Tag: platformed.info

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How Alibaba, Android and Airbnb change the geometry of business

This article was originally published on Sangeet Paul Choudary’s personal blog Platform Thinking – A blog about building early stage ventures from an idea to a business, and mitigating execution risk.

A keynote laying out the shift that platforms are bringing about in the nature of business today. 

One of the central concepts I talk about on this blog is the shift from linear business models to networked business models: from Pipes to Platforms. The business priorities while building these two contrasting forms of businesses are very different and I’ve explored that in detail inan earlier essay here.

We also note that this shift has already happened in several industries. I explore that in detail in the essay here. (I would highly recommend reading both essays in tandem even if you’ve read them separately earlier.)

Media has already been transformed by this shift and become social. Telecom has been transformed by the explosion of the app economy. Professional services of all kinds are being transformed with the rise of the peer-to-peer sharing economy. And I believe that significant opportunities exist in the manufacturing and traditional goods industries for platforms to come in and create new markets. The rise of the Maker Movement and the growing democratization of 3D printing will accelerate this shift further.

There are three fundamental changes that accompany every such shift in the industries that start getting transformed:
1. New networked markets get created
2. New sources of supply start to emerge
3. New consumption patterns are created

We looked at all these shifts in detail in the rise of YouTube, Airbnb, Elance-Odesk, and to a lesser extent, Kickstarter, in this essay here.

To bring all of these concepts together into one cohesive whole, I want to share a keynote that I delivered earlier this year as the closing keynote at CrowdSourcingWeek 2014. I was invited to speak at the G20 Summit events in Brisbane last week and I shared a further more evolved point of view on how resource-intensive industries like oil and gas and mining will also change because of platforms and how new job creation will be spurred by the creation of new markets.

In this essay, I would like to share the first keynote from CrowdSourcing Week 2014. I hope to share the second set of thoughts from the G20 Summit events in the coming weeks. The video doesn’t incorporate the slides but much of the talk should be self-explanatory.


Industries are getting transformed. While it’s important for startups to understand how things are changing, it’s even more important for the old guard to realize that the traditional rules of business do not apply any more.

One of my constant endeavors through this blog is to address both sides and help share the message of how many of the fundamental rules of value creation in business have changed forever.

Tweetable Takeaways

The three key takeaways from the video, the new rules of business in a networked world:

The Ecosystem is the new Warehouse  Tweet

Community Management is the new HR  Tweet

The Network Effect is the new Scaling Strategy  Tweet

This article was originally published on Sangeet Paul Choudary’s personal blog Platform Thinking – A blog about building early stage ventures from an idea to a business, and mitigating execution risk.

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90 minutes at #PNCamp and the PR Engine cheatcode is yours

“There’s an empty slide in your deck reading user acquisition, which follows the slide showing hockey stick adoption. We’ll grow virally! Three words that fill up the slide nicely. Relying on virality as a standalone source of user acquisition is fatally flawed to begin with.”

That’s Sangeet Paul Choudary at his usual best. He probably said that a hundred times over, yet Startups continue to falter when it comes to understanding user growth and PR. The two are distinct, but underlying is a common trait, that about being remarkable. Have you extracted the remarkable ideas from your product and turned it into a PR opportunity? Or you think you are remarkable and still don’t get noticed?

Meet Sangeet Paul at PNCamp.in as he dissects the PR and Virality code step by step. It’s 90 minutes of pure adrenaline rush as you realize what can now be in your reach.

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A Platform Thinking Approach to Building a Business

Every business is an engine. It needs to do a certain set of things repeatedly to create value. If you haven’t figured out that set of repeated operations, you probably haven’t created a scalable business yet.

Ford needs to repeatedly assemble cars, Google needs to repeatedly run its crawler, Facebook needs to repeatedly get users to interact with other users.

THE BUSINESS ENGINE AND REPEATABLE OPERATIONS

Every business goes through three stages:

Creating the engine: Early stage, figuring out the set of repeatable operations it needs to do to create value.

Oiling the engine: Rapid testing and iterating to refine and optimize the repeatable operations

Stepping on the gas: Scaling by repeating the repeatable operations

THREE APPROACHES TO BUILDING A BUSINESS

So this is the formula for building a business. You figure out how you are creating value. You identify a set of operations that repeatedly create value. You figure out a way to efficiently conduct these operations repeatedly.

There are three broad ways that businesses conduct these operations repeatedly and get things done:

  1. Get employees to do the work
  2. Get algorithms to do the work
  3. Get users to do the work

Let’s think through the problem of navigating the web for the most relevant information for the day. Three companies try to solve this in three very different ways:

Yahoo: A bunch of editors decide the best content for the day

Google News: Algorithms decide the top news of the day

Twitter: Users’ tweets and retweets decide the top news of the day.

For those of us who read the earlier article on the three broad models for problem-solving, here’s the interesting part. These three approaches correspond exactly with the three models for problem solving.

A brief recap of the three approaches to problem solving

The ‘stuff’ approach: How can we create more stuff whenever the problem crops up?

The ‘optimization’ approach: How can we better distribute the stuff already created to minimize waste?

The ‘platform’ approach: How can we redefine ‘stuff’ and find new ways of solving the same problem?

Essentially, the three approaches to building a business now are:

The ‘stuff’ approach: Get employees to do the work

The ‘optimization’ approach: Get algorithms to do the work

The ‘platform’ approach: Get users to do the work

Depending on which approach you take, the way you build your company could vary significantly.

A platform thinking approach to building a business involves figuring out ways by which an external ecosystem of developers and users can be leveraged to create value. The iPhone app store does this, YouTube does this, and so does Wikipedia.

UNDERSTANDING REPEATABLE OPERATIONS

It’s important to note that we are talking about repeatable operations. Writing code is not a repeatable operation. It is a one-time infrastructural activity, similar to building out the assembly line or setting up the factory. The operations that the code automates (e.g. login management) are the repeatable operations.

WHY ECOSYSTEMS, NOT ALGORITHMS, ARE YOUR COMPETITIVE ADVANTAGE

Most problems that could be fully automated are already automated today. The next level of scale will come not by automating alone (and letting algorithms alone do the work) but by leveraging an ecosystem ( and letting algorithms synchronize disparate actions).

There are very few companies that compete purely on the strength of algorithms. Google is a rare example of a company whose competitive advantage lies in a set of very complex algorithms that it fiercely protects. Facebook, Twitter, YouTube etc. compete not on the strength of their algorithms but on the strength of their ecosystems. The algorithms are easily replicable but the ecosystems aren’t. Hence, building a business where the ecosystem scales the value creating operations is quite different from building a technology-only company.

PLATFORM THINKING AND SCALE CONSIDERATIONS

Scale is achieved by making repeatable processes more efficient (faster/cheaper) and effective (accurate).

One of the ways to infuse platform thinking into your business is to look at a problem that is being solved manually, and repeatedly, and see if it can be solved by external users instead.

Facebook realized that it would have to translate its interface for every new foreign language. The norm was to do it with an in-house or outsourced translation team. Facebook chose to crowdsource it, building not just a more scalable model, but in many cases, better translations as well.

This is also demonstrated in the evolution of an online community. Quora started off with employees asking questions and answering them. Over time, it transitioned both these activities from the employees to the users.

The problem that comes with this, of course, is that you let out control and with that you need to build in checks and balances to ensure that no one is gaming the system. Quora and Reddit offer good examples of bringing in these checks and balances and scaling them along with the community.

THE THREE QUESTIONS FRAMEWORK

What are the repeated chunks of work in my business?

The first part involves identifying the activities that need to be repeated to scale and expand the business.

Who is doing the work today? 

Secondly, is the work being done manually or algorithmically? If so, can we bring in greater efficiencies (speed) or effectiveness (accuracy) by leveraging an ecosystem?

How can we get someone else to do that work? 

Finally, users,  like employees, need incentives. Fitting in the right organic and inorganic incentives forms an important part of relying on an external ecosystem to build value.

This article was originally published on Sangeet Paul Choudary’s personal blog Platform Thinking – A blog about building early stage ventures from an idea to a business, and mitigating execution risk.

Image source: Flickr/Creative Commons