TechCrunch gets the interface

In a column, for TechCrunch, Tom Goodwin claims “The battle is for the customer interface“. It’s always cool to see people agreeing with you – it’s been 18 months or so since I wrote “It’s all about controlling the interface“, and 3 years (has it been that long?) since I wrote “7 rules for interface control“.

It’s odd that Goodwin starts with Uber and doesn’t mention their most recent purchase (a mapping startup) – a classic interface play. Nor does he mentions this.

The battle rages on…

7 rules for Interface control

One of the most critical elements of a successful strategy in the digital age is the Interface control.

By “Interface” I’m not referring to UI and the implied design elements; nor am I referring to APIs, although relevant to the discussion. By “Interface” I’m referring to a point – physical or digital – at which a business and a customer meet, and transact using data: the business receives valuable data from the customer (or money, which in the digital age IS data), and the consumer receives relevant data or data-like service. John Battelle called it “points of control“, and control is certainly the objective here; but I prefer using “Interface control” as it describes WHAT you’re striving to control, and brings to bear the fact that customers are part of the equation.

Under this definition, the importance of “Interface” cannot be overstated. Interface control can lead to the acquisition of competitive barriers such as high switching costs; it can provide the key for unlocking network effects; it can lead to the disruption of entire industries as a result of pseudo-disintermediation (i.e., instead of taking out the middle man, a new middle man is put in place). Those who acquire control of key Interfaces have a better chance of gaining surplus profits.

3o years ago, when IBM decided to outsource (so to speak) the development of a PC operating system, it forever gave away the most important Interface with consumers when it came to the PC; at the same time, Microsoft’s dominance was practically cemented (although it took a decade to come to fruition). Microsoft’s control of the PC interface was a major reason it so easily crushed Netscape in the browser wars. Even today, with the mobile Interface gradually overtaking the PC Interface in importance, Windows 7’s sales demonstrate how Interface control can turn into a license to print money.

Battles for Interface control are raging all around us. Take the battle for the social layer. This is more than a battle to control users’ social interactions; it is a battle to control ever-increasing portions of users’ data, within any site or application, inside or outside of social networks. Facebook is certainly the 800-pound/800-million-strong gorilla in this arena, with Google finally showing signs of success and MySpace a corpse. But when marketers and media properties blindly implement Facebook’s myriad buttons they are foregoing a critical Interface with their consumers – one at which consumers provide invaluable data on their habits and preferences. Sadly, the battle is conceded before it’s begun, without even trying to establish an Interface based on mutual value exchange.

The mobile phone, with its constant physical proximity and inherently personalized nature, is the ultimate Interface according to our definition (Adam Greenfield’s term is apt: interface object, as opposed to a communications device). No wonder, then, that several Interface-control struggles are taking place simultaneously throughout the mobile value chain. Mobile operators, handset manufacturers and OS makers are all vying for control over the Interface with the end consumer. The operators – historically, the dominant players in the chain – are fighting to escape the “dumb pipe” fate; handset manufacturers are trying to avoid commoditization. The OS makers (some of them doubling as handset makers) are striving to get onto as many handsets as possible – i.e., into the hands of as many consumers as possible.

The iPhone is by now a classic example of an OS/handset maker bypassing carriers to take an Interface-control position. For many mobile consumers, the iPhone touchscreen and App Store form the primary interface with the mobile universe. The contrast between Apple’s position and Nokia’s position is striking. Nokia’s move to hand over smartphone OS control to Microsoft might prove to be Nokia’s undoing; it certainly hasn’t learnt from IBM’s PC mistake. Nokia has simply given up on trying to control the Interface with consumers and is now relegated to the hardware battle, stuck in the middle between Apple and low cost manufacturers. The Android OS was supposed to perform an iPhone-like magic trick for Google; but its phenomenal growth notwithstanding, its fragmentation and “openness” allow operators to keep de-facto control of the Interface.

The apps, being a potential barrier to switch, are a key interface element, and so attracting developers is a critical driver in attaining (and maintaining) control. Apple is the one to beat here, with Google gaming steam. Operators want to play too (again, “dumb-pipe-ophobia”) – but they’re mostly playing Apple’s/Google’s game instead of their own. If they seek Interface control, they should leverage their assets to become indispensable for developers: unique APIs, proprietary segmentation data, marketing support, and carrier-based services.

Numerous other Interfaces are at play nowadays, some of them overlapping with mobile, social or both. A few examples:

• Location – Google, Facebook and quite a few others (e.g., Foursquare) are vying for position, with no dominant player yet.
• Photo sharing – Instagram is an amazing story. One of the giants will grab it.
• Real time broadcasting – not sure that’s an Interface, really. If it is, then Twitter’s it. If it isn’t – well, that explains part of Twitter’s problem.
• Music – Napster destroyed the traditional Interface. iTunes became a dominant alternative. Is Spotify about to change things?
• Books – “Buy once, read everywhere” is Amazon’s way of planting Kindle as the Interface for books.
• Living room entertainment – Google vs. Apple vs. Microsoft
• Voice – Apple’s Siri is a breakthrough, but Nuance is the one with the keys to the castle.
• Memory – yes, memory. Evernote can be the future Interface.
• Health, travel, payments…

Interface control is important not just for technology companies, but for CPG companies, as well – after all, a fight to control an Interface is a fight to control access to customers. Ordinarily, CPG companies reach consumers indirectly, but as direct-to-consumer paths gain in importance it will become imperative for CPG companies to analyze whether they can achieve some level of Interface control. Here are some guidelines for any company to consider when performing such analysis:

1. Map your Interfaces.

Analyze all stages of the value chain, and identify existing or potential customer touch points that can be turned into strategic interfaces. Remember: a strategic Interface is not an API or a UI, but a critical point of interaction – online or offline. For example, customer service is a critically important but often neglected Interface, outsourced for the sake of cost cutting. Bad customer service is in fact an example of a failure to take advantage of an interface at which the business-customer value exchange can be dramatically important. Another example is the “P” in CPG – the Package: when every customer has a mobile handset with a built-in camera, the package holds unique potential as a retailer-circumventing interface (up until now I’ve discussed industry/category Interfaces; the examples above relate to intra-company Interfaces, which are no less important).

2. Vertical integration is not a panacea.

It does not ensure Interface control. Sony, for example, boasts vertical integration in the 3D space: from 3D cameras to 3D content to 3D TVs. The problem? Most of the interfaces in this “integration” offer no added value to consumers; few consumers will insist on purchasing a Sony 3D TV in order to watch a Sony-produced 3D movie. It’s therefore important to ask yourself the right interface-related questions: are the interfaces under my control really important to or relevant for consumers? Are these Interfaces at all? The Sony-Apple comparison is instructive here: in Apple’s case, the interfaces between the company and the developers, between the app store and consumers, and between consumer and handset are all relevant – i.e., mutual value exchange takes place in each and every one.

3. More information = more power.

The extent to which you control a certain Interface correlates directly with the quality of the information received or provided through it; the more comprehensive/exhaustive/relevant the information – the more power you can wield through the Interface. It is no coincidence that Google’s acquisition of ITA was challenged by other industry players: the quality of information in Google’s hands increased thanks to the acquisition – and hence, its power.

4. Proprietary information = more power

Strive to gain control by leveraging proprietary information; APIs can be useful here. Credit card companies, for example, possess extensive data on their customers’ and consumers’ financials and financial habits; by offering developers APIs that leverage that data, they can maintain their grip on a market threatened by digital disruption. In another example, leading food companies can leverage recipe data to provide value to consumers in relevant interfaces (e.g., mobile).

5. Controlling distribution is as important as controlling information.

That’s a rule both the music and newspaper industries have had a hard time to grasp. Both have suffered from the loss of control over previously-lucrative Interfaces. Take newspapers for example: first they lost sight of the Interfaces readers use to search for jobs, real estate, cars and other classifieds; then they lost the Interface through which readers consume news. Now they’re left with the “paper” in “newspaper” – an interface that’s no longer relevant for most. Yep, content is king. If you have distribution, that is.

6. If you can’t build a platform, become part of one

What if you’re a small company with seemingly no chance of controlling any Interface?  Try to identify the right ecosystem for you, and ride it to glory; who knows, you might discover your own Interface on the way (Zynga and Instragram are intriguing examples). But if the elephant you’re riding on becomes possessive, watch out.

7. The middleman is more important than ever.

The Internet did bring about disintermediation onto quite a few industries – but in many of them it simply put in place new middlemen: enter Craigslist, enter iTunes. Often, to control an Interface is to be a middleman, a broker; despite all the technological advances and digital innovations, some of the most ancient principles are still valid. Plus ça change, plus c’est la même chose.