Platforms such as Facebook, Google, Amazon, Apple and Netflix have emerged all-powerful over the last few years. However, over time, the cracks started showing. Customers were worried about their over-dependence on these entities and their privacy. Incumbent businesses that got disrupted by platforms were concerned by the destruction of value. Governments across the world were concerned about platforms’ unbridled power. And politicians started pushing back, as the debates in the run-up to US elections demonstrated.
Then COVID-19 happened.
It has reset the way governments, customers, and even its harshest critics, look at platforms.
In this Masterclass, Sangeet Paul Choudary explains how this complex story will play out in the coming weeks, months and years. And what we can do about it.
Choudary is a business scholar, C-level advisor to more than 35 of the Fortune 500 firms, and best-selling author of Platform Scale and Platform Revolution. He has led executive education and strategy workshops for business leaders and policymakers across the world and runs an online learning programme, Platform Playbook, for enterprises and startups.
Besides the Founding Fuel team, four distinguished guests engaged with him.
- Anuradha Rao, former deputy managing director, State Bank of India
- R Srinivasan, professor at IIM Bangalore.
- Haresh Chawla, business builder, startup Investor, thought leader and advisor.
- R Sriram, co-founder of Crossword Bookstores and Next Practices Retail.
The 90-minutes-plus masterclass addressed a range of questions on technology, business models, nonprofits, country strategy, economy and society. Here’s a synopsis:
The basics: There are two types of business models
- The conventional ‘pipes’ which create a product and push them to end-users.
- ‘Platforms’ that provide an infrastructure for third parties to connect. Platforms enable producers and consumers of value to connect and interact. They also set the rules of governing those interactions.
Shifts due to supply and demand
You can use two lenses to analyse the impact of COVID-19 on platforms and businesses in general.
- What trends is the business speeding up and slowing down?
- How is behaviour changing on the demand side and the supply side? What’s getting concentrated or commoditised?
- Eg. Netflix. Because theatres have shut down, there’s more demand for streaming. That gives studios as extended opportunity to test new business models. On the supply side, for network TV, live events (such as sports) have stopped. So network TV will license content from streaming players.
- Eg. Disney. How can it replace or augment the experience of going to an amusement park? What core assets does Disney have that it can use to create and deliver value to customers through digital platforms? Unleash interactivity with Disney characters? Disneyland experience through games?
- Eg. Restaurants. On the demand side, customers don’t go to restaurants. On the supply side, restaurants in prime real estate might shut down if the lockdown continues. Will aggregators invest in dark kitchens, hiring chefs from the restaurants and creating the right products using data?
Ownership, incentives and the commons
These are the key differences between platforms for business and platforms for non-profits.
- There's opportunity to use platforms for real large-scale impact in the not-for-profit world. Especially if we start seeing new actors coming in without legacy baggage.
- The challenge: Because of a lack of incentives, the brightest minds may not be working on some of the most important problems.
How might a non-profit platform be different?
- In the for-profit world, when you build a platform, you always try to identify what is the control point—that single inimitable asset which you can control, because of which the rest of the ecosystem becomes dependent on you.
- For Facebook and Google, it's our data, which is owned by them.
- For Google on Android, it is Google Maps because it is so expensive for others to create mapping data.
- For platforms in the non-profit world, ownership is distributed, and the assets can be shared as commons for social good.
- There’s a greater possibility for releasing important components of your platform into the commons and allowing a larger ecosystem of innovation around it.
Can traditional businesses avoid commoditisation?
- If they think strategically about it, they can.
- A pre-Covid example is Apple Pay vs banks. When Apple Pay goes into a country, it negotiates with banks. If a bank doesn't agree to its terms, it goes to the next bank. Eventually, every bank will have to come on board on Apple’s terms. In Sweden, they flipped who was going to be the platform—banks came together and created a common payment mechanism. And asked Apple Pay to be part of their payment mechanisms. By then 70% of the population was using the banks’ payment mechanism.
- In a post-Covid world, there’s no clear scenario. That said, there's definitely going to be an increase in power of platforms in general. Because a large consumer base is training the platforms’ algorithms right now.
Infrastructure vs platforms
Platforms can be used in rural markets. However, some of the key elements—user identity (authentication), reputation data (creditworthiness)—might be missing. To enable that, one will have to build basic infrastructure—such as India Stack—on top of which platforms could be built.
How platforms impact inequality
Orchestrators Vs Enablers
- Orchestrators, such as Amazon Marketplace, create markets, control the demand and supply, and match the two sides and orchestrate them. The control point is the demand side behaviour and the demand side data. Orchestrators tend to create inequalities.
- Enablers essentially provide infrastructure to producers, who then create something and amplify it to consumers. Example, Shopify, for whom the control point is supply-side infrastructure. They don’t create such inequalities.
Commoditised services Vs Specialist services
- The more commoditised the service, the more likely that the platform will control the producer rather than empower them. For example, Uber, where you don’t care who is driving you. Here a low rating can have a driver kicked out of the platform.
- In contrast, specialists (eg, a designer in Upwork) can use their ratings to get better deals. The more skilled you are, the better opportunities you can create for yourself.
- So, for blue-collar work, for-profit platforms are exploitative. Once drivers or delivery providers join platforms, they find it hard to get time to upskill and move to highly differentiated services. That exacerbates the inequality.
- One solution is providing blue-collar workers to port their ratings to another platform or to a third party, so they can use the reputation points they earned in one system to go to a competing platform.
Countries as platforms
- Country-level platform strategies are a way to increase competitive advantage for countries in a global, connected world.
- For country-level platform strategies, they need to think like the Android model, which has three elements:
- an open infrastructure (the Android OS)—what could be open infrastructure?
- a control point (Google Maps)—what could be a key control point?
- and neutrality—how could they be neutral so that they have an important geopolitical position?
- Eg. Singapore
- The shift: Singapore’s strategic location allows it to have a control point of physical trade. Now trade is moving online and becoming digital, With platforms like Alibaba, and China's Belt and Road initiative set to pull trade away. Also, post COVID-19, countries will try to build local supply chains.
- The strategy: Become the hub for all trade-related FinTech and supplement that with a free data port so that the data flows come back to Singapore.
- Eg. China: It has followed a three-pronged platform strategy built around the Belt and Road initiative—what’s called the digital Silk Road.
- Alibaba provides an electronic world trade platform, which essentially sets up digital Free Trade Zones in different countries, digitises commerce.
- China through Huawei is providing critical digital infrastructure for smart cities to cities along the Belt and Road initiative. But all the learning models of how to orchestrate these cities, how to manage the services, will be decided centrally in China.
- National identification services—Venezuela uses China's identity management platform for its elections and national identity scheme. And China is now trying to provide that to other countries, as a way to track the spread of COVID.
- The fourth piece that China has always been exporting has been surveillance technology.
- You dig into How platforms really work: A week-long interactive immersion http://www.foundingfuel.com/article/how-platforms-really-work-a-weeklong-interactive-immersion/
- You can sign up for Sangeet's weekly newsletter at http://platforms.substack.com.
- You can also access Sangeet's online education at http://platform.institute