Personal Finance

Platforms disrupt old business models

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Summary

  • Today competition has shifted from offering products — services, within the bounds of an industry sector, to creating platforms, and being part of ecosystems.
  • Five years ago if you asked managers who their competitors were they would likely list those in their industry.
  • Today, their competitors can be completely outside, boundaries between the so called industry sectors are blurring, and in many cases beginning to disappear. 

Business in a time of coronavirus has accelerated questioning about fundamental assumptions. What is the best way to do business? How firms compete and thrive is not how it used to be, now it is often asymmetric. Little David defeats Goliath. Idea of competing in a traditional industry is what managers know how to do, but now the lines of what is an ‘industry’ are fast being blurred. 

Prime example would be Safaricom, is it in financial services, media streaming entertainment or in telecommunications? 

Today competition has shifted from offering products — services, within the bounds of an industry sector, to creating platforms, and being part of ecosystems. Five years ago if you asked managers who their competitors were they would likely list those in their industry. Today, their competitors can be completely outside, boundaries between the so called industry sectors are blurring, and in many cases beginning to disappear. 

Part of the reason for this is the global dominance of platforms and ecosystems that cut across traditional industry sectors.

Platform thinking

The use of hubs design in the flow of information, goods and services has been in existence since Roman times, more than 2,000 years ago. Like hubs, platforms have been in existence for millennia. For example, village market, is a ‘platform’ bringing together buyers and sellers.

However, in just over the last 10 plus years, the idea of a platform has changed radically. Thanks to the radical increase in ICT processing and storage capacity, platforms are a disruptive innovation game-changers that have transformed companies and industry sectors. An example of this disruptive innovation in Kenya would be M-Pesa and globally, the introduction of platforms like, for instance, Amazon, Google, Uber, Facebook, Airbnb and Jumia have changed the face of how we do business forever. For instance, Airbnb, an accommodation sharing platform, that just started in mid-2008, sold more rooms pre-corona than Hilton that has been in business for 100 years. Yet, Airbnb does not own any properties, just as Amazon does not own any stock, it makes its money by being a selling platform for other retailers. Platforms represent a radical shift in business models bringing together buyers and sellers. 

How can Kenyan businesses and organisations tap into the essence of platform thinking and the lessons learned? There is a need to ask how a business can move away from the now more ‘traditional linear organisation model’, to see itself as a part of, for instance, an ecosystem, leveraging its strengths, its assets and capabilities to have a significantly greater impact?

In many cases, firms are interacting, ‘doing business’ with a wide range of organisations, where in reality, they are part of an ecosystem. There is a need to recognise that today, leading organisations across sectors, have concluded that they can no longer play it alone as they contemplate ways for their business to expand, innovate, disrupt or just compete.

The solution for many Kenyan businesses may be to address the problems they face by having an ability to partner within an ecosystem of cross industry players that work together to define, build and execute market-creating solutions, that innovate and in the process create jobs. 

That’s the theory, making it work gets tricky. Competition today is increasingly asymmetrical, that’s good news for the small creative Kenyan entrepreneur. This means competition is not between companies that are pretty much alike, in other words: symmetrical. Asymmetrical competition allows the pint-sized business start-ups, the possibility to be able to zoom out of nowhere, and fast topple yesterday’s giants, based on questioning traditional assumptions.