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Beyond black and white: Why traditional strategy fails in a platform world
In business, even when one element seems obviously better, it’s unwise to neglect the other. Same is true in business strategic thinking. Strategy, and ‘not strategy’ .
“When everyone in the world sees beauty, then ugly exists. When everyone sees good, then bad exists. What is and what is not create each other. Difficult and easy complement each other,” wrote Lao Tzu, more than 2,300 years ago.
Is it a business risk to see the world in black and white? Has the bedrock of thinking about business strategy radically shifted? Why do traditional brick and mortar companies often struggle?
Have the once clearly defined boundaries between industries faded? What business is Safaricom really in – is it financial services, voice and data, retailing, or entertainment ? Is the problem ‘dwindling market fortunes’ or how senior management thinks about the business they are in?
In business, as in life, we tend to think in opposites. One would not exist, without the other. Light or dark, high or low, hot or cold, smart or stupid. That’s how we make sense of the world, trying to understand how things work.
But in making judgements, calling one opposite good and the other bad, perhaps we are missing something. Is there another way of looking at things.
One quality depends and complements the other. In business, even when one element seems obviously better, it’s unwise to neglect the other. Same is true in business strategic thinking. Strategy, and ‘not strategy’ .
Ancient roots
Is strategy a new idea? Strategy can be looked at both on a ‘long view’ going back more than 2,000 years, from ancient and Biblical times to more recent thinking about business strategy from 1920.
Much of business strategy has been influenced by military strategy, dating back to, for instance, Alexander the Great in 333 BC. When a 23 year old Alexander, with an army of 50,000, defeated Darius with his 1 million troops.
What has been the bedrock of thinking about business strategy, from say 1985 onward? Does it still apply in 2025?
Michael Porter’s frameworks – industry five forces, value chain, generic strategies of cost leadership, niche, and differentiation– shaped 20th-century strategic thinking. They are designed for linear, product-based firms in stable industries.
Porter’s training was in industrial economics. For instance, the five forces framework looks at the profitability of industries, say pharmaceuticals versus airlines. Goal of business is to create and capture value.
Taking a flight creates great value, yet airlines ability to capture that value in profits is difficult, even in the best of times due to high fixed costs and fuel price volatility. In contrast, the pharmaceutical industry is significantly more profitable than airlines, with much higher gross and net profit margins, in part due to high barriers to entry.
What industy are you in?
Problem is that today, boundaries between industries are blurring. For instance, what industry is Amazon, Google, Apple, Safaricom or Equity Group in? Boundaries of industry are disappearing. Plus, competition can be asymmetric, tiny smart David can defeat an over-confident Goliath.
Advances in technology created platforms
Business models rule. Today almost 60 percent of the largest companies globally are based on a platform business model. Thanks to technology’s processing speeds and memory, a platform has none of the traditional brick and mortar presence that businesses used to require, plus they don’t have an expensive inventory. A platform simply brings the buyer and seller together, thanks to a digital footprint.
“Besides huge market capitalisation Alibaba, Alphabet (Google), Amazon, Apple, Facebook, Microsoft, and Tencent all have another thing in common: heavily populated platform business models. Platforms are the favoured operating model for seven of the world's 12 largest corporations,” notes McKinsey.
World beating platforms have a number of things in common. They are all software-based digital environments with open infrastructures, matchmakers linking people, organisations, and resources, orchestrators of ecosystems extending across sectors and national borders, reducing marginal costs to near zero, and harnessers of network effects.
Porter's frameworks assume competition for value capture in a closed value chain. Platform strategy requires orchestration of value creation across open networks.
Competition is not based on features, rather more on the number of people on the platform – network effects.
Once competitive products – services can soon become commodities, that can be given away for almost free, for instance, WhatsApp, or Google Maps, or Khan Academy, providing world class education.
From PR hype to genuine rethink
Imagine Acacia Insurance, on the surface saying all the right things. Lot’s of public relations like hype “transforming devasting risk into financial stability” but in practice the age old insurance company was struggling.
Having lost confidence in the former golf swinging CEO, the board installed yoga practicing, Sarah to inject a dose of imaginative thinking.
Sarah realised that going a step beyond banc assurance, the traditional lines in the provision of financial services had shifted.
Sarah looked out globally, seeing that many of the larger established financial institutions were floundering in this era of disruption as fintechs and nimble startups keep slicing off pieces of the financial services market. While old style thinking industry leaders scramble to adopt the same shiny technologies, Sarah saw they are missing the heart of the problem -- the way business is being thought about.
By adapting a blend of the traditional linear business model and platform thinking, Acacia went on the blur the lines of what was possible.
Both in serving its more affluent customer base, it began focussing on financial inclusion, breaking into what was previously thought to be unprofitable markets.
Just as in a novel, in business, context is everything. Charles Dicken’s A Tale of Two Cities set in London and Paris, before and during, the French Revolution is a study in contrasts.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us.”
