Friday, August 16, 2019

Explaining Platforms



Platform means different interpretations in different contexts. Adding the digital context is part of addressing the questions that arise on what platforms mean for businesses. While beginning to figure out what platforms mean in the context of the business, several challenges arise. Practitioners come up with at least a couple of perspectives for drafting platform strategy for business – A business model perspective and technology infrastructure perspective. 

News on platforms goes with mega-success stories and impact at the global level. Such stories inspire aspiring business professionals to take on the journey in whatever capacity they think feasible. The impact of the rapid development of technologies that support the platforms dreams increases the tendencies to have ambitious goals around the new approaches to growth, achieve scale, and find new avenues for value creation. 

In established businesses, the challenges are two-fold to the professionals involved in making a plan for embarking the platform journey. First, the leaders may not be well prepared to lead people with the initial plethora of questions that arise. For this, the leaders must understand that expertise and research in this area is evolving.  There are many experimental approaches which can prove a success/ failure in their specific context. Second, the challenge for the aspiring professional is not to be overwhelmed on the abundant success stories as well as the lack of models to fit their business context. 

Look for unifying frameworks while paying attention to the glaring and subtle differences. Get a grasp on the fit for the context. A social platform can be a Facebook as well as YouTube or Twitter – completely different business models. A development platform like Android operating system, Salesforce along with its market place is quite different with its traditional counterparts of open-source Linux or Windows Operating systems.  Both Uber and Airbnb are market place platforms bringing new options to consumers affecting their day to day lifestyles, but their community-building approaches are totally different. What is common among these is all these platforms have an “Interaction first” theme around their design. They are connecting producers and consumers in new ways using digital capabilities with little initial investment. They are plug and play business models with highly modular artifacts enabling the quick evolution and scale with less hierarchical intervention. 

In Sangeet Choudary’s platform stack , there are three layers to explain platform – the infrastructure, market place, and data. Each of the platforms we hear about has invested in at least one of these layers differentiating themselves with new and often disruptive designs to create value. Some practitioners explain platforms around their journey towards building platforms from their current business models and content distribution mechanisms. This approach is more common with the incumbents who are facing the trends of platform businesses. 

The disruption is clear when we hear the need for regulation when the impact is on the health of the societies. Caution with governance mechanisms is required to avoid competitor’s exploitation in the name of competitive advantage. Governance and regulation must be meaningful for the platforms. Platform designs take advantage of the presence of competition. There are several instances of how traditional boundaries are crossed in the virtual, digital world of platforms – often discovering traps and pitfalls leading to better orchestration of the boundary resources as a remedial strategy. 

Significant academic and market research contributed to design choices and frameworks around the basic questions on design and strategies for platforms. The fundamentals of design frameworks include topics about architecture, value creation, governance mechanisms, and competition. For starters, read here. The authors bring to the table several easily available resources, mostly research articles to chart out the design issues around an established design framework. A crucial requirement is to get the sponsorship preparing for distributed leadership. Everything on the web is public and open,  backed with steps toward building trust and reliability in the digital networks. What works on the ground is traditional. Much needs to be thought ahead on reputation building on the web.

There are a few significant principles around networks that successful platform makers achieve. These principles are the DNA of the platform makers themes in everything they do whether it is carefully evolving the designs or preparing for the emergence of their platforms. For thinking in networks, read Linked carefully. On the author’s website, there are downloadable chapters too.  This book helps understand how to envision the seemingly random phenomena around major events that happen due to the nature of the web-based frameworks. The impact of web-based networks is borderless, spread across societies and businesses. Complexity leading to chaos is an inherent property of large networks if not managed and strategized well. For many professionals, careers and contributions seem to take the “red queen effect”. To avoid stagnation and cautiously embark the journey, the new rules of the business games can be understood with an eye on the happenings on networks around. 

Platforms and ecosystems are often associated with the digitization initiatives in the company. The Digital is often associated with all the newly evolving technologies in the Internet era and also their convergence – Social, mobile, cloud models built around networks using big data, AI, machine learning, collaborative applications. Disruption and transformation are the big themes around digital. Going Digital includes preparation and building capabilities for the internet age. incumbent businesses must be clear about the impact of the newly evolving technologies and business models on their business value proposition to make the right decisions at every step of the journey. 

Finding a place in the more complete ecosystem dynamics is associated with their business models and several early decisions. We will discuss a few fundamentals about ecosystems in the write up on Ecosystems






































Suggested Online Readings:




https://platformed.info/platform-stack/



Books: 

Network related fundamentals: 

Linked (for downloadable content check out: http://barabasi.com/book/linked). 


Business Related fundamentals:

Match Makers: The new economics of multi-sided platforms 
by David S Evans & Richard Schmalensee  
(https://matchmakereconomics.com)

Platform Revolution: How networked markets are transforming the economy and how to make them work for you
 by Geoffrey D. Parker, Marshall W. Van Alstyne, Sangeet Paul Chaudary 

EdX course:  Platform Strategy for Business is based on the Platform Revolution book. 

https://www.edx.org/course/platform-strategy-for-business-2


Thursday, August 15, 2019

Web 1.0, Web 2.0, and what followed


Two and half decades since the arrival of world wide web, most businesses are continuously experiencing the profound impact of new, digital web entrants. The new may not have become equals or counterparts to the old, but their positioning in the web-based business world seems to be quite unique and challenging. Notice the business models behind them that make this kind of entry possible. It would be a grave mistake to view the new, similar, yet thriving businesses in your industry and try to become one without undergoing the experiments and strategy exercises in your own context. Appearances from far can be deceptive. 

Popular business models described by experts since the early web days support the above statements. Some of you reading this post may be recalling your own journey with the expert insights and the interpretation of the business models. 

I think it was in the early 2000s, Prof Michael Rappa in his open course,  Managing the Digital Enterprise,  consolidated the new digital business models, coming to light by then. I guess at this time, E-commerce and Internet commerce did not make much of a difference yet in people's lives. Web-based businesses seemed to provide a channel for transactions with a focus on presence and reaching out using the web as another window for the business to serve customers from a distance. 

Prof Rappa stated that internet commerce is sure to give rise to new business models. Amazon made it to his business models list as a  Brokerage model and was described as a hosting service, a virtual mall, or a market place. Amazon also appeared as a virtual merchant in the merchant model. PayPal and eBay appeared as transaction and auction brokers respectively.  

In the Advertising model, Google took the place of both query-based paid placement and content-targeted advertising. Craigslist was discussed as an easy to list (listing service) alternative to existing yellow pages/ penny saver/ even newspaper advertising. 
Apple iTunes Music Store duly took its place as a Bit vendor under the merchant model category. 

Wikipedia (open content) and Open source (software development) made it to the community models. Flickr was part of the social network service model. Netflix was the rising subscription service model. 
In the university classrooms, online courses started out as replacements to distance education, scaling up their existing offerings. MIT open courseware became the pioneer in opening up world-class educational content reaching out to millions of aspiring students and life- long learners across the globe. Online learning systems resembled the uploaded versions of on-ground classroom-based learning.  The e-mail was getting popular with people outside the business intranet mail systems.  

Tim Oreilly came up with the article,  what is web 2.0 along with comparisons of web 1.0 and web 2.0 businesses. The article is more than comparisons. He brought clarity to some powerful concepts, a few core principles and practices around web 2.0 technologies and business models,  strategically positioned as a platform, gravitating towards some core competencies "forming a veritable solar system, global brain (with the mental chatter as the blogosphere)". Next, he mentioned "hyperlinking is the foundation of the web". The lesson from collective intelligence is that “network effects from user contributions are the key to market dominance in the network era”. 
Talking about blogging, he highlighted the importance of the RSS technology that is significantly behind the database-backed web/ “incremental web” / “live web”. This technology allows for subscribing to changing the content (syndication) giving way to the weblog, not just a webpage. The fundamental framework of web 2.0 (see web 2.0 meme map)  is listed in this article – covering the data-centric nature (raising debates on who owns the data, the new types of databases), end of the software release cycle (leading to software as a service, perpetual beta), loosely coupled lightweight programming models (think user participation), software adaptable on multiple devices, anytime, anywhere user interaction model and leveraging long tail, a global phenomenon (masses contributing with their own content) , adoption of RIA (rich internet applications) with dynamic content. These principles backed by the Web 2.0 based technologies were shaping the new web, which have now become a common practice in modern enterprises.

Enterprise 2.0 by Andrew McAfee emphasized the value of  Emergent Social Software Platforms along with varying tie strengths among people.  While listing all the benefits of making use of the collaborative, social, aspects of software (a big shift from web 1.0 to web 2.0) McAfee highlighted self -organization of the social networks shaped by its participants with the ability to build large communities without a central authority or guidance. The self-organization ability is paving the way to large business ecosystems in today’s digital world. Several of nature’s laws are penetrating into large enterprises requiring better and relevant ways of managing the ecosystems. Dion Hinchcliffe made significant contributions to the writing on the web and business models. My favorites are all of his diagrams with such clarity, enhancing the visual appeal, not missing the detail. 

Several researchers and practitioners continue to predict and write about the evolving web trying to fit into a few paradigms (semantic web, mobile web, cognitive web, web 3.0 and even web 4.0), compared with the previous (?) more popular trend. This approach may lead to an understanding of a few, specific, characteristics of the web and drivers that enable those characteristics, but they can only hit the self- imposed barriers and limitations of the larger view of discussions sooner or later.  

It is getting clear that there is no stopping to the continuous revolution the web is weaving. Yet, some of the trends seem to be taking back seat compared to some others. Interpreting the trends has become a relevant and serious practice to predict which trend would overtake the other.  

Convergence, disruption, and innovation to create a parallel virtual world have become the norm with the backing of ever-growing technologies, business models, and strategies. The major themes of technology-based innovations are around Artificial Intelligence, Big Data, Analytics, Internet of things, and Cloud computing. The business models in the limelight are around social networks and web-based platforms.  Platform strategies are framed from perspectives from engineering and economics by researchers and practitioners.  To try to contain the web world in a few themes is something similar to containing the magic of the genie world figuring who is touched and not yet touched by the magic wand and what they became after... 


Mary Meeker’s internet trends, IDC report (s), World Economic Forums Reports on Platforms and Ecosystems,  and writings of the several, world-wide consulting firms have become resource libraries to get a handle on the business practices on the web.  The web trends are giving way to clear vision of aligning with the omniscient, omnipresent web for each and every country, business, and the active, individual participants forming several universes.
Forming hubs and communities has become a goal for anyone associated with the trends of the web in the all-pervading social media and networks. This could manifest as an attention-drawing, self-promoting scheme for an individual who can ride the tide the social activities demand. Social media activities require time and skills to become the genuine master of the new and trendy social media skills that the web era demands. This trend can also be viewed as a positive force for those who would not have voiced their opinions and make a presence for themselves along with sharing their views. Still, more importantly, trying to name a trend and getting on the bandwagon is not the approach for serious business practitioners.

 Full of paradoxes, the web has come a long way, far from the times when Nicholas Carr’s IT doesn’t matter(2003) debates on the Information technologies were causing concerns. The programmers and professionals of the early Y2K’s may have disappeared into the oblivion or morphed to creations of their own making, but the web world has not been stopping for anyone. 

There will be a follow-up post to highlight the significant contributions of authors and researchers in bringing clarity to the ever-growing business models of the web. 


















References:



























A few references on web 3.0 and web 4.0 – based on practices observed. 









Wednesday, May 22, 2019

Co-opetition - Cooperate and still compete


Much has been talked about cooperation and communication in the internet era in schools, colleges, and workplaces. Many professionals recognize that there are several differences in how students are taught about collaborating in teams in the classroom, how employees of a firm operate in teams. The dilemmas about how a business operates in day to day operations as well as how strategic decisions are made in the interests of stakeholders (internal and external) are not left out from debates either.  

Collaboration has limited scope for business activities, especially when faced with specific challenges (both internal and external) at the organization level. Collaboration is a concept and a form of synchronous and asynchronous engagement at multiple levels, ranging from countries and firms to people observed in all areas of work both large and small scale, since ancient times. The objectives of engaging in work to achieve a common goal and collective outcomes reveal characteristics of collaboration that include nature of ties, timeless and transferrable skills of people, processes and more recently, use of evolving technologies catering to the nature of work and context.

Gaining competitive advantage is also limited in scope when faced with challenges of context-related innovation to grow from the current to the future.  Probing into decades of evolution of how organizations and firms view competition deriving advantage reveals how competitive strategies have evolved starting from Porter’s competitive advantage theories. While finding value and differentiation among products to compete is focused on external environments, developing core competencies being process-oriented has been the strengths of firms focusing internally. The inside view of competition brings in seriousness and reflection oriented methods to deliver superior approaches to maintain the health of the organization. 

Collaboration and competition separately have limited scope for the context of business activities and strategies when faced with dilemmas of the interest of the stakeholders. 

A part of the answer to challenges that incumbent businesses on where and how to find the next growth space (and a bunch of products as a result) are in creating and forming competing teams for future growth strategies from within first. There are theoretical frameworks that back this argument, see “complex network coopetition strategies”. 

Co-opetition is not about collaboration or competition perspective but a balanced combination of both perspectives to find solutions. And yes, it is common for large enterprises to view their internal business units as competing for business units.  Why not be truly competitive while cooperating partly and competing effectively?  

Keeping the teams separately does not get them anywhere because of their clear differences. Merging them will not get instant solutions either. On the other hand, competing with ideas to get grants for research and development projects is quite common in business and academic organizations. This approach indicates a healthy competition from inside to get the best out. 

First, care must be taken to form the challenge teams for growth strategies with a mix of talent in a large organization.  I recommend hungry talent,  those aspiring to become new architects of the future organization.  This includes talent from research and development, engineers and developers, users, marketing, and strategists, and other stakeholders. They must think beyond their current stakeholder mix too and redefine their new possible stakeholders - starting with the new organization talent from within.

Next part of the answer lies in the lessons from the Netflix grand prize challenge that happened around 2008/ 2009 by putting forward their current knowledge base and asking outsiders to figure out the best recommendation algorithm. A large enterprise has a tremendous amount of scattered talent pool. They need not go outside but must be willing to share knowledge for enabling competition within their newly formed challenge teams. The teams must be able to interact on areas carefully crafted to let innovation happen with freedom, yet keep the competitive spirit and motivation to participate. 

Netflix grand prize case/ discussion is valuable for the way the teams were managed by adopting rules and conditions for “free revealing and knowledge brokering" that are quite unprecedented in firms.  Discouraging opportunistic behaviors and managing the teams through the life of the various phases to progress from inventing to innovating, demonstrating value is not easy. Research on Netflix grand prize team management case is available extensively - starting with the famous NY times article for light reading.  Many team collaboration researchers have contributed to insights and scenarios on forming collaborative and still competing communities. 

Yes, such teams can sound redundant when talent is viewed as individuals contributing to uniqueness. Because these teams are from within,  working on similar projects appears a waste of resource initially. But the ideal mix creates the syndication at micro, meso, and macro-level for the dimensions of knowledge and economic value creation. In fact  - such strategies must be viewed from multiple dimensions of value creation at the various levels and layers in organizations. In the article on co-opetition strategy (read here),  the researchers demonstrate “matrix representation of coopetition for value creation”. This includes partial cooperation as well as competition from within and outside firms. 

Netflix is not the only one that experimented in such scenarios of competition and collaboration among communities. Such co-opetition existed from ages in industrial districts of Italy in traditional settings. During the ‘80s, the Japanese car manufacturers could beat US competitors with such strategies. The LCD TV market has been dominated by the Sony Samsung resource-based strategic alliances, yet competing for customers head-on. 
The ICT standards happen to bring together many competing firms' approaches towards hardware, software and communication technologies. The alliances among airlines is a very common example for models of co-opetition for efficiency and resource utilization. For many such examples, and a detailed case study on how Amazon consistently uses coopetition based business models - in its marketplace,  web services, and content platform (kindle), read here.

Creating and capturing value based on co-opetition business models is the theme behind these endeavors.  Understanding which areas of business practices and models benefit by collaboration and competition is the foundation for the drivers of co-opetition models. Inter-firm relationships and networks can be oriented towards a “positive-sum game”, win-win situations, and positive network externalities.



References:



https://www.nytimes.com/2009/09/22/technology/internet/22netflix.html

https://hbr.org/2014/02/use-co-opetition-to-build-new-lines-of-revenue













Thursday, April 11, 2019

Challenges of Balancing Hierarchy and Modularity in Platform ecosystems




Hierarchy and modularity are the structural, organizing artifacts behind networks. Their impact is manifested as hubs and communities on the Internet. Understanding how they are formed, their characteristics, what factors facilitate and inhibit their growth helps knowing how technologies evolved and in turn how they shaped industries and organizations so far. Balancing the two seemingly paradoxical models has always been a challenge to any business organization and the ecosystem they take part. 

The fabric of the organization of the Internet network is a cluster of nodes which is modular by construction at the base level. Modularity is measured by clustering coefficients which tells how interlinked the neighbors of nodes are. The distribution of the clustering helps understand the extent of modularity. 

Highly connected nodes form hubs. Connected nodes are the connectors whose strength is measured by the number of links connecting them. This is a property of the structure of a network. 

The property of modularity appears often in design discussions – whether it is computer systems design or a departmental functional design in business. The purpose is to shift the responsibility and ownership of independent actions without the intervention of the parental system owning the module. Most systems are built with the purpose of a few central themes and modules to start with. Complexity grows with building around the core, meeting the needs with scale and functionality. 

A complex system - whether it is computer systems architecture or an organization of a social movement, or an operating business organization is part of an engineered structure of principles behind hierarchies and modularities. The fabric of the operating networks consists of several components operating independently as well as being facilitated by hierarchical structures and systems of people, processes, and technologies. 

Several models explain that hierarchy or formation of hubs happen when clusters of nodes are linked to nest or are held together creating hierarchical clustering of modules - a generic property of real networks as well as the world wide web. For example, Granovetter’s model explains how people’s threshold values affect joining a hub for a social movement. It is difficult to predict which social movement takes off or which network will be successful in matching, segregating systems. It is not just the individual threshold values but also the group’s distribution of thresholds that matter. Airbnb and Uber are different platform businesses with their underlying operating network very different. Airbnb faced the complexity of getting people to list although there were many interested in renting. Uber and Lyft face a different kind network shifts due to the localities and people’s segregating patterns. 

Observing how any complex system evolved over time gives a handle on what next for a complex system. Computer architectures - both hardware and software evolved due to inbuilt modularity. Mainframe Computers such as the IBM 360 started as hardware systems with successful attempts to separate software functionalities from the hardware. This enabled the software to run on several machines, giving way to software evolution and several devices allocated for specific functionalities. Modular approaches enabled partitioning tasks resulting in parallel computing, coordinating the system-level decisions.

While evolution is a natural and a healthy way of growing a system, the value derived from the new designs and approaches has their merits leading to the emergence of systems that cannot be envisioned from the older, evolved systems. The tradeoffs of performance, risks, dependencies increase with complexity. They are compensated by the values offered by the innovations leading to economic feasibilities. 

Modularity as a basis for strong and weak ties:

The rise of the voice of the individual with the web 2.0 modular artifacts such as blogs and the collaborative networking among communities with wikis have led to various ties – both weak and strong. The small and low-level interactions collectively pave the way to stronger, self- organized communities of employees and customers inside and outside the enterprise when self-organization is viewed as a benefit rather than a risk for the enterprise. Traditional organizations are known for their hierarchical models of authority, division of labor and a foundation for a stable environment for the people. These areas of strengths need not turn to become weaknesses when the balance of central, hierarchical models and independent modular systems operating for the benefit of the work that needs to be done. 

Strengths of Hierarchy and modularity - their manifestations in shaping technologies and organizations

The operating system governance, architectural decisions, and several centrally controlled system configuration management decisions are fostered by hierarchical models in computer systems. For example, traditional mainframe computer operating systems architectures evolved over time. They are the foundational ground for several capacity planning tools, automated operations tools, recovery, storage and backup, performance monitoring, job scheduling and many more - the list is enormous. 

Most important points to notice are twofold. 
No matter how far the distributed computing systems have evolved, there is always a place for the mainframe systems. Today’s cloud computing endeavors include Big data and machine learning which run on massively parallel computer systems and servers. When the component applications of operating systems matured enough to become independent, they formed the basis for new technologies and industries. The storage and work-related applications such as data warehousing, groupware, workflow, and document management systems evolved into systems capable to survive and thrive as industries. Data management systems capabilities have grown exponentially to analyze and provide deeper insights and augment human capabilities.

Impact to organizations: 

The impact of technologies on organizations is not only shaping the way people do their work but also shaping the structure of organizations – both the technology industries and those that use them. This impact is attributed to the several paradigm shifts in the various types of technologies produced over time ranging from the vertically oriented hardware, operating systems, database and application layers of the computer systems to the horizontal PC DOS operating systems and the applications produced around it. These led to the client-server, enterprise architectures (bridging the client-server with a middle layer),  followed by the web 2.0 and web 3.0 technologies oriented towards including the commons,  by building and spreading the communities. Adjusting themselves to the modularity and hierarchies that technologies demanded is fundamental to the enterprise organizational structures of the internet era. 

The current trends of digital network businesses indicate how modularizing is impacting their expansion as well as profits.  They have been successful in building components suitable and aligned with the internet era. Apart from leveraging the internet era advantages of digital modularized distribution channels, the internet era born-digital platforms have become "aggregators" of the modularized supply-side resources. The internet platforms are primarily aggregators of modular components shifting the value from pre-internet era integrating approaches.  How they modularized suitable to their context is discussed in detail in a Stratechery post here. 

Best of both worlds for people and organizations:

I came across the word “hyperarchy” in the article by Khan, M., & Azmi, F. (2005). The authors discussed the WWW as a hyperarchy which is an “essential element of information culture” with flexible work arrangements that arise as a consequence. They warned that the organizational changes are lagging behind the turbulent age everywhere in the world. A decade and a half later, this is still a fact. 
Discussing the various features of hyperarchy, the authors recommended for “Velcro organizations” which are fluid and cohesive enough to organize and flexible enough to delink for work on demand. The authors quoted Bower JL, 2003 with the analogy of how players organize for Soccer and Rugby. As in Rugby, playing Velcro hooking requires agility and strong skill set to act on demand. Rugby is not a position game like soccer. 

A large group of business models of platforms is essentially "plug and play" models of organizations providing the infrastructure for producers to create and interact with consumers on top of the platform. For example, YouTube is the media platform with producers of video content plugging into the platform to create content. Consumers check in to watch the video content. Medium is the publishing platform where writers write their articles, readers subscribe to Medium to read. 

Exploring the potential of several possible organizational models suitable for growing in the webspace is a continuous effort for both small and large businesses in the digital age.  






References:

Linked by Barabasi, chapters 

The Fourth link - pages 40 - 54
Small world
The After link - pages 227 - 238
Hierarchies and communities
https://hbr.org/2019/01/why-some-platforms-thrive-and-others-dont
Bower JL, 2003. “Building the Velcro Organisation: Creating Value Through Integration and Maintaining Organisation-wide Efficiency”, Ivey Business Journal, November/December, pp 1–10

https://iveybusinessjournal.com/publication/building-the-velcro-organization-creating-value-through-integration-and-maintaining-organization-wide-efficiency/

Baldwin, C. Y. (2019) “Platform Systems vs. Step Processes—The Value of Options and the Power of Modularity,” HBS Working Paper (January 2019).

Baldwin, C. Y. (2018) “Introducing Open Platforms and Business Ecosystems,” HBS
Working Paper (October 2018).



Khan, M., & Azmi, F. (2005). Reinventing Business Organisations: The Information Culture Framework. Singapore Management Review, 27(2), 37-62.

https://platformed.info/platform-stack/

https://stratechery.com/2015/aggregation-theory/