of everything is the most important element of all. The proliferation of software as the key control system both company internal systems and products shipped to consumers, is creating the means to stitch together new products and experiences almost on the fly from services that are already available. Companies such as Nike have become platforms by capturing data from millions of devices worn by their customers and allowing third parties to build on this data. This platformization affords opportunities both to the provider of the platform (ecosystem growth, expansion of product value, revenue) and to those building on top of it (speed of innovation, distribution).

While The Economist writers have more of a handle on the commercial forces are work, at the technical level what is happening in the API space clearly underpins this explosion – we may call it the API Economy – but it is the same phenomenon. APIs enable the platform building blocks for business creation and make them vastly more accessible than ever before. The “Cambrian Explosion” has already been name checked out for what is happening in APIs by Peter Van Auwera:

“I believe we are witnessing a similar “Cambrian Explosion of everything” in the information technology evolution of the recent years, and we see a relatively rapid appearance of new “life” forms, new building blocks for the way we do business in this hyper-connected economy.” [Cambrian Explosion of Everything]

and expanded on by Craig Burton in his post on this blog late last year.

There is also an excellent complimentary view tweeted out by Peter Coffee a few days ago saying:

In other words, APIs also unchain us from the OS silos we had before and allow us to innovate on the devices / platforms we use while simply pulling in the other functionality from around us.

The point is however that these building blocks are available to everybody and as company we’re seeing many organizations large and small pursuing the path to become a platform. For large organizations, some of the required transformation may take longer, but once platform thinking takes hold – both in terms of providing platform services and consuming them – we’ll likely see even more rapid change across the whole economy.