Running a hardware business without a platform ecosystem is hopeless in the 21st century. That is the message we are getting from the struggles of GroPro. The era of the old Sony, Panasonic and other hardware-centric icons had since passed. Today, you cannot just build electronics and expect to survive as a business..
Why? Anyone can clone that electronics. And can do so at a better price model.
You only defense is platform which cannot easily be replicated. That means having an App Store supporting iPhone thereby providing an inherent value which only iPhone as a hardware cannot deliver.
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GoPro Inc. fell to a record low Monday after Goldman Sachs Group Inc. became the second firm in two days to recommend selling the stock, highlighting the camera maker’s struggles to compete in an increasingly crowded market and overcome missteps with new products.
“We think GoPro’s main challenge is that its core action market is largely saturated, as it has not attracted a significantly broader and more mainstream audience,” Simona Jankowski, an analyst at Goldman Sachs, wrote in a note to clients. “We expect GoPro to continue to struggle fundamentally.”
The shares fell as much as 10 percent to $7.95, the lowest intraday price since June 2014, when the company first sold shares to the public at $24.
On March 3, Citigroup Global Markets Inc. initiated coverage of the stock with a sell recommendation and a price target of $8. Citi analyst Stanley Kovler called the company the “best house in a deteriorating neighborhood.”
GoPro’s market-leading action camera products are not enough to overcome the overall decline in standalone imaging products like camcorders and cameras, and increased saturation in mature markets like the U.S., he wrote.
For African entrepreneurs, as you become to build hardware companies, you need to quickly think about how to build platforms around them. Without platforms, it is not likely you will do well. Electronics, no matter the quality, will sooner or later become a commoditized product. But when it is supported with a platform ecosystem, you can a have solid defense against commoditization.
App Store is a platform ecosystem for iPhone. Even if someone can make a replica of iPhone, the store is not something that can be easily cloned because of the apps. Had GoPro built a platform, it could have differentiated itself from other camera companies. This is an important lesson to drive any hardware strategy.