If you’re a maker of semiconductors you inherently get the platform economics of a “design win” business. You create a platform (your chip), and you seek thousands of “design wins”, where other companies do all the work to sell your chip, because it’s designed into their product. A relatively low number of those designs may go to market, but odds are decent that a few of those will break through and sell millions of units of your product.
The more of these design-win breakthroughs you have, the more powerful your ecosystem. And not just in terms of raw sales. The more frequently your chips are designed into other products, the more that success will grow your entire ecosystem, which in turn amplifies the entire virtuous cycle.
How so? Well, engineers will be used to working with your chips, so they’ll think of them for their next project. Developers will be used to coding to platforms built on your chips and will prefer to continue to leverage that knowledge rather than starting anew. A very significant part of your overall sales growth, in fact, can be based largely on increasing numbers of engineers and developers understanding your tool chain, your standards, your documentation, and your value add.
Brilliant, right? So why don’t we talk more about “design win” as a business model for software platforms?
Most software platforms have ignored the “design win” business model in favor of the other model: “dominance first”. Sell your product, first and foremost. Make your primary goal to make your platform so imposingly, monolithically in control of your market segment that no one else has a chance to compete. In this model, having a community of developers that build for your platform is of secondary concern, because “Of course they’ll build apps for us. We’re the only platform worth building for.”
Given recent history, it’s easy to understand why. If you were lucky enough to be the inventor of the dominant web browser(s), the iPhone, or Facebook, well… you pretty much took over. You were able to reasonably quickly establish millions of points of presence — that is, millions of customers, who in turn were also millions of potential customers for third-party developers on the platform.
There’s no denying that that kind of overwhelmingly powerful position creates enormous market power (defensive and offensive). Both the iPhone and Facebook effectively cemented this “dominance first” business model in the minds of press and investors as the only viable path to success. They were insanely popular platforms first, then the “design win” side of the equation (apps and further platform growth) came after. Fair enough, but that’s hardly the only way to succeed, and it’s arguably much harder than it needs to be.
“Design win” first
Still, quietly, brilliantly, the “design win” model lives on. And prospers. Look behind the scenes at unsung platform-first heroes like Twilio or SendGrid. Both companies are developer platforms that have had unicorn-sized success with IPOs and ongoing valuations with business models based on developer adoption.
In fact, Twilio and SendGrid demonstrate that “design win” is quite possibly the more viable business model, because it’s eminently executable for even the most cash-strapped startup:
- Create a foundational platform that solves a problem for developers.
- Enable each developer to pursue their desired use case by providing all of the appropriate initial tooling for experimentation and design.
- Sell the platform as a “design win” to thousands of developers as the substrate from which their potential successes arise.
- Focus on your developer customer’s happiness and support each developer to the hilt.
- Provide developers with additional ability to scale (whether that’s reseller agreements, additional capacity or services, promotion, etc.).
- Reap the rewards of your developer ecosystem growing your platform for you. Now you’ve got a million customers, and you are an even more attractive platform to new developers who can immediately deploy to your millions of points of presence.
After all, how reasonable is it to expect the alternative “dominance first” model to work out? I think it’s a fair observation that having a hit product that generates a million or more customers within a company’s early life span is pretty difficult. (See my post “Looking Past the Unicorn Hunt” for why trying to find the instant-success “killer app” is a waste of time.)
It’s ever thus
Looking back at history, before digital companies such as Twilio and SendGrid had success with this model, two titans of tech scaled their initial business on exactly the same formula with a couple of crazy good platforms:
- Apple, with the Apple II
- Microsoft, with MS-DOS
In their early days, both companies sold relatively little product, but what they did do was create platforms. And those platforms were adopted by individual entrepreneurs with problems to solve in their own domains and industries. Scores of “value added resellers” purchased the platforms and built additional software to solve a specific problem. They then marketed and sold both their software and the platform to their customers as a package. Design win! Hundreds of wonderfully successful small, medium, and large businesses created millions of points of presence for the platforms with just their solutions selling into those vertical markets.
And, of course, both companies had design wins amongst the community of “cross-vertical” application developers too. These were applications that were so universally adopted that the application itself — spreadsheets, databases, and word-processors — when coupled with the platform, also sold millions of points of presence.
There were even high-school and college kids who got educated about the platform(s), and they too joined the ranks of the successful “design win” entrepreneurs, helping to build what we now know as the global tech industry.
It was the design win-ners who emerged victorious. Within a few years both Apple and Microsoft had vibrant marketplaces of millions of points of presence into which niche software application developers could now play a role. And the platforms expanded from there. It was a virtuous cycle — vertical developers and broadly generalized developers creating scale for niche developers, which further increased the overall strength and power of each platform.
“Design win” is the model of Misty Robotics. When it comes to developers, we’re in the mold of Twilio, SendGrid, Apple, and Microsoft. We’re working with value-added software developers to tackle their dreams within vertical domains where they see robots playing a role. We’re working with entrepreneurial dreamers who see more generalized robot skills that might become “the killer app” of robots. And we’ll create the overall volume for niche robot skill and accessory developers to flourish.
We’ll concentrate on creating an amazing platform upon which many experimenters can experiment easily and affordably. We’ll be responsive. We’ll continue to focus on the developers’ needs — not the siren song of broad consumer marketing.
And, we’ll have winners. Winners who emerge into many industries to sell tens of thousands of robots with their specialized robot skills. Winners who create broadly-applicable skills and accessories. Then, one day, like Apple or SendGrid, the press will wake up and wonder: “Wow; where did those millions of points of presence come from?”
It’ll be one “design win” at a time.