🚨 Palantir's Secret: Solving the Unsolvable
🚨 Palantir's Secret: Solving the Unsolvable
Forward Deployed Engineers solve the unsolvable
Editor: Emanuele Marabella
When the mission is critical and there is no room to fail, you don’t call normal troops. You call Special Operations.
Special Ops are trained to perform in whatever environment to get the job done.
Their unique skill set makes them the most elite soldiers. In a similar way, Palantir’s business is built around engineers that require the same spirit and solve previously unsolvable problems. Forward Deployed Engineers (“FDEs”) deploy Palantir’s software to solve the most critical issues and help clients react to shocks.
Understanding the centrality of FDEs’ role in Palantir’s business is critical to capture the rationale behind certain Palantir business decisions.
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Why FDEs are the pillar of the model
Internally FDEs are called “Delta”, which is probably a reference to the Delta Force, the most elite team of special operators specialized in anti-terrorism, the field where Palantir was initially deployed.
FDEs deploy and customize Palantir’s software platforms to customers with the goal of achieving technical outcomes.
Their success is therefore measured by the value they create for customers.
This setting produces crucial features:
Efficiency: FDEs have the incentive to find the most effective way to solve the problem.
Pricing Power: successful achievement of previously unsolvable problems gives Palantir high pricing power.
Trust: an operative output is worth more than 100 PowerPoint slides.
A happy client will be prone to keep the implemented solution, generating recurring Revenues for Palantir, and expanding the relationship with Palantir for further use cases.
Palantir sells outcomes.
The source of Palantir’s Moat
Karp underscored the importance of access to the battlefield when it comes to military technology, but the same principle is translated in the commercial space by working closely with corporate clients and having direct exposure to their pain points.
“These things take five six years to build if you're very good at it and you need access to the battlefield. You can't build these things in the lab.” - Alex Karp, REAIM
Thanks to their proximity to problems, FDEs generate crucial insights that are not only critical to help solve similar problems but also develop new features in Palantir which can subsequently be used to empower FDEs and clients.
In other words, FDEs produce precious R&D while getting paid.
Solving a critical new problem for the first time is demanding, but that solution can be used to solve similar problems without the need to reinvent the wheel each time. This way, Palantir compounds knowledge of already solved problems.
This brings us to a fascinating corollary:
The more Palantir solves problems, the more it unlocks the ability to solve further problems while scaling the solution to the existing customers.
This is the source of Palantir’s moat.
If a problem was previously unsolved, it means that commercially available software solutions were unsufficient to tackle it.
Therefore, if Palantir actually solves the problem, it naturally leads the competition while having a software solution that works.
From problem to product
By building software to solve problems, Palantir develops an increasing number of use cases that become modules inside Foundry and Gotham.
For instance, in the picture below you can see the solutions Palantir has developed for the insurance industry. These products are developed by working closely with its Insurance clients/partners like Swiss Re, proving again the fact that Palantir should be considered an Enterprise Network (Palantir: The Biggest Networks Start Small).
FDEs in Palantir’s value chain
The following image could help better visualize FDEs’ critical role in Palantir’s value chain.
We can synthesize the process as follows:
FDEs solve clients’ problems by leveraging Palantir platforms as a Swiss army knife with a multitude of possible use cases.
FDEs give feedback internally to Software Engineers (“DEV”) on the use cases they are tackling.
DEVs improve Palantir platforms by building archetypes to facilitate the solution of similar problems in the future. It’s like adding another blade to the Swiss army knife.
The new tools are scaled to existing customers or used to generate an impact on new potential customers.
Thanks to this unique structure, Palantir is able to create software that works ahead of other software companies.
Becoming the industry operating system
Palantir seeks to solve the most complex problems as a source to build new products.
Therefore, Palantir seeks to work with the biggest and most complex organizations.
If they can solve their problems at scale, they can develop solutions that naturally work also for less complicated entities.
By partnering with the most complex organizations Palantir develops the best products.
This allows us to better understand why Palantir has preferred having a few relevant, big clients that are leaders in their sector rather than going mass market like other peers have done.
By building the solutions that affect the leader of each industry, Palantir can become one step closer to becoming the “operating system of the modern organization.”
Conclusion
By recognizing the importance of FDEs, we can see that for Palantir, success is not solely dependent on acquiring clients, but on identifying suitable partners who can contribute valuable research and development towards addressing complex industry-wide challenges.
The heavy reliance on FDEs, however, is not all roses as it presents serious challenges to Palantir’s business model. We will uncover this in the coming articles.
Yours,
Arny
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