How Being App-Happy Undermines Your Business
Apps might be relatively easy to produce, but they're not a cure-all for startups' business problems.
Considering the runaway success of the app market, it’s easy to understand why many founders think their paths to unicorn status runs through App City. While some pundits were digging an early grave for apps, Apple was busy breaking records. The company’s App Store experienced its busiest day in history on Jan. 1 of this year, notching nearly $240 million in sales.
This single-day surge represents another spike in the expanding app marketplace. In 2016, developers earned more than $20 billion through the Apple App Store -- a 40 percent increase from 2015 earnings. For some historical perspective, developers have earned $60 billion in total since the app store launched in 2008.
These gaudy sales figures add to the lure of app development as the latest panacea for startups.
While it might be relatively cheap, easy and fast to produce an app, these low barriers to entry are misleading. Too many founders rely on apps alone to drive profits, ignoring traditional business wisdom in the process.
Even if a company develops a market-disrupting app that reinvents smartphone use, developing the tech and tossing it onto the app store without any sort of strategy will likely lead to failure. Whether you’re producing an app or opening a new brick-and-mortar store, your venture still needs plenty of marketing, positioning and customer service.
Simply put, businesses cannot thrive on apps alone.
Thinking beyond the app
I’ve seen this app-happy mindset in my entrepreneurship classes, which involve students working over the course of a semester to create business ideas that solve real-world problems. These young minds regularly see creating an app as the perfect solution, typically replacing an existing service or marginal problem such as finding cheap insurance or locating a nearby gas station with a smartphone app.
The bulk of these app-driven solutions attempt to emulate the success of OpenTable, the online restaurant reservation app. This approach frequently involves adding a dash of digital convenience to existing physical infrastructure.
This sort of digital window-dressing on the real world drove the initial dot-com boom of the ’90s. The main issue with this line of thinking during the Cretaceous period of the internet is the same problem driving the app-first approach of today: By creating a digital link to an established brick-and-mortar industry, you’re tying yourself down to the present. This also makes your company susceptible to anything that might disrupt the physical side of your industry.
Instead of a tie to the present or past, entrepreneurs need to use their vision and intellect to think beyond the curve and lasso the future of a given market.
The app of your dreams
Innovation in the digital age isn’t about using technology to improve existing experiences; true innovation involves completely exploding the current model. The best solution to one of society’s woes could very well be an app -- Uber, Kindle and Tinder have completely disrupted their respective industries -- but consider the strategy behind your app before sending your creation into the wild.
1. Remain grounded in reality. The pizza industry is firmly rooted in the real world, with a reliance on physical ovens, ingredients and delivery drivers. Despite this reliance, pizza juggernaut Domino’s has relentlessly tinkered with technology in a quest to simplify the ordering experience.
The company started with a mobile app that allows customers to bypass phone calls and website visits to order pizza. That’s great, but Domino’s took things a step further by creating a tweet-to-order system and experimenting with ordering via text messages and emojis. Most recently, the company made it possible to order directly from an Amazon Echo. The next time you want a supreme pizza, Alexa has you covered.
This trailblazing in the digital world appears to be paying off. The pizza company’s endeavors drove 50 percent of U.S. sales in 2015, according to TechCrunch, with Domino’s bringing in $4.7 billion from digital ordering channels worldwide.
Domino’s provides a road map for how apps can drive value, but only when they integrate as seamlessly as possible with the real world. Apps that deliver a way to track, follow up and manage existing processes create value by essentially giving users a remote control for the economy.
Apps should not be digital veneers masking traditional behavior. Instead, they should spur a change in fundamental consumer behavior.
2. Everything has its limits. Even the digital universe of apps has some boundaries. Aside from the need to upgrade and maintain apps, developers must deal with barriers between existing platforms.
iOS has traditionally been the more lucrative platform for developers, with many apps appearing on Apple devices before other platforms. In particular, a lot of mobile games land on iOS first before branching out to Android devices. “Super Mario Run,” which generated about $53 million for Nintendo, launched on iOS in December but and on Android devices in March.
While Apple still dominates the U.S. scene, Android is carving out a larger market share elsewhere. Android has gained some traction because it benefits from the latest versions of Google’s apps and the Google Play store has a higher percentage of free apps than the Apple app store.
Be mindful of the strengths and weaknesses of various platforms. While it’s possible to launch on several platforms at once, you’ll also risk being a jack-of-all-trades and master of none. Developing an app for these different devices simultaneously can quickly increase your expenses and time to market.
3. The end should justify the means. This might sound like heresy, but consider whether people even need an app to solve the problem your business is targeting. Will they need a solution to your problem with regularity? That will determine how frequently they use your app. Will your customers find your proposed solution valuable? This answer should tell you everything you need to know.
An emerging business needs a “yes” answers to both of those questions for an app to make sense. Having a great app should not be your goal. Instead, focus on adding value to the customer through a great app.
The value you deliver should justify the cost rather than the other way around. An app that’s cheaper than the alternative isn’t necessarily a better tool for users. Creating a half-baked app could destroy value in the end, so focus on the value you want to create rather than the cost it takes to get there. That’s the only way to justify any business decision, including app development.
Software is indeed eating the world -- as Marc Andreessen opined back in 2011 -- but not by digitizing existing functions. The true power of software lies in changing behaviors through sidestepping physical limitations that dictate much of what we do today.
It’s unclear whether we’ve seen the apex of apps, but all the sales records in the world are useless without a clear and beneficial connection with the physical world. Founders cannot succeed by trying to substitute technology for business skills and market knowledge. There is no app for that.
Entrepreneur Leadership Network Contributor