On The Horizon Weekly – Uber Alles?
| Platforming | Agility | Ubervision | Ecosystem Value |
|Stowe Boyd||Jun 4, 2019|
New York NY – 2019-06-04 – There’s more than a little debate over the sustainability of Uber’s current business. But there’s no question it has a Grand Vision. But first, some platforming.
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Platforming is the process of transforming an industrial-era vertical business into a participant in a networked platform ecosystem, or creating a platform ecosystem from the ground up. Platforming is the tactical realization of a platform strategy.
Stowe finds Vivaldi’s model useful. It uses two lenses to analyze companies’ potential for building out a platform ecosystem: one that evaluates a company’s brand relationship with its stakeholders, and another that maps it against five critical factors.
In sum, those companies most likely to succeed in platforming are technologically curious, highly networked, digitally-grounded, and show high ecosystem potential and an ecosystem mindset.
Still I felt that maybe an additional obsession is missing, perhaps a sixth factor: a Learning Mindset. All platform ecosystems have to have the second engine — the learning engine — to complement the value engine, so that experience can be turned to new advantage. Perhaps dropping the qualifier technological from technologically curious would go part of the way there?
The report evaluates a host of companies through its lenses, and comes up with a list of the top 50 potential platformers. While some of the 50 are no surprises – Netflix, Google parent Alphabet, Pfizer – others are inspiring. Stowe finds Vivaldi’s profile of paint supplier Sherwin-Williams compelling.
Platform Ecosystems and the Fallacy of Agile Transformation is innovation expert Haydn Shaughnessy’s expose of some of the flawed thinking that goes into enterprise “transformation” strategies. Haydn argues that because that we’re in an ecosystem economy now, some of the classic concepts behind agile transformation must be updated.
The arrival of platform and ecosystem businesses, like Amazon and Alibaba, has caught most executives off-guard. Even though there is a decade’s worth of experience in how the platform and ecosystem model works, many executives can’t conceive of the scale of business that they need to grow.
They are trained to believe in the core competency of the firm and therefore can’t even comprehend the nature of platforms that have the capacity to innovate across many areas of the market simultaneously. In other words, they stick to the core at the expense of working towards scope.
Horizontal platforms blurring vertical industry structures, global connectivity, and micro-transactions are disruptive forces that demand multi-skilled people and a customer-centric approach that is more than just existing CRM systems or call centers. Haydn notes that Alibaba is set up for global connections, scale, and scope. Many Western companies appear held back by two other weaknesses:
The first is centralised corporate memory. There is really only one major version of how companies should and can function in the west. Our scientific thinking reinforces the idea that there is a canon of knowledge, or expertise, that is due a lot of respect because it is built by consensus. Chinese companies have ripped up the western canon of business logic. The platform and ecosystem model paved the way.
The second is the belief that the answer to a seismic, once in a century change can be addressed with a formula such as agile transformation. It actually needs executive re-education on a mass scale.
Haydn maps out seven steps beyond the buzzword-compliant operational procedures modeled after agile software development and lean iteration that are necessary for ecosystems. I particularly liked this one, for bringing in customer input:
[…]Companies like Amazon have already shown how to treat customers but the missing link is how to incorporate customers into strategic innovation processes so that you can deliver a broader scope of value. Businesses are hoping AI and big data will do it but we find again that visualising the customer landscape is more effective because it creates conversations.
Playing Both Ends Against the Middle. Uber may have had a disappointing IPO and a crummy first quarter as a public company, but it doesn’t lack for vision.
But scaling that up is not the big vision. Uber wants to move to the other kind of work that [Bertrand] Russell wrote about: it wants to move beyond telling drivers what atoms to move around, but wants to grow its algorithms to encompass telling all sorts of workers to perform all sorts of work.
Some of those workers will be automatons — like autonomous vehicles picking us up and dropping us off, delivering food and packages, and hauling freight cross country. But Uber could also build its platform and ecosystem to be connecting gig workers with jobs, restaurant and hotel workers with shifts, a consulting firm with a project opportunity, or a brain surgeon with a patient.
Uber wants to play both ends against the middle, an enormous flanking maneuver for the work marketplace.
It might be a little scary, but
The idea of a generalized platform ecosystem for work — in which potentially every worker can be matched with potentially every company, and where the friction that we take as a given surrounding their interactions — hiring, negotiating payment, transferring funds, coordinating work — is handled by scalable smart contracts and AI… well, it is a truly grand vision.
The Market Value of Joining an Ecosystem. Building on an earlier pilot program, department store chain Kohl’s signed a deal where its stores in the Chicago and Los Angeles regions will act as return centers in its sometimes-competitor Amazon’s ecosystem. The company announced that it plans to roll out the program across all its stores in July. Its stock popped. Stowe points out:
Kohl's, with a $12 billion market capitalization, increased its value in the market's eyes by more 10% -- around a billion dollars -- because it has decided to embrace a leadership role in Amazon's ecommerce ecosystem. The market is assuming that Amazon customers will take advantage of the convenience of returning orders via Kohl's. The numbers in the pilot proved that to Kohl's management, too. But I bet that Kohl's was surprised by the magnitude of the boost.
This is occurring in a desperate time for retail in the US, with dozens of independent chains closing. The retailers that are thriving are often more digitally savvy, or explicitly online companies that are developing a bricks-and-mortar strategy, like Amazon, Casper (the mattress company), Warby Parker (the glasses company), and Bonobos (the clothier).
But Kohl's has frozen into this outstanding group in a reverse play: through an ecosystem partnership with Amazon. And what was the value of that single move? A billion dollars.
Not everyone is thrilled by the Uber vision. In American Affairs Hubert Horan presents a very negative look at the company: Uber’s Path of Destruction. And The Drive summarizes an MIT study that argues Uber’s economics might not work even with driverless cars: MIT Paper Tackles The Challenging Economics Of Autonomous Taxis. (That’s a different study from the one that miscalculated Uber driver pay rates.)
I’m more than a little skeptical about cryptocurrencies, but I agree with Irving Wladawsky-Berger that blockchain technologies could play an important role as distributed ledgers in platform ecosystems: Blockchain: The Networked Ecosystem Is the Business. The Wall Street Journal has stories on two implementors: Honeywell Brings Blockchain to Used Aircraft Parts Market and Salesforce Rolls Out Blockchain Builder for Noncoders.
A Study of More Than 250 Platforms Reveals Why Most Fail. A trio of professors from Harvard, the University of Surrey, and MIT have a new book on the business of platforms. Many platform attempts end up imploding. Their Harvard Business Review article outlines why: mispricing, mistrust, mistiming, and premature dismissal of competitors.
Digiday contrasts how the leading U.S. home supplies chains support their ecosystem of contractors How Home Depot and Lowe’s are modernizing their B2B businesses. Home Depot is definitely more digital.
In The Platform Economy: Why APIs And Integrations Are Crucial Adobe explains platform APIs to marketing execs. It’s a little basic, but we all have to talk to marketing.
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