NEW FOUNDATIONS OF PLATFORM-ECOSYSTEM THINKING — THE SENSEMAKING WEBINARS — #2
Platforms in the 2020s: watch out regulators — it’s time to face technology head-on!
On February 3rd, 2021, we had the pleasure to host the second webinar in a series where we dig deeper into specific topics covered in our New Foundations of Platform-Ecosystem Thinking whitepaper. This time we had no less than Sangeet Paul Choudary joining the stage, with excellent Stowe Boyd grilling Sangeet and Simone Cicero with questions on fairness, platform regulation, and whether platforms are inherently precarious for workers. Catch a few of our highlights in this post!
The webinar was set around the theme of platform-marketplace pervasivity, as captured especially in Chapter 1 of our whitepaper — The New Foundations of Platform-Ecosystem Thinking — and Sangeet Choudary’s recent report The State of Platform Revolution 2021, both released in late 2020. With Stowe Boyd in the moderator seat, particular focus was placed on the state-of-play of the platform economy as we continue into the 2020s, zooming in on what the continued platform revolution means for policy-makers and for platform workers. The active community comments and questions testified the passionate interest in those questions among our viewers. And, of course, Sangeet and Simone never disappoint the keenest platform enthusiast with well-thought, articulate answers. Below is a list of highlights, but we strongly suggest you take an hour to look at the full conversation!
Did you miss the first sensemaking webinar on Organizational Adaptation to the Changing Landscape, featuring Dave Snowden, among others? Watch all sessions on our YouTube channel.
Highlight #1 — Rebundling activities around distributed interactions: the next platform frontier
As a starting point, Stowe gave the floor to Simone, to kick off with the question of why we should be talking about platforms and the platform economy. Referring to the “marketplace pervasivity thesis” in our whitepaper, Simone described how the digitalization of our economies has essentially driven a trend where transaction costs have plummeted to the extent that what used to require firm-based transactions now can happen directly through digital markets (citing Rita McGrath). Platforms come in as orchestrators of value creation happening through interactions — stepping away from the pure idea of products and services — and rebundle activities through new business models.
Sangeet further elaborated on this, looking back at the evolution of platforms in the last two decades noting that: first, platforms captured value through networks, then when networks got commoditized, platforms moved to data as the key value driver. What we’re seeing now is a further modularisation of the economy, with transaction costs plummeting not only on the consumer side but all across the value chain: the result is an economy where business processes and APIs make for the next frontier of platform value creation through rebundling of such modules. This evolution is captured throughout The State of the Platform Revolution report, and particularly in the second, third, and fifth themes: Theme #2: Value migration transforms industry economics, Theme #3: Rewriting the incumbent playbook, and Theme #5: Embedded Finance is Rebundled Finance.
Highlight #2 — “It’s not about Substack anymore”: when platforms land on the physical world
In the second question, Stowe prompted a reflection around the idea that traditional firms are being disrupted by these trends.
Simone captured the trend of a deeper penetration of the platform revolution into our societies — driven by increasing standardization of transactions — where the digital eventually lands on the physical world. In this area, which he believes we can no longer leave in the background since “it’s not about Substack anymore”, but entering a messy terrain of organizing welfare and basic needs. The result we’re seeing is one of re-regionalization, where local policy-making and culture will be important factors determining how this fragmentation may play out.
Highlight #3 — Openness and concentration: designing business model portfolios for the new platform era
Reporting on what businesses or regions “can do” in anticipation of these changes, Sangeet highlighted that in an era where the return on assets has plummeted (due to dematerialization), companies must look at every part of their value chains as a “stack” to understand what the best strategy may be for each segment. Amazon’s warehouse network, for instance, shows how physical assets need to be coupled with digital, whereas seen in isolation it could become a liability.
“The single most important skill today is to really identify what is the right business model portfolio that will give you the best return on assets and return on capital. That’s the single most important job for a CEO today” — Sangeet Choudary
For some components of the value chain, it may make sense to stay as open as possible and go for broad participation in many players’ key business processes, while in some cases it may make more sense to focus on trying to concentrate and centralize your position in the ecosystem. For instance, Stripe has been playing with both openness and concentration, gaining a central role in Salesforce.
Highlight #4 — Regulation: focus on commoditization and standardization
About half into the conversation, Stowe opened to the theme of policy and regulation, something extensively covered by Sangeet’s work. What Sangeet highlights in this regard is that policy-makers ought to focus on the regulation of commoditization and standardization: two related but separate processes commonly leveraged by platforms, and which play out very differently in the digital compared to the physical economy. Commoditization focuses on simplifying wide distribution and dominating markets, thereby to some extent removing direct competition. Standardization, on the other hand — which aims to simplify access and usability — sometimes means removing agency of platform workers as a side effect. In the case of Uber, for instance, drivers do not control which routes or riders to take, nor can they stand out based on excellence. To the user, they are all the same. These are the processes that need to be understood and intervened upon, rather than seeking to break up monopolies ex-post. Theme number seven of his report captures how regulation is catching up with platforms.
“We have let complexity enter our lives without knowing what the consequences would have been. It looks like we are now entering a decade in which lots of governments all over the world are starting to figure out that they need to step into integrating with the technology sector. If technology is left to develop according to basically no political understanding, the impacts can be really radically hard to manage” — Simone Cicero
Simone pointed out that when it comes to policy-making, we often forget about the politics of policy and — referring to a recently published podcast conversation with Rita McGrath — said that technology and policy have been traditionally viewed as separate. This is not the case anymore and policy-makers need to reckon with this integration.
Highlight #5 — Who runs the platform strategy? The emergence of countries-as-platforms
Moving towards the end of the conversation, Sangeet pointed out that platforms tend to be mostly influenced by four key stakeholders: users, designers, investors, and government. In some cases, the platform strategy may be dominated by the investor, while in other cases more by the designer or the users. The latter could be the case for a local food production platform, for instance.
What’s interesting to witness, however, and which has been captured in the State of the Platform Revolution report under its third theme — China’s country-as-a-platform strategy — is that data intelligence and standards become a new important way for countries to compete on the world stage (it used to be around forming strategic alliances or natural resource-based competition). We see country-as-a-platform strategies forming in countries like China, where one of the key interests is to export standards that other geographies become dependent upon. A key example is the Electronic World Trade Platform founded by Alibaba, which aims to standardize payment and financial support for SMEs to facilitate their access to cross-border trade. While this is a government influenced country-as-a-platform strategy, Sangeet suggests that a similar strategy launched by the US might be more investor-driven, while in India it’s more design-driven.
Simone came back to the idea of local government, bringing in reflections on strategic disconnection and cosmo-technics: in an upcoming conversation with Simon Wardley on the Boundaryless Conversations podcast, Simone and the British mapping guru discussed how strategic thinking coupled with the understanding of the evolutionary landscape may constitute a new basis not only for corporate actions but also for how governments take action on the regulation and control of the technologically powered economy — something where the Chinese government is demonstrating a stronger capability versus western economies.
Highlight #6 — The unsolved question of inequality: a K shaped recovery
In the final part of the conversation, the trio pondered on the unresolved question of inequality in the platform economy. Sangeet pointed out that in his report, he has described a likely K-shaped recovery. This quote from the summary of the report captures well what was discussed:
“One of the most visible manifestations of the K-shaped economic recovery of 2020 is the increasing divergence in the platform economy. While platform businesses didn’t just recover but soared to new valuation heights, the workers in many of these platforms’ ‘ecosystems’ were increasingly commoditized and disenfranchised. Worker classification as contractors coupled with increasing algorithmic control of their work leaves them with the worst of both worlds. Platform work often combines the constraints of employed work (lack of free agency) with the disadvantages of being an independent contractor (poor access to benefits)” — Sangeet Choudary in The State of the Platform Revolution 2021.
Highlight #7 — From platform thinking to “connect and leverage” thinking
Simone remarked that in light of the trends discussed, we’re moving from platform thinking to “connect and leverage” thinking where — also according to what Sangeet noted at the start of the conversation with “unbundling” now reaching out deep inside the whole value chain — the measure of success for organizations will be largely related to their capability to remix capabilities that more often exist outside of their organizational context than inside, and to create internally equally highly leverageable capabilities that will need to be brought on the market more often than kept inside the — disappearing — organizational boundaries.
Sangeet complemented highlighting that policy-making needs to overcome risk avoidance and legacy mindsets, which sometimes prevent positive outcomes. He also pointed out that platforms — because of their availability of data — have a much better understanding of the main issues of the platform economy than policy-makers do, calling for more open data standards where think tanks and governments could build such intelligence to feed into policy.
You can read more about Sangeet’s thoughts on this in the seventh theme of the report covering Big Tech and Big Government.
Conclusions
Certainly, this webinar reinforced many themes along which our research is evolving, where we increasingly refer to the idea of an “economy of overlaps” unfolding with:
- business models increasingly reaching through and beyond a single organization calling for intra- and inter-organizational collaborations;
- an emerging interdependence between institutions and the business sector at a regional level to ensure regional competitiveness, and the control of otherwise potentially deeply harming technological impacts;
- a trend that sees corporations and industrial players evolve to increasingly integrated with localities in a perspective of subsidiarity and collaboration to ensure more resilient supply and value chains, as we’ve been explaining in Chapter 4 of our recent whitepaper.
The landscape of organizing that unfolds is complex, multi-polar, and messy, and our institutional and business players don’t necessarily seem ready: a profound reinvention of organizational models is apparently now due at all levels — including the institutional — to build organizational structures that catch up with the maturation that we’ve seen happening in the market, experience context.
Boundaryless is working on this for over a year now with the development of the Entrepreneurial Ecosystem Enabling Organization framework. Those of you who are curious to peek into it can explore our framework page here: https://platformdesigntoolkit.com/eeeo-toolkit.
Despite being born out of fruitful collaborations with corporate players and being inspired by the need to compete and thrive in the interconnected economy from the business perspective, we believe that the EEEO can provide insights also into how we organize institutions and emergent ecosystem of work and value creation that can be more civic and citizen enabled: after all if we really accept the idea of the age of overlaps unfolding, the very distinction between business, institutions, and citizens may be obsolete.
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