How to create the most value for the next technology wave



Major technology platforms shift every 10-15 years, with new platforms building on the ones they preceded. The PC was the platform of the early-1980s, then the internet came in the mid-1990s to improve the functionality and connectedness of PCs, then the smartphone emerged in the mid-2000s to put an internet-connected PC in everyone’s pocket.

We’re due for the next major technology platform shift, and artificial intelligence, augmented reality, and virtual reality are those next platforms.

So how do you maximize value creation for the next wave? Here’s our answer:

If you can create an operating system (OS), create an OS. If you can’t create an OS, optimize a component of the new technology platform. If you can’t optimize anything in the new platform, at least disrupt an industry that’s been relatively untouched by technology.

Let’s touch on each of those three opportunities.

Build an OS

If you can build an operating system, build an operating system. We define an operating system as combining core pieces of new technology into a single platform that makes them available to third parties. This is different than the dictionary definition because we don’t see operating systems as purely related to a computer.

We would argue that Google is the OS of the web, combining organic discovery, paid discovery, video content distribution, monetization tools, analytics, etc. If you have a web presence, you must, in some way, touch Google.

Amazon is the leading OS for commerce. They combine proprietary fulfillment, third-party sales, payments, audience driven by a strong brand, etc. If you sell things online, you should consider doing it through Amazon. Facebook is a social OS. They combine the social graph, news feed, video/live video, messaging, targeted promotion, etc. If you want to build services that connect people with one another in some way, you should do it through Facebook. And, of course, iOS and Android combine a camera, a touchscreen, GPS/location, an accelerometer and internet access, and offer ways for third-party developers to distribute their software (app stores).

Owning the OS layer has historically been the path to the greatest returns during technology platform shifts. Apple, Google, Microsoft, Amazon and Facebook all have market caps over $400 billion as of this writing, making them some of the biggest companies in the world.

We expect those five companies are going to spend more than $50 billion in R&D this year and $5 billion-plus will go toward the development of AI/AR/VR “OSes.” Thus, owning an OS in the new computing paradigm is hard and highly competitive. Everyone knows how much value there is in owning the OS layer. It’s why Facebook paid $2 billion for Oculus when it was just a developer kit — a shot at owning the OS for virtual reality. It’s also why private companies like Magic Leap have had so much venture interest regardless of valuation — a shot at owning the OS for augmented reality. If they succeed, the returns will be substantial.

Optimize a new technology component

If you can’t build an OS, optimize a component of the new technology platform. Snapchat and Uber are two examples of this type of opportunity from the smartphone shift. Snapchat optimized the smartphone camera, making it more fun and engaging. They created disappearing messages, stories and lenses to enhance the content that users could create. They built a culture around fun and natural content.

Facebook has since followed in opening up the camera to developers at this year’s F8. Uber built a business that optimized the GPS/location component of the smartphone. The purpose of a map is to get somewhere. Uber optimized this intent, creating a logistics platform that paired users looking for a ride given a specific location with nearby drivers. Beyond Snapchat and Uber, Dropbox optimized file sharing, Spotify optimized music consumption, Stripe optimized payments, Slack optimized communications for business, etc.

The interesting thing about optimizing a component in a new technology platform is that it can open the window to create an operating system: Combining core technologies and making them available to third parties. Now Snapchat is experimenting with hardware like Spectacles, which may be an early experiment in creating an AR OS. You could argue that Uber is building a transportation OS getting into food and other delivery segments, as well as autonomous vehicles