"Are You Focused Only on Quarterly Gains? What's the Cost to Your Long-Term (Marketplace) Success?"

Un Espresso per favore!

It is WEEKEND and I am glad you take a sip of Ecosystem inspiration.

This is #EcosystemEspresso #40

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2| Platform Disco - Discover business model strategy - tech - humans behind modern transactional platform ecosystems

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3| Ecosystem Espresso with co-author and 3 parts coming

This edition of the #EcosystemEspresso is testing waters of looking at the humans behind platforms and their challenges. I am in the process of writing a 3 part #EcosystemEspresso with Anke Egger which goes even deeper. It is fun and will be exciting as Anke is combining business strategy with line-up, coaching, yoga education and practical experience working with leaders. So look forward to it!

4| "Beyond the Quarter: Rethinking Long-Term Success in Platform Business Models"

Many of us have been there: Being part of a company that is stock-market traded and bound to quarterly reporting. This is on one hand a reality, on the other hand it increasingly becomes a challenge, if leadership invests all their attention, energy, time and resource in making the next quarter.

The price businesses have to pay is often obsolescence in the mid-term. Given tech development is exponential, the decline might happen tomorrow even faster than we think.

In light of this environment many business leaders default to the known, the core, the short-term. It gives the feeling of control and certainty. Until. Until it is too late.

I think about 3 things leaders should choose to do NOW:

1. Plan with the growth of platforms
2. Embrace Uncertainty
3. Treat Strategy not as (financial) planning

Quote of the Week

Uncertainty makes me uncomfortable, but I believe it is the only way to achieve any new transformation or joyful thing I want in my life.

N & S Furr

Now, let's take a big sip of Ecosystem Play!

"Beyond the Quarter: Rethinking Long-Term Success in Platform Business Models"

Short-termism is creating real opportunity cost, foregoing growth opportunities in networked business model, like marketplaces and platforms. In an ecosystem economy going all alone is another missed opportunity.

1| Where shall growth come from?

Harder every year to find growth

One of the main questions. And every year harder to answer to make the numbers. Supply chain challenges, inflation, input cost etc. So, putting the breaks on cost and somehow you make it.

You do not even notice, and a year is over. And back to square one.

While this is already tough, intense and energy draining, now hyper-change is added on top: Tech enabled business model innovation and the climate crises. So, in other words while you are so busy, the rules of fields of your chess board are being moved. All the energy is needed to come back to your field, while competition is on another chess board.

Marketplace and Platforms: Grow more!

Looking at the performance of marketplaces, it is obvious that they consistently outperform linear models. Still too many business are on the path of more of the same and are surprised that it is getting harder and harder every year. At the end of the short-termism flywheel is first cost-cutting and then becoming a small playerer or bankruptcy.

The main reasons on why marketplaces should be on your growth agenda:

1. Reach new customer groups in B2C and B2B
2. Drive profitability
3. Increase brand awareness

There are clear benefits of marketplace business models:

There are 3 main targets selling on Marketplaces and through Dropship:

• Retailers: which primarily sell products from brands and their own PLBs to consumers through physical storefronts, eCommerce, or both.
• Brands: which own production and distribution of their products and sell through multiple channels, like D2C, Retailers, distributors, wholesalers.
• Marketplace-native sellers: which focus on selling on and through marketplaces.

You sell faster

In this survey on avg. it took 23 days to start selling on a marketplace after uploading the catalogue. The 25% of sellers were selling after 4 days!

This might be a curated or vertical marketplace (43%) or a generalist one, like Amazon (57%). Traffic and competition is higher on Amazon, but on specialised marketplaces profits can be higher (2-5%) as per the study.

Foregoing real sustainable growth

As operator of marketplaces you can make very good margins without linear cost increases given network effects and efficiency of marketplaces.

See the "Take Rates" below. Imagine margins you as operator can make on the net-revenue that is transacted over your platform:

Now imagine the huge number of customers and transactions that powerful marketplace software these days can achieve. Put this in contrast with relatively small overhead you need to achieve that.

Layering Opportunities and business models on top

Retailers love their products. And yes, "retail is detail". Hence, a lot of focus on the products. But like in offline, with loyalty programs, manufacturing of PLBs, advertising contributions, listing fees, marketplace operations offer many opportunities to make customers happier, as it is so easy, a true "one stop shop"...

Increasingly businesses are clear in light of competition from #Asia or #hyperscalers like #Amazon, they can no longer compete on price, assortment or convenience. #Services seem to be the next place to go. And #Services are hard because of the human factor.

Services layer

As marketplace operator with the respective organisation, tech, culture, customer-centricity etc., it is easier to layer services on top.

Advertising layer

Given the traffic, shopping & purchasing environment and involvement and access to data it is more attractive to spend directly in this commerce environment.

This is huge! And it is still highly fragmented across different platforms, but this is profit!

Embedded Services Layer

Next to these layers, there are embedded services that make the customer journey simpler, more seamless and less time consuming.

As part of subscription services like #Prime or the checkout process embedded finance allows customers to buy now-pay later, use multiple forms of credit lines etc. And embedded insurance to secure transactions, transport use of products and services.

Next to these more and more established layers, think about layering ecosystem of ecosystems. A great example is #Apple, #Tesla or #Booking (I just choose randomly):

• Apple: Subscription of apps, fitness, entertainment, cloud, payment etc.
• Tesla: Subscription of entertainment, FSD, insurance, energy VPP etc.
• Booking: Place to stay, rental car, aviation, experience, insurance etc.

Other Layers

Please feel invited to read about more layers in our new book which was presented today at #NRF2024 in New York.

2| Embrace Uncertainty

The last years were "intense" - it will never be so slow again

While indeed the sequence of events was and is not easy. Welcome to the 21st century. So, leaders can either withdraw and do more of the same. Or they adapt to how the world is.

We always hear about: "you have to take risk"! - it is soooooo abstract. Let's therefore break it down a bit.

Human beings are wired to be afraid of uncertainty. This is something that neuroscience studies show clearly. We have a natural orientation to try to eliminate all uncertainty, but what we don’t realize is that as we do that, we also eliminate possibility.

N. Furr

While we hate uncertainty, because we would not have survived without fear. It sits in the limbic system. And we can deal with it structurally differently. Leaders have a choice. More of the same, but why expect different results or new paths:

In their book "Upside of Uncertainty" the authors introduce 4 steps:

1. Reframe is about identifying both the uncertainty and the possibility in any situation.
2. Prime captures the tools to prepare in advance so you are more robust in the face of uncertainty.
3. Do is about taking action, but research shows there are better ways than others to step into the unknown.
4. Sustain is about becoming resilient in the face of surprises and setback

Source: Furr, Forbes

Pessimism and Optimism are learned explanatory styles we use to interpret the world.

Seligman or Furr

In short, when something bad happens, pessimists interpret it as 1) permanent, 2) pervasive (meaning it applies to all aspects of their life), and 3) personal. As a result, setbacks become catastrophic.

By contrast, an optimist does the opposite, seeing whatever happens as 1) temporary (e.g., “I’ll soon find work”), 2) localized (e.g., “I lost my job but I’m great other areas of my life”), and 3) not personal (e.g., “the company made some bad decisions growing too quickly, too bad they lost out on me!). Not surprisingly events are de-catastrophized!

There are two Is

We are all two people, one who sees (I-self), and one who is seen (me-self). An important path to happiness is learning to emphasize the I-self!

It therefore starts with you, your "I-self" and not the "me-self" (see Prof. Brooks).

• What is your personal and professional intention?
• What is your why?
• What views have you brought here?
• What are you willing to explore and let go?

As the philosopher William James explored in depth, you must be an observer of things around you to survive and thrive, but you must also observe yourself and be observed by others to have any consistent sense of self-concept and self-image

Prof Brooks

The importance of curiosity and living in the moment

This sounds super-soft and non business. However, business is at this point still conducted by humans. So, you as leaders need to spend more time with who you are and who you want to become in this context. What are you willing to risk, what is out of scope and so forth.

"Intention without attachment".

Thích Nh?t H?nh said one of the greatest attachments that people have in modern life is to their views and opinions.

Prof Brooks and the Dailalama speak about the attachment as well. Check these quotes:

Intention is fine, but attachment is bad.”

“Look, it’s not that I don’t have my views, I just don’t have the attachment to these views"

Here are some concepts you can personally explore and dive in deeper. Without your leaders changing, how shall the business change? And if you do not change = embracing networked business models as growth drivers, someone else is already. However, the problem is not competition, but your customer′s expectations!

1. Setting Intentions Mindfully: Focus on setting goals with a clear and present mind, understanding the deeper purpose behind each intention.
2. Acceptance of Various Outcomes: Cultivate a mindset that accepts different outcomes, understanding that not all goals will materialize as planned.
3. Focus on the Journey, Not Just the Destination: Emphasize the importance of the process and learning experience over the fixation on the end result.
4. Emotional Balance: Maintain emotional equilibrium regardless of success or setbacks, preventing extreme reactions to outcomes.
5. Releasing Control: Understand and embrace the fact that some factors are beyond personal control, and adapt strategies accordingly.

Inspired by Prof. Brooks, Harvard.

3| Strategy, not financial planning!

"Same procedure as every year!"

I have been there, done that as well. Every year are we growing +3 or 5% - this is incrementalism and ok for very mature businesses. However, with new tech possibilities, very traditional business transform. If all you do as leader is negotiate the financial model of top line, bottom line and opex, that is not sufficient anymore

“Good strategy works by harnessing power and applying it where it will have the greatest effect,” and “good strategy is an approach that magnifies the effectiveness of actions by finding and using sources of power.”

Rumelt

Platforms are true source of power

Throughout this #EcosystemEspresso and the series in general you should have come to the conclusion that a true powerful strategy is at your hands.

Get help from outside. It is not easy to embrace, understand and stay committed as leadership team.

Technology is the least concern as software solutions are advanced and good #SystemIntegrators know their stuff. It is more about the people, the operating model and strategy including staged expansion #metrics!

Let me give an example that is fresh from last week, from around the corner and that can go either way.

A great platform success or "only" a great product!

75 years and a big jump into opportunity land

Think back to Film and Cameras, we now have a studio camera capability in our pockets. Or Binoculars, after 75 years #Swarovski launched the first AI- powered solution (Happy Birthday). Why am I using this example. They come from where I am from. And there is huge opportunity with the product in the narrow sense, but more importantly for business model innovation!

The new technology allows for very different experience and solving a true problem.

While bird watchers, hunters and outdoor experts know their stuff, as they are pros or intense hobbyists, we as normal users do not. Being connected with nature is beautiful and it is more than just the view through. It is the whole sensation of being outdoors. Silence, smell, air etc.

Stefan Schwarz and team have presented the product at #CES2024 last week. This product offers a hook. If #SwarovskiOptik is smart to really establish a platform and later layers of ecosystem of ecosystem is to be seen.

Launching is not (yet) winning

While the potential is there, it does not mean that the tech focus will drive usage and expansion into new target audiences. Swarovski Optik is not so big. A platform business model could allow inverting the firm and tapping into infinite resources. A marketplace grand strategy can support the right sequencing from developer community, partner-led growth to experience platforms.

Even if this first generation does not yet work in line with full expectations understanding the customer problem and solving it better and better will allow to enter platforms!

Financial planning closes doors too early

If you have a true strategy, one failure will not get you off it. If your customer insights are right, and the bundle not, then you have learned how it does not YET work.

We are the ones that implemented most marketplaces around the world. There are Billion USD examples but also examples that were shut down too early.

Therefore, we have become one of the leading "Strategic SIs" that developed strategies and helps ready leaders across #businessmodel #strategy, #tech and #operating model.

A key challenge is, that business model innovation often is only "another" project. In reality it is transforming the company. You do not enter such an endeavour without the preparation.

4 common mistakes

In their research David B. Yoffie, Annabelle Gawer, Michael A. Cusumano grouped the most common mistakes in platforms into four categories:

1. mispricing on one side of the market
2. failure to develop trust with users and partners
3. prematurely dismissing the competition
4. entering too late.

Definition of Strategy by Richard Rumelt:

Richard Rumelt, a renowned strategy expert, defines strategy as a coherent set of analyses, concepts, policies, arguments, and actions that respond to a high-stakes challenge. He emphasizes that the essence of strategy is in the actions and decisions aimed at overcoming significant obstacles to achieve important objectives.

Characteristics of a Good Strategy:

1. Diagnosis of the Challenge: Clearly identifies and understands the nature of the challenge or problem the organization faces.Example: A company recognizing that its main challenge is a rapidly changing technology landscape and adapting its strategy accordingly.
2. Guiding Policy for Dealing with the Challenge: Establishes an overall approach to overcome the identified obstacles.Example: A business deciding to focus on innovation and customer experience as its guiding policy to outpace competitors.
3. Coherent Set of Actions: Implements a set of coordinated actions that work together to accomplish the guiding policy.Example: A retailer enhancing its online presence, optimizing its supply chain, and training staff in customer service to create a seamless shopping experience.

Characteristics of a Bad Strategy: (Rumelt)

1. Lack of Real Insight: Fails to address or misinterprets the core challenges and issues facing the organization.Example: A company ignoring emerging market trends and continuing with outdated business models.
2. Failure to Choose or Prioritize: Attempts to address too many targets simultaneously without clear priorities or trade-offs.Example: A small company spreading its resources too thin by trying to compete in multiple markets at once.
3. Incoherent Actions: Implements actions that are not mutually reinforcing or are even contradictory.Example: A firm claiming to prioritize innovation but cutting its R&D budget to boost short-term profits

2024! May it be good!

1. Plan with the growth of platforms
2. Embrace Uncertainty
3. Treat Strategy not as (financial) planning

It starts with "I-self" and observing that platforms win and then developing real good strategies. This is almost simple!

We are committed to facilitate from #PlatformStrategy, #Brand-led Ecosystems to #Implementation of tech. #McFadyenDigital

Join the platform revolution: one platform and ecosystem at a time. We are leaders in #circularityplatform thinking worldwide.

Have a great start into the week!

Come back next week please.