Platform markets and services – Curious about change

So much has been written about platforms organisations, and their value in the markets is becoming increasingly dominant.

platforms value

The analysis of platform companies often focuses on the business model and it is indeed a very different one from conventional businesses. However, what is less often considered is the mindset behind the model. This contrasts fundamentally with how organisations have viewed their role in the past. The distinction is between control of scarcity (traditional) and leverage of abundance (platforms), and the role of the organisation in achieving that goal.

Most organisations have seen the necessity of command and control over a particular set of assets (physical property, people, IP, a product or service portfolio) as fundamental to their success – control which dictates who has access to those assets, for what price and via what channels. Hence decisions about sale or lease, mass or niche marketing, on or offline sales. And as growth has become more elusive, the control has been reinforced by increasing focus – on individual markets, competitive advantage, a specific market need etc.

Platform businesses have a very different perspective – in essence they perceive their role to be to maximise the market opportunity – in some cases (such as Amazon or Uber) on both the demand and supply sides. They then become the route through which the entire market accesses something – be it data (Google), property to rent (Airbnb) or transactions (Alibaba).

The consequence of such an approach is that the platform enables growth in multiple directions without materially changing the cost base. Uber is not about only the people who want a ‘taxi’ late at night, it’s about the generation that doesn’t want to buy a car, park a car or drive a car (for environmental or other reasons), or those who want an income (supplemental or otherwise), or who want convenience. The platform provides a solution to all of these and more – without change. And as Airbnb (and of course, Amazon, Apple, Google, Tencent and Alibaba too) is demonstrating enhancing the offering is equally simple. So not only is Airbnb targeting the SME market, it’s also offering ‘experiences’ – led by the existing customer base.

In all of this, the underlying mindset is not about focus, it’s about abundance. It’s not about control, it’s about opportunity and maximising it. Many established organisations have a dominant position in the market place – they understand their value networks up and down stream, and have a strong brand presence. All of which would be valuable as platform plays. But the mindset is looking for growth from a predictable, controllable, focused market or product set or route already understood.

So how might this change? Some of it is in terms of definition and perspective – being clear about whose agenda is driving change. All of these platform organisations share an obsession with understanding not just what their markets say they want and need, but what they are doing and almost more importantly why they are doing it. That’s like a supermarket asking ‘why are you shopping?’ The answer today feels like an assumption based on a lot of data about what and how (the shopping basket and whether it’s online/offline, delivered, collected etc) but behind it lie a raft of interesting ‘why’ type questions – Why a weekly shop? Why you? Does the when matter and what does it say why you shop? Why shop for food rather than go out? Then the question arises – is the platform the shopping or the activities driving it? Or is the platform the supply side – ease and cost benefit of collating goods? In his blog Edge Perspectives John Hagel talks about today’s world the contextual age – where opportunity and growth lie in deep understanding of, and responding to, the context rather than the transaction.

John Hagel also talks about transformation as the shift from caterpillar to butterfly – rather than the ability to do what’s already being done cheaper, faster, more efficiently. Thinking from a platform mindset is one angle of that kind of transformation for growth, whether the net result is to become one, partner with one or adopt some of the mechanics.

My latest addition to changeisanopporunity is around the democratisation caused by digital technologies, using Nutmeg, an online investment management site which makes clear that anyone, even with small amounts of money can invest – and at costs which make it attractive to do so. This is achieved through the use of algorithms in this instance but it is just the tip of the iceberg – data and analytics (both descriptive and predictive), machine learning and automation are all contributing to this trend. And as sensors are increasingly embedded in everything we touch and use, the internet of things will make all of this even more feasible and cheaper. At one level therefore technology is a real driver of democratisation – opening up privileged areas to a much wider population, and making expertise transparent and accessible rather than scarce and expensive – in that sense this is another aspect of abundance from scarcity.

But does the democratisation solve all problems? Does everyone have both the access and the capability to use the technology needed? Does everyone understand the implications of engaging (not just investment management but whatever platform transactions they are joining)?And does the transparency over costs and the comparison with traditional routes provide a complete view of the opportunity here? And let’s not forget that investment management is by its nature regulated to protect those who may be vulnerable but not every industry where digital democratisation is occurring has the same levels of oversight. . .

So this democratisation brings with it ethical questions as to where responsibility for decisions rests – and the extent to which making something simple to do, and cheap to achieve is sufficient of itself – or does it bring additional responsibilities?