27. Where does “full stack” start and stop?
I am a fan of Aaron Levie’s Twitter game. His tweets are generally insightful and often very humorous. He tweeted something last night that caught my eye.
One response read:
This will be a recurring conversation in technology over the next 10 years, as Internet- and smartphone-first companies grow and take share from brick-and-mortar- and analog-first companies. It will be a change driven, absent major market corrections that force an adjustment of strategy, by venture capital investors deploying their version of Chris Dixon full stack startup playbook:
The full stack approach lets you bypass industry incumbents, completely control the customer experience, and capture a greater portion of the economic benefits you provide.
Dixon mentions “Tesla, Warby Parker, Uber, Harry’s, Nest, Buzzfeed, and Netflix” as adherents to the full stack playbook. He gives tip of the hat to Apple too. All great companies. All rely on someone else somewhere in their business, which begs the question: where does a company’s full stack start and top?
Take Netflix, for example, who in August announced that they had closed their last data center to complete their transition to relying entirely on third-party cloud servers. Coincidentally, they are big Amazon Web Services customers. With AWS, Amazon has not only found a cash cow. They have taken the bottom layer of their own “full stack” and started renting it out to others, like Netflix, for whom owning servers represents too “full” a stack.
It’s an amazing comment that Netflix, who by the nature of their business must operate a complex data and networking operation, have chosen not to make that part of their “owned and operated” capabilities. They have instead chosen to invest more heavily in becoming a producer of original video content. For Netflix management, it must have seemed that it was original content that would allow it to differentiate not computing.
That is a difficult analysis to perform. It must, however, be the test that governs a full stack strategy. Going full stack for the sake of going full stack is a waste of money. Finding crucial components in the delivery of your product or service where you can save your customer money, improve the quality of your product, and capture more economic value long term… those make for worthwhile investments. The Netflix case is instructive.
Note to reader: This is day 27 of 92 in my commitment to write for 30 minutes each day from October 1 through the end of 2015.