Walmart, Kosmix and @WalmartLabs
Walmart is no stranger to the power of business platforms. Walmart was one of the first companies to invest heavily (estimated at $300 Million in 1989) in a business platform as a means to empower radical business growth. Walmart used its integrated logistics business platform to grow from roughly $44.9 Billion in 1993 to over $400 Billion today. Since 1993, Walmart has extended that business platform to create a far-flung and engaged business ecosystem with thousands of supply chain partners.
But, Walmart has not scored well in Internet retailing, nor has it effectively incorporated its customers into its business ecosystem. While Walmart is the undisputed leader in terrestrial retailing, it lags in digital marketing and digital retailing.
That may be about to change.
Enter Kosmix and its founders. With the acquisition of Kosmix in April 2011, Walmart has moved from a 1st generation terrestrial-based platform strategy to a 2nd generation multi-business platform strategy. And to provide an organizational home for this new approach they established@WalmartLabs in Silicon Valley with the Kosmix founders (Walmart video announcement).
2nd generation business platforms employ what we call universal connectors, that enable dissimilar business platforms to electronically snap together with minimal customization. 2nd generation business platforms also have a significant cloud component to their architecture (technically speaking, SaaS, or Software as a Service) so that the business platform does not need to operate inside a particular company’s data center and hence its capabilities can be shared. For example, most mobile apps run in the cloud as a software as a service
Kosmix is a 2nd generation business platform. A bit of history is in order. Kosmix was founded by two of the original founders of Junglee Corp., Venky Harinarayan and Anand Rajaraman. Junglee Corp. pioneered Internet comparison-shopping in 1996. Amazon.com acquired Junglee in 1998, hire Rajaraman and the technology supports or inspires many of the customer services that the Amazon.com business platform now provides.
Kosmix’s underlying technology rests on sophisticated analysis of semantic networks, that is, the way in which information among the nodes in networks is related. So in a social network of customers, for example, semantic network technology can help to understand what customers think about a product or service, how customers relate to other customers in terms of what they consider important, which customers influence other customers and a host of other meaningful relationships that may not be apparent on the surface. Facebook, LinkedIn, Twitter, Google, and others use similar techniques to mine their social graphs.
So consider what this means for Walmart. Walmart already has one of the most sophisticated and effective vendor business ecosystems based on its logistics business platform (see Case Study of Walmart Stores). It knows what products are moving in what stores, at what velocity, whether it has the necessary inventory and whether its vendors can keep pace. Its buyers and vendors also have visibility into these stats and many of its vendors (see VMI) directly manage their product inventory in realtime with this data.
Couple this 1st generation business platform with social network data and semantic analytics and Walmart can cover the entire customer lifecycle and more. Walmart has the potential to link customer preferences, interests, and perspectives into the supply chain and related logistics. In addition, it can move into understanding buying preferences and habit of customer before they become customers or when they are in the early stages of the discovery process. The Kosmix business platform provides Walmart with visibility into the digital world much like the visibility they currently enjoy in the physical retailing world through their network of 9,600 stores in 28 countries.
Kosmix may be the missing link that Walmart needs. It also illustrates how a company with formidable IT assets and expertise can couple its current systems infrastructure with a range of emerging business platforms either through acquisition or through contracts. Walmart modifies its systems to use universal connectors to link to Kosmix in the cloud and rapidly assimilates its capabilities. Such a strategy catapults Walmart into the digital age and into the world of the elastic enterprise. A word to competitors: look out below.
And what about leadership? Walmart is known for its leaders, beginning with founder, Sam Walton and a succession of stellar CEOs. But Kosmix signals an evolution in the Walmart leadership approach. @WalmartLabs and the Kosmix signals that Walmart is opening its corporate boundaries and casting a broader leadership net. Kosmix founders bring new skills and leadership styles to Walmart and the 2nd generation business platform strategy will inform Walmart leaders in new way and enhance their decision making approach. Note also that social networking guru, Jim Breyer from Accel Partners is a member of Walmart’s Board further reinforcing their new strategic approach.
As Anand Rajaraman commented in his blog about the Walmart acquisition in April: “We are at an inflection point in the development of ecommerce. The first generation of ecommerce was about bringing the store to the web. The next generation will be about building integrated experiences that leverage the store, the web, and mobile, with social identity being the glue that binds the experience. Walmart’s enormous global reach and incredible scale of operations — from the United States and Europe to growing markets like China and India — is unprecedented. @WalmartLabs, which combines Walmart’s scale with Kosmix’s social genome platform, is in a unique position to invent and build this future.”
Agreed. Walmart just entered the future realm of retailing and threw down some serious swag for its future culture, business strategy and business infrastructure.