Category: Excerpts

The decade leading up to the COVID-19 pandemic witnessed the rise of platform business models as they drove stock market gains and extended their influence across economic and political activity. The pandemic has accelerated these platforms further.

Platform Scale for a Post-Pandemic World by Sangeet Paul Choudary explains the inner workings of platform business models and their ability to scale rapidly. Here is an excerpt from the book that illustrates the same.

Scene One: The Pandemic

In August 2020, Apple became the first company to reach a $2 trillion market cap. That same month, Amazon’s Jeff Bezos became the first man to reach a personal net worth of $200 billion.

Even as most companies struggle to cope with the realities of a post- pandemic world, the platform firms—Amazon, Google, Microsoft, Apple, Facebook—have performed exceptionally well. Relatively smaller firms like Netflix and Shopify have also generated significant shareholder value.

The impact of platform firms during the pandemic has extended far beyond gains in the stock market alone. Google and Apple have joined forces to launch the Google–Apple contact tracing (GACT) platform, which uses application programming interfaces (APIs), Bluetooth technology and operating system (OS) level changes to assist in contact tracing.

While most supply chains reeled under the effect of the pandemic, Amazon and Alibaba came to the rescue. Even as the US–China trade war heats up, Alibaba’s Electronic World Trade Platform initiative is working with countries like Rwanda, Malaysia and Belgium to create a new infrastructure for global trade.

China’s platform economy leaders—Alibaba, Baidu and Tencent— have also been developing AI-driven solutions for COVID-19 diagnosis, vaccine development, contact tracing and risk assessment. Alibaba’s epidemic prediction solution model is trained on public data gathered from across China and predicts the trajectory of a coronavirus outbreak in a specific region with 98 per cent prediction accuracy. Meanwhile, the Alibaba Cloud hosts a virus genome sequencing application to diagnose new COVID-19 cases and has opened up its computing resources to research groups working on vaccine development around the world.

The pandemic has also highlighted the role of platforms as arbiters of discourse. Amazon took down books that it determined carried medical disinformation from its marketplace. Facebook, Twitter, Medium, Reddit and Pinterest have performed similar judge-jury- executioner roles, limiting search results for certain terms or entirely removing content deemed as misinformation.

Platform regulation was on the rise over the second half of the 2010s, and 2020 was supposed to be the year when Big Government would seize power away from Big Tech. Instead, what we’re seeing is quite the opposite.

The pandemic has accelerated the very grounds on which Big Tech was supposed to be regulated. Data access, privacy and usage laws are being revisited to counter the pandemic through contact tracing and other surveillance mechanisms.

As a final testament to the pervasiveness of the platform economy, platforms have started taking over governmental functions during the pandemic. This sounds dramatic but isn’t without precedent. During times of crisis, private firms often step in and take over activities which governments fail to perform. Platforms, as market mediators, are even more likely to take on such roles. Amazon’s directive to stop accepting non-essential products from third-party sellers who use its warehouses is an example of a private firm stepping in as a market regulator.

The pandemic has reinforced the importance of the platform economy. In the 2020s, we will see the platform economy gain further strength as the post-pandemic world uncovers new value pools for platforms to exploit.

Scene Two: The Post-Pandemic World

As we emerge into a post-pandemic world, we are already beginning to see the first signs of massive value migration.

More broadly, the post-pandemic world will see shifts in power across value chain actors. Platform scale and the ability to aggregate large and engaged user bases in order to attract other actors around your business will play a pivotal role. As an example, consider the rise in demand for online streaming services like Netflix and Amazon Prime Video during lockdown. These two brands may not use an open ecosystem of producers as other platforms do, but they benefit from many of the same drivers of platform scale that we explore subsequently in this book.

One might argue that things will return to normal post-lockdown. But it’s quite likely that they won’t. This seemingly transient shift in demand-side behaviour is driving a shift in negotiation power in the value chain.

With the pandemic-induced closure of major theatre chains, studios are breaking what’s known in the industry as the ‘window’— the three-month period between when a movie hits the big screen and when it’s offered for rentals or streaming. This window protects theatre revenues.

But with the pandemic, studios have been launching their films directly on streaming channels, eroding the window. Universal, with Trolls World Tour, announced that it will make movies available at home on the same day as their global theatrical release. In response, AMC Studios barred Universal from ever launching a movie in their theatres. Meanwhile, with AMC Theatres struggling, Amazon was looking to acquire its assets as of June 2020, further driving the consolidation we see during such periods of value migration.

In India, Amazon secured rights to premiere Bollywood movies, originally scheduled for a theatrical release, directly on Prime Video. Pre-pandemic, Amazon was getting into online sales of movie tickets to gain bargaining power over movie theatres and possibly negotiate the release window. With the pandemic, this balance is likely to further tilt in Amazon’s favour.

The post-pandemic world will also see new revenue models emerge. China’s Huanxi Media partnered with Douyin, a streaming platform by ByteDance, to launch its movies and TV shows direct to streaming on a new business model involving a combination of a licensing deal and a share of the advertising revenues. As studios like Huanxi Media test the success of releases on streaming platforms, they will likely use that data to negotiate with theatres post-lockdown. Theatres won’t go away, but their bargaining power may decrease. The combination of demand migration and a shift in bargaining power will likely create a permanent shift in power towards Amazon and Netflix. The longer the pandemic- induced changes last, and the greater the number of hit films and shows released direct to streaming, the more likely such a shift becomes.

The pandemic has induced a similar shift in the food retail value chain. With many countries moving into lockdown during the pandemic, there’s been a significant shift towards e-commerce in food retail. This is further reinforced by the disruption of food supply chains, a supply- side effect. A combination of these demand-side and supply-side effects has driven value towards online grocery platforms that can best harness these shifts. Demand has been increasingly centralized, with a few large online grocery platforms that can use centralized demand data to better predict demand patterns, improve stocking of fulfilment centres and better inform their supply chains. Post-pandemic, supply chain inspections and quality control requirements are likely to increase, and this will again favour larger players. This combination of demand- and supply-side effects will strengthen large grocery platforms.

In the post-pandemic world, we will increasingly see aggregation of demand with a few large players. With centralized and aggregated demand as a control point, large platform firms will be able to effectively orchestrate the entire ecosystem to deliver value to consumers and will be best positioned to harness value in these new value pools. As this book illustrates, leveraging technology—often commoditized—to orchestrate connected users towards new and efficient value-creating interactions holds the key to the business models of the future.

Platform Scale for a Post-Pandemic World serves as a maker’s manual, helping executives design and build platforms, and provides a lens to analyse the shifts currently underway and their implications for future platform-scale businesses.

The world today is facing a looming crisis in leadership. Ruchira Chaudhary’s book Coaching: The Secret Code to Uncommon Leadership makes the crucial distinction between controlling from a position of power and coaching from one, which often make the all the difference between success and failure. Here is an excerpt:

‘You are failing us. But the young people are starting to understand your betrayal . . . You have stolen my dreams and my childhood with your empty words. The eyes of all future generations are upon you. And if you choose to fail us, I say we will never forgive you. We will not let you get away with this. Right here, right now is where we draw the line.’

A visibly emotional Greta Thunberg, the teenage climate activist, berated and excoriated world leaders for their inertia over the climate crisis. Her speech at the United Nations summit became symbolic of her generation’s demand for a better world. She has constantly provoked world leadership, demanding ‘how dare’ they not do more for the environment and for the future generations.

Would we—the current leadership of the business world— have to be similarly answerable to our younger colleagues one day for leaving the corporate world bereft of good leadership?

There is a massive leadership shortage in the world today even though there is enough talent, according to leadership gurus James Kouzes and Barry Posner. There are potential leaders out there who have a lot of talent. People who are eager, passionate and keen to succeed. And yet, we find ourselves in the midst of a leadership crisis when looking to steer the organizations (and nations) of tomorrow.

By 2025, 75 per cent of the workforce will comprise of millennials. Yet organizations around the world do not feel they have an ample leadership pipeline for current and future needs. About 86 per cent of the respondents to the latest World Economic Forum Survey (WEF) corroborate the view that we are indeed experiencing a leadership crisis. Companies believe they do not have enough leadership bench strength and the demographic shifts are creating more demand for exemplary leadership than the supply.

They go on to ask that if the need for leaders is so high—why aren’t we developing enough leaders? Why is the pipeline so bare, despite the knowledge that having the right leadership is critical to thriving and surviving in the future?

What holds true with the environment can also hold true for business.

Building sustainable leadership for the future is complex and unfortunately not enough of a priority, yet it is critical to the vitality of future businesses. As with the environment, the choice to act rests with us. We can bridge the leadership gap by nurturing and coaching our teams and our emerging leaders now, creating a much stronger pipeline of future leaders, ready to hold the rudder of the economy, when the time comes.

According to leadership scholar Jack Zenger’s research on the topic—this shortfall is fuelled by inadequate preparation. Potential leaders are simply not ready to lead others and most leaders are not getting adequate training. Not surprising, considering that the average age of a manager who goes through any leadership programme was forty-two!5

Just as you would not seek medical treatment from an untrained physician or allow an untrained mechanic to fix your new car—why would you let untrained, unprepared leaders steer your organization?

Why then aren’t we building enough leaders especially in light of such alarming statistics? Why aren’t organizations, educational establishments and governments spending more time, effort, energy and resources in developing this next line of leaders?

That’s because our approach to building leaders isn’t working!

Organizations (societies and nations) are often run according to ‘the superchicken model’, where the value is placed on star employees who outperform others. The model refers to ‘interactions among chickens’ observed in a study by Purdue University evolutionary biologist, William Muir, and explained later in this section.

As we saw in the case of Dr Big, Sachin and Travis—we are instantly drawn to our best performers, our stars, and there is a natural assumption that these superstars will morph into superstar leaders.

We’ve assumed that success is achieved by picking the superstars, the brightest men, or occasionally women, in the room, and giving them all the resources and all the power. The reality however can be very different says Margaret Heffernan.

The idea that top performers can be selected for desirable characteristics has a long pedigree. Charles Darwin, himself, relied upon animal breeding practices to explain how nature plays the same role as the farmer. During Darwin’s time in the mid-19th century, it was widely assumed that creating a better society was a matter of selecting the most able individuals.

This was the basis of an experiment conducted in the 1990s by Dr William M. Muir, professor of animal sciences at Purdue University. The purpose of the experiment was to increase the egg-laying productivity of hens. The most productive hen from each flock was selected to breed the next generation of hens, and so on and so forth, inevitably resulting in a flock of high-productivity chickens. In this model, scientists at Purdue University set out to build a flock of successful chickens by selectively breeding the best of the flock.

According to a Forbes article, ‘Muir left the chickens alone for six generations, expecting to see the super chicken flock turn into a breed of productivity thoroughbreds. But that’s not exactly what he found. The first group—the average chickens—were the same as before . . .’ These were plump, well feathered, healthy and actually producing more eggs than they were at the start of the experiment. ‘The super chickens, on the other hand, weren’t exactly fat and happy. All but three were dead. The individual superstars had pecked their kin to death.’

What should have amounted to a breed of ‘superchickens’ ended up producing a strain of hyper-aggressive hens that incessantly attacked each other.

Muir’s chicken experiment has become legendary among social scientists because it’s a kind of a parable—window into human behaviour and the way we work, and maybe also a lesson on how we could do better. It is not a surprise that these superflocks seem like an apt comparison to organizations of today. As Margaret Heffernan shares in her TED Talk, ‘Forget the Pecking Order at Work’, superchickens in the workplace can cause super problems.

…The superchicken model tells us many things about teamwork, collaboration and, most importantly, that being a star performer or being naturally gifted at your craft is sometimes not enough. These performers need to be nurtured and their craft honed if we want them to lead with the same panache and excellence.

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Coaching: The Secret Code to Uncommon Leadership is a must-read for leaders, aspiring leaders and especially those that wish to transition from being just good leaders to extraordinary ones.