{"id":2611,"date":"2020-02-26T17:05:47","date_gmt":"2020-02-26T16:05:47","guid":{"rendered":"https:\/\/www.druckerforum.org\/blog\/?p=2611"},"modified":"2020-07-31T13:04:03","modified_gmt":"2020-07-31T11:04:03","slug":"networks-and-platforms-the-new-means-of-value-creation-by-christian-sarkar","status":"publish","type":"post","link":"https:\/\/www.druckerforum.org\/blog\/networks-and-platforms-the-new-means-of-value-creation-by-christian-sarkar\/","title":{"rendered":"Networks and Platforms: The New Means of Value Creation <\/br>by Christian Sarkar"},"content":{"rendered":"\n
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As\nthe leading management conference in the world, the Global Peter Drucker\nForum<\/strong> serves as a conduit of powerful ideas and insights for both business\nand society.  In 2019, the conference\ntheme was <\/em>The Power of Ecosystems<\/em><\/a> <\/em><\/p>\n\n\n\n

My<\/em> observations are from the Plenary\nSession 2, Day 1, from the Global Peter Drucker Forum, 2019. Chaired by Adi\nIgnatius<\/strong>, Editor-in-chief, Harvard Business Review Group, the panel\nincluded: Vinton G. Cerf,<\/strong> VP and chief Internet evangelist, Google; Michael\nG. Jacobides<\/strong>, Professor, London Business School; Miriam Meckel<\/strong>,\nFounding publisher ada, Handelsblatt Media Group; Amy Webb<\/strong>, Founder,\nFuture Today Institute; Professor Stern School; Zhang Ruimin<\/strong>, CEO and\nChairman of the Board of Directors, Haier Group<\/em>
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The\nBiggest Risk for Business: Focusing on the Product<\/strong><\/strong><\/p>\n\n\n\n

Adi Ignatius<\/strong> started with the intriguing statement\nthat the biggest risk for companies now is to focus on their product<\/strong>, an\nidea he attributed to panelist Zhang\nRuimin. <\/strong>\u201cIf\ncompanies are not thinking about a broader ecosystem of customer experience\nthey’re going to be left behind.\u201d<\/p>\n\n\n\n

So how should we think about ecosystems?<\/em><\/p>\n\n\n\n

Marc Jacobides<\/strong> explained that while\nwe might speak of ecosystems in metaphoric and playful<\/a> ways, it is firms like\nHaier that are creating a \u201cdense web of relationships that are operating\nacross their own boundaries whose power rests on structured sets of\ncollaboration.\u201d<\/strong> Opportunities for value-creation emerge because technology allows us to revisit how we add value and reorganize the value chain. <\/p>\n\n\n\n

Vint Cerf<\/strong> expressed\nthat as an engineer, he wanted \u201cstability, interoperability and the ability to\nadapt to change.\u201d Google has reorganized itself internally to \u201cmake the\necosystem work well.\u201d It has created a core group focused on \u201cmaking the\necosystem function technically and uniformly,\u201d he explained.<\/p>\n\n\n\n

Drucker Forum 2019<\/strong><\/span><\/h2>
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This article is one in the \u201cshape the debate\u201d series relating to the 11th Global Peter Drucker Forum, under the theme \u201cThe Power of Ecosystems\u201d taking place on November 21 & 22, 2019 in Vienna, Austria.\n
#GPDF19 #ecosystems<\/strong><\/span><\/p>\n<\/div><\/blockquote>\n\n\n\n

Will\nPlatforms Survive? <\/strong><\/p>\n\n\n\n

Adi <\/strong>then asked: \u201cDo you think the current platform model will survive?\u201d<\/p>\n\n\n\n

Miriam Meckel <\/strong>suggested that there were two pathways. One, a\ncontinuation of the current platform monopolies<\/strong> which will continue to\ngrow via network effects and create \u201cgargantuan wells of data\u201d; if this\ncontinues, she surmised, there will be a bifurcation<\/strong> of the Internet\nbased on politics \u2013 with a Western internet<\/strong> and a Chinese internet <\/strong>with\nits social credit system<\/a>.  Two, the \u201cbreakup of Big Tech\u201d \u2013 as proposed<\/a> by\nElizabeth Warren \u2013 which will create a more competitive landscape with more viable\nplatforms emerging. This model could encourage public value creation\nopportunities, she implied.<\/p>\n\n\n\n

Vint Cerf<\/strong> insisted that there\nwas a third way, beyond monopoly and competition, which was collaboration and cooperation<\/strong>. He said\nthere was a path that allows collaboration and cooperation, even while you\ncompete with each other, but where you don\u2019t feel trapped in a particular piece\nof an ecosystem.  His example was Kubernetes<\/a>, the open source container\norchestration system for automating application deployment, scaling,\nand management.<\/p>\n\n\n\n

What is an\nEcosystem Brand?<\/strong><\/p>\n\n\n\n

Adi <\/strong>asked Zhang Ruimin<\/strong>: \u201cYou\u2019ve called\nHaier an ecosystem brand. What does that mean for your business strategy?\u201d  <\/p>\n\n\n\n

He started bluntly \u2013 \u201cWe all need to transform into ecosystem\ncompanies or we won\u2019t be able to survive.\u201d<\/em> \n\u201cHaier,\u201d he explained, \u201chas been one of the been ranked as one of the\nlargest white goods manufacturers in the world, but now we want to transform\ninto a major ecosystem.  In the future I\nthink single standalone products are no longer valuable. What’s more valuable\nis a user case scenario where all of the appliances are connected together.\u201d<\/p>\n\n\n\n

Users want the best experience \u2013 a total experience.  He continued, \u201cHaier is working on an\nInternet of food which connects oven, microwaves, stoves, and refrigerators;\nthe connected appliances talk to food producers and cook and recipe providers\nso that our users are not simply using the appliances but accessing the best\nfood ingredients and the best recipes so it’s about the experience of food.\nPartners join us because they can grow 15% (per annum) in China using the Haier\necosystem as a channel. This means that we are no longer fighting alone but fighting\ntogether for our users.\u201d<\/p>\n\n\n\n

Ruimin saw two trends for the future: one, where products are\nreplaced by integrated use-case scenarios and, two, where ecosystems overlap\nand cover different industries. <\/p>\n\n\n\n

Ruimin said that deal sizes might be sixty thousand dollars\ninstead of a few hundred dollars, showing the value of this approach.  <\/p>\n\n\n\n

To demonstrate this, Haier uses its experience stores to showcase\nthe ways in which products are embedded into the daily life of the\nconsumer.  The smart home has a smart\nkitchen, a smart living room, and a smart balcony.  <\/p>\n\n\n\n

More intriguing is how Haier then engages the consumer in an\nongoing \u201cconversation\u201d to continuously improve the living experience<\/em>.\nMost customer relationships end with the sale, but here the relationship\nactually begins after<\/em> the sale!<\/p>\n\n\n\n

Inspired by Ruimin – Philip Kotler and I came\nup with the idea of an \u201c<\/em>Internet\nof Purpose<\/em><\/a>.\u201d<\/em> <\/p>\n\n\n\n

How Should Companies Prepare for the Future? <\/strong><\/p>\n\n\n\n

Adi <\/strong>then asked: \u201cHow\nshould companies prepare for a future where they may have to participate in\necosystems?\u201d<\/p>\n\n\n\n

Amy Webb<\/strong> pointed out\nthat one of the challenges is based on how humans use language.  While we tend to speak in terms of metaphors,\nwe need to get far more specific to address the issues presented to society by\nAI and Big Data. \u201cThere\u2019s a lot of misplaced optimism and fear about this,\u201d she\nsaid, \u201c with a lot of our cues coming from science fiction, where we\u2019ve got\nvery clear ideas of what the future might look like: for the most part it\u2019s\nrobots coming to murder us in our sleep, or robots taking our jobs.\u201d<\/p>\n\n\n\n

The real issue, she says, is that we don\u2019t have\na lot of transparency and clarity around data policy.  At the highest levels of business, she finds\nthere is almost no discussion of data governance.  This is important, she explains, because\n\u201cwe\u2019ve had a leadership vacuum in the United States over the past few\nadministrations, while in other areas of the world, we currently have\nconflicting ideas of the future of data and AI.\u201d<\/p>\n\n\n\n

Webb\u2019s concern: \u201cwhat if some of these\ncompanies started trading on this proprietary data in a way that that might\ncause a new kind of an inflation that we’ve never seen before, a new kind<\/p>\n\n\n\n

of housing bubble or problem?\u201d  <\/p>\n\n\n\n

Webb also brought up the tale of two internets\n\u2013 US vs. China, and with it her concern that we are witnessing a restructuring\nof the world economy and a future of deep uncertainty.<\/p>\n\n\n\n

Organizing<\/strong> as an Ecosystem: The <\/strong>RenDanHeYi Model<\/strong><\/p>\n\n\n\n

\u201cIn the era of the Internet of Things, companies need to become\necosystem companies.\u201d <\/p>\n\n\n\n

With that statement, Zhang Ruimin began explaining the ecosystemic\norganizational\nstructure<\/a> of the Haier Group. \u201cWe have created a RenDanHeYi<\/em> model\nwhich means aligning our employees with the needs of the user.\u201d<\/p>\n\n\n\n

Translated, \u201cRen\u201d is employee, \u201cDan\u201d is \u201cuser needs,\u201d and \u201cHeYi\u201d is\n\u201cthe connection between each employee and the needs of each user.\u201d<\/p>\n\n\n\n

Ruimin explained how The RenDanHeYi model lets go of the\ntraditional \u201ccommand and control\u201d management paradigm.  At Haier, the traditional management model\nhas been replaced  to create a network of\nthousands of micro-enterprises, each a small team of about eight employees.<\/p>\n\n\n\n

\u201cPeter Drucker said that in 21st<\/sup> century companies\neveryone will become our own CEO.  This\nis what we are doing. CEOs have three powers: the decision-making power, the HR\npower, and the power to set compensation. We gave these three powers back into the hands of\nour micro enterprises.\u201d<\/p>\n\n\n\n

Ruimin\nalso explained that when other companies came to study Haier, he would ask if\nthey could give up the three powers to their people.  The answer was always \u201cNo.\u201d<\/p>\n\n\n\n

The\nonly other companies we can think of that have done something similar and\nsustained it over time are the Semler Group<\/a> (now Semler Partners)\nin Brazil and W. L. Gore & Associates, Inc. in the US. <\/p>\n\n\n\n

This\nis the true meaning of \u201cLeadership Everywhere,\u201d the theme of next year\u2019s Drucker\nForum. <\/p>\n\n\n\n

FURTHER READING:<\/strong><\/p>\n\n\n\n