Back in 2007 the five major mobile-phone manufacturers—Nokia, Samsung, Motorola, Sony Ericsson, and LG—collectively controlled 90% of the industry’s global profits. That year, Apple’s iPhone burst onto the scene and began gobbling up market share.
By 2015 the iPhone singlehandedly generated 92% of global profits, while all but one of the former incumbents made no profit at all. Apple (along with Google’s competing Android system) overran the incumbents by exploiting the power of platforms and leveraging the new rules of strategy they give rise to. Platform businesses bring together producers and consumers in high-value exchanges. Their chief assets are information and interactions, which together are also the source of the value they create and their competitive advantage.
Understanding this, Apple conceived the iPhone and its operating system as more than a product or a conduit for services. It imagined them as a way to connect participants in two-sided markets—app developers on one side and app users on the other—generating value for both groups. As the number of participants on each side grew, that value increased—a phenomenon called “network effects,” which is central to platform strategy.
Though they come in many varieties, platforms all have an ecosystem with the same basic structure, comprising four types of players. The owners of platforms control their intellectual property and governance. Providers serve as the platforms’ interface with users. Producers create their offerings, and consumers use those offerings.
As Apple demonstrates, firms needn’t be only a pipeline or a platform; they can be both. While plenty of pure pipeline businesses are still highly competitive, when platforms enter the same marketplace, the platforms virtually always win.
The move from pipeline to platform involves three key shifts:
1. From resource control to resource orchestration.The resource-based view of competition holds that firms gain advantage by controlling scarce and valuable—ideally, inimitable—assets. In a pipeline world, those include tangible assets such as mines and real estate and intangible assets like intellectual property. With platforms, the assets that are hard to copy are the community and the resources its members own and contribute, be they rooms or cars or ideas and information. In other words, the network of producers and consumers is the chief asset.2. From internal optimization to external interaction.Pipeline firms organize their internal labor and resources to create value by optimizing an entire chain of product activities, from materials sourcing to sales and service. Platforms create value by facilitating interactions between external producers and consumers. Because of this external orientation, they often shed even variable costs of production. The emphasis shifts from dictating processes to persuading participants, and ecosystem governance becomes an essential skill.3. From a focus on customer value to a focus on ecosystem value.Pipelines seek to maximize the lifetime value of individual customers of products and services, who, in effect, sit at the end of a linear process. By contrast, platforms seek to maximize the total value of an expanding ecosystem in a circular, iterative, feedback-driven process. Sometimes that requires subsidizing one type of consumer in order to attract another type.
These three shifts make clear that competition is more complicated and dynamic in a platform world.
How Platforms Change Strategy
In pipeline businesses, the five forces are relatively defined and stable. If you’re a cement manufacturer or an airline, your customers and competitive set are fairly well understood, and the boundaries separating your suppliers, customers, and competitors are reasonably clear. In platform businesses, those boundaries can shift rapidly.
Forces within the ecosystem.
Platform participants—consumers, producers, and providers—typically create value for a business. But they may defect if they believe their needs can be met better elsewhere. More worrisome, they may turn on the platform and compete directly with it.
Forces exerted by ecosystems.
Managers of pipeline businesses can fail to anticipate platform competition from seemingly unrelated industries. Yet successful platform businesses tend to move aggressively into new terrain and into what were once considered separate industries with little warning.
Focus.
Managers of pipeline businesses focus on growing sales. For them, goods and services delivered (and the revenues and profits from them) are the units of analysis. For platforms, the focus shifts to interactions—exchanges of value between producers and consumers on the platform. The unit of exchange (say, a view of a video or a thumbs-up on a post) can be so small that little or no money changes hands. Nevertheless, the number of interactions and the associated network effects are the ultimate source of competitive advantage.
Access and governance.
In a pipeline world, strategy revolves around erecting barriers. With platforms, while guarding against threats remains critical, the focus of strategy shifts to eliminating barriers to production and consumption in order to maximize value creation. To that end, platform executives must make smart choices about access (whom to let onto the platform) and governance (or “control”—what consumers, producers, providers, and even competitors are allowed to do there).
Platforms consist of rules and architecture. Their owners need to decide how open both should be. An open architecture allows players to access platform resources, such as app developer tools, and create new sources of value. Open governance allows players other than the owner to shape the rules of trade and reward sharing on the platform. Regardless of who sets the rules, a fair reward system is key. If managers open the architecture but do not share the rewards, potential platform participants (such as app developers) have the ability to engage but no incentives. If managers open the rules and rewards but keep the architecture relatively closed, potential participants have incentives to engage but not the ability.
Platforms often launch with a fairly closed architecture and governance and then open up as they introduce new types of interactions and sources of value. But every platform must induce producers and consumers to interact and share their ideas and resources. Some platforms encourage producers to create high-value offerings on them by establishing a policy of “permissionless innovation.” They let producers invent things for the platform without approval but guarantee the producers will share in the value created. However, unfettered access can destroy value by creating “noise”—misbehavior or excess or low-quality content that inhibits interaction. Most successful platforms similarly manage openness to maximize positive network effects.
Metrics.
Leaders of pipeline enterprises have long focused on a narrow set of metrics that capture the health of their businesses. For example, pipelines grow by optimizing processes and opening bottlenecks; one standard metric, inventory turnover, tracks the flow of goods and services through them. Push enough goods through and get margins high enough, and you’ll see a reasonable rate of return.
As pipelines launch platforms, however, the numbers to watch change. Monitoring and boosting the performance of core interactions becomes critical. Here are new metrics managers need to track:
- Interaction failure. If a traveler opens the Lyft app and sees “no cars available,” the platform has failed to match an intent to consume with supply. Failures like these directly diminish network effects.
- Engagement. Healthy platforms track the participation of ecosystem members that enhances network effects—activities such as content sharing and repeat visits.
- Match quality. Poor matches between the needs of users and producers weaken network effects.
- Negative network effects. Badly managed platforms often suffer from other kinds of problems that create negative feedback loops and reduce value.
- Finally, platforms must understand the financial value of their communities and their network effects.
Because platforms require new approaches to strategy, they also demand new leadership styles. The skills it takes to tightly control internal resources just don’t apply to the job of nurturing external ecosystems.
The failure to transition to a new approach explains the precarious situation that traditional businesses—from hotels to health care providers to taxis—find themselves in. For pipeline firms, the writing is on the wall: Learn the new rules of strategy for a platform world, or begin planning your exit.
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These are the four habits that I've found helpful for building my leadership presence in a way that's meaningful, effective, and consistent.
1. SPENDING TIME IN THE TRENCHES
I like to know what everyone else is doing and thinking and what they're working on—without turning into a micromanager. I've discovered that wanting to know those things is all about being interested in the individual as a person, not as an employee. And that simple habit can serve leaders well whether they're managing remote teams for employees who are right there in front of them. Your own sense of your presence as a leader won't mean much if your employees find you inaccessible.
2. BEING "ALL THERE"—AUTHENTICALLY
Being engaged means letting the other person know that I’m actively listening and interested. I try to ask questions and offer encouraging words when I see they've really delivered on something. Being "all there" isn't just something to focus on when discussing work projects, though. I go to lunch with my employees, plan some fun days outside the office, or just join them on their walks during breaks. It's in these informal situations that I often feel I can connect most authentically.
3. MASTERING THE ARTS OF CONVERSATION AND STORYTELLING
Being enthusiastically conversational comes naturally. But I'm a talker—and the art of conversation takes more than just dominating the discussion. Instead, it means listening and asking questions without interrupting. I've had to learn more about the value of body language—not only my own, but also being able to tun into what others' postures, expressions, and gestures are subtly telling me. These easy-to-miss conversational cues can often tell you more accurately what somebody's really thinking.
4. SHOWING YOU CARE WITHOUT BEING SHOWY
Leaders who are truly present don't keep their emotional distance. If anything, this diminishes any sense of presence by preventing a real, human connection from taking place. I’ve found it's especially important for me to convey warmth and concern to those who don't see me interact with others in the office everyday—those only communicate with me by phone, Skype, or chat.
None of these leadership skills can be developed overnight. I've struggled with all of them. It's taken me considerable practice and testing to see what actions are best received by my employees. Plus, once I’ve established these behaviors, it's never meant I could switch on autopilot from that point forward.
Because presence isn't about your persona or your bearing. It's about what you do each day. And actions need to be taken—repeatedly, deliberately, and with a constant eye to their results. Presence, in other words, takes practice.
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By some estimates, roughly half of U.S. jobs will be potentially affected by automation in the near future. So what are the skills we need to build now to remain employable over the next decade?While specific abilities and knowledge will certainly vary from industry to industry, there are some overarching trends that will affect most of us says workplace futurist Jeanne Meister, a partner at Future Workplace, a New York workplace consultancy. Here are five skills to start building now to maintain your marketability over the next decade.
TRENDSPOTTING
With the workplace changing so quickly, it’s essential to develop systems to not only monitor those changes, but to distill the information and training you’ll need to keep up with them. That means staying abreast of industry developments, taking classes, attending trade events, and following thought leaders who are talking about your sector. It also means being observant about the day-to-day tasks and functions that matter and how they’re changing, separating anomalies from trends.
COLLABORATING IN NEW WAYS
Two trends are converging that will force us to get comfortable collaborating in new ways. First, companies are using more freelancers and soloist services—the so-called "gig economy"—so it’s important to be able to work effectively with disparate teams. In addition, employees can spend more than quarter of their workdays reading, writing and responding to email. Any process that time-consuming is ripe for disruption.
And it’s happening. Platforms like Yammer and Slack cut down on the flow of messages in your inbox and keep project versions, information, and updates in one central, searchable location, she says. She says companies will increase their use videoconferencing.
BUILDING BRANDS—EVEN AS EMPLOYEES
Knowledge workers and others whose employment recruitment has an online component need to show their expertise through participation on sites like Quora or industry-related sites where they can share their thinking on key issues. "Those things have become more relevant in terms of when people try to assess how good you are at something," Bala Iyer, information technology professor at Babson College says.
Brand-building and other entrepreneurial skills will also be important as more workers shift to the gig economy and freelance work. To compete on a regular basis for the next job, you have to have a body of work and online capital to back up your pitch.
LEARNING NEXT-LEVEL TECHNOLOGY
Whether it’s a wearable device that can help you do your job from the road, learning how to interact with machines equipped with artificial intelligence, or the onset of automation in your office or other workplace, remaining employable will require embracing rather than eschewing tech changes. Pay attention to what’s happening in the most advanced workplaces in your field and prepare. That way, you’ll be ahead of the game when the changes come to you.
DEVELOPING YOUR EMOTIONAL INTELLIGENCE
It sounds trite, but the one thing machines will have a tough time doing is building relationships. Developing emotional intelligence—empathy, embracing vulnerability, building strong connections your co-workers and your network—will go a long way to keeping you highly marketable, says Jacob Morgan, author of The Future of Work: Attract New Talent, Build Better Leaders, and Create a Competitive Organization, and cofounder of The Future of Work Community, an online membership organization exploring how the workplace will change.
Looking for the next changes and remaining ahead of the curve in learning about them will be essential to remaining among the most marketable employees. Finally, paying attention to the human side of work—the area that machines will be most challenged in replicating, can be the ultimate way to keep your job opportunities strong.
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