App Prosperity

Image via cg-art

In “The Rational Optimist,” Matt Ridley defines prosperity as “the increase in the amount of goods or services you can earn with the same amount of work,” and he calls out some inspiring examples of how prosperous the world has become. In 1910, a phone call from New York to Los Angeles would cost 90 hours of work at the average wage; today, it’s less than two minutes of work. Today you can buy 7,200 hours of reading light with an hour of work; two centuries ago, that same hour of work could only afford 10 minutes of reading light.

In the past decade, I’ve watched software applications experience their own boom in prosperity. When I was at Microsoft, SQL Server 2000, which took two years and hundreds of engineers to build, was a highly regarded product release in large part because of its speed and efficiency. Fast forward to October 2007, and fewer than 20 engineers built and launched the beta after 84 days of development. Less than three years later, three people built the Instagram app in eight weeks. Doing the math, that’s roughly a million collective hours of work for SQL Server 2000, ten thousand work hours for Hulu, and a thousand work hours for Instagram. I’ll admit, those are three very different applications, but they do all share an impressive trait: They are all very successful software products serving millions of users and worth billions of dollars. And the changes in the orders of magnitude are indicative of an important trend: Great software applications have clearly become easier to build.

But that’s only half the story. In a single decade, gone is the need to manufacture, package and distribute physical media (SQL Server). Gone is the need to buy, rack and maintain server hardware (Hulu). You can now focus exclusively on the customer experience and business logic of your application and use third-party platforms for all the supporting infrastructure, and do that all for a fraction of the cost (Instagram). Software applications are doubly prosperous: They are not only easier to make, they’re also far cheaper. The next billion-dollar start-up launched with 100 hours of dev work, costing only a few thousand dollars? It not only could happen, it will happen.

Another way to think of this app prosperity phenomenon is this: Because of the rapidly decreasing time, resources and costs involved, it’s now a given that any app can be built. Pure technical execution is no longer the difference-maker for companies that it once was. Of course, bad engineering can sink any business, but great engineering alone isn’t enough to win anymore — think about highly technically gifted companies like Color, for which engineering capabilities didn’t result in a win. Building faster than the competition is now often a difference of weeks, not years. Building cheaper than the competition is now often a rounding error. When multiple companies can solve the same customer problem in the same amount of time for the same cost, factors other than product and engineering execution will determine who wins.

So what are these new success factors? I’ve seen three important ones emerge: Distribution, Design and Business Model.

Not long ago, Groupon became the fastest company in the history of business to reach $1 billion in sales. But it would be tough to say that was achieved on the backs of engineering horsepower, considering the company didn’t hire its fifth engineer until it had over 100 other employees. But what Groupon did have was total mastery of viral distribution by setting up a clever incentive for customers to promote Groupon to their friends in order to activate deals, which helped grow its email list to more than 150 million subscribers.

Pinterest CEO Ben Silbermann also recently credited distribution — not engineering — as the key ingredient to his company’s success. It’s true that social bookmarking services are pretty easy to build — stand up a templatized Web site and grab Scrapy, Goose or another free crawler framework and you’re in business, which is why there were plenty of those sites before, during and after Pinterest launched. But none were as beautifully crafted or as thoughtfully designed as Pinterest (the poster child for Masonry layout), and none have 20 million users.

More recently, as Warby Parker, Birchbox and a host of other new commerce companies have burst onto the scene, highly targeted and vertical e-commerce has become cool again. But unlike the commerce companies of yesteryear that had to invest in big engineering teams to create custom infrastructure (Amazon used to have its own internal web programming language called catsubst, if you can believe it), these new companies have built on top of third party solutions, most commonly ecommerce-in-a-box Magento. They can then focus their resources and attention on their innovative business models — like Warby Parker with its disruptive pricing and margin management, or Birchbox with its creative subscription plans.

Exceptional growth strategy, user interface and monetization are what made the difference here, not engineering.

In a world of app prosperity, the most prosperous technology companies will be the ones that understand that being able to build their products is only a single step in a much longer journey. When every app can be built by anyone, you don’t need the greatest engineering team to win, and your competition doesn’t need that team to beat you. For businesses, technical execution is necessary, but no longer sufficient, for success. New skills and disciplines will be required to win out. And as consumers, we get to sit back and enjoy the show — because when every app can be built, that also means every app will be built. And that’s when we all get to prosper.

Eric Feng was formerly the founding CTO of Hulu and a partner at Kleiner Perkins Caufield & Byers (KPCB). He most recently founded Erly, a social media start-up funded by KPCB, which was acquired in May of this year.

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