Firm of the Future - Part II

In the last few years, platforms have become attractive for a number of reasons:

- Non linear revenues : Costs are almost delinked to revenue growth - enabling geometric growth in Profit and corresponding market valuations

- Extensibility of the platforms to multiple markets with minor localisation

- Extensibility of the platforms to multiple product/service categories, multiple customer segments ( e.g. using Amazon as a B2B platform , beyond the original B2C , Adding Artwork as a category etc...)

Platforms bring a different dimension that is hiterhto unknown in the traditional business world. That is taking data from one set of customers and making money by offering this data to another set of customers.

Easier to understand with an example.  A health app ( that encourages/tracks healthy lifestyle/diet/excersize etc ) is free for retail customers to use , update data and track their own health. But the platform owner makes money by offering this data to insurers who can now underwrite better policies thanks to the rich data they have of these customers and their likelihood of getting sick.

By the same logic , a retailer may make more money of the data patterns that it collects of its customers , than by selling groceries to them! ( subject to customer privacy of course!) 

Did you know that Samsung makes more money selling components to Apple than selling its own phones? 

A prerequisite for the Firm of the Future is to have this kind of disruptive thinking that goes beyond traditional business models to make money. Nothing is off limits!

What qualifies as 'Firm of the Future'?

From what markets and investors are rewarding worldwide and from what I see , the following are the qualities of 'Firm of the Future'

1. Asset Light / 'Light' Assets : The firm is light on assets which keeps the asset servicing costs quite low and makes it easy for the firm to 'Pivot' to a new product/market/business model. Its more powerful to have 'light' assets such as Data and Intellectual Property which are lot more rewarding from a perspective of Return on assets. They are also that much harder for a competitor to replicate.

2. People Light: Most of the firm's activities do not depend /directly related to number of humans required to run them. This makes it easy for the firm to reduce/avoid attrition/training/retraining/skill gap/demand -supply issues.

3. Cost Variability - Bulk of the costs of the structure are variable and hence can be directly fine tuned to the market demand. Even better are those whose costs are not linked to revenues !

4. Scalability - A platform is easily scalable vs a manufacturing plant or a services factory. The combination of #3 and #4 means the Profit growth can be geometric and not linear.

5. SMAC - Businesses connect to /leverage Social Media, Mobile, Analytics and Cloud. You might note that all these are closely connected to how millennials live /work and play!

6. Assets  to Services to  Platform : Owning a platform is in many ways a business that relates to the above than a services business or an asset based business.

7. Pivot - The ability to pivot to market demands/poor business model/ business model obsolescence/ better business idea etc - How easy/able is your business to pivot ?


How does your business/ business idea  relate to the above ?