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 ?

Predicting the Past

Everyone is an expert on the past.

They can explain why something has worked, why something was unique/successful and path breaking.

The challenge is not in predicting the past but seeing a future that many miss today.

From the kid who saw the opportunity to sell mobile recharge on a street corner, to the specialist who supplies 'cut onions' in bulk to the street hawkers in Mumbai, someone who saw that there is money in platforms and not traditional hard assets...  all of them have seen a future that millions missed.

That is one critical skill that no school/college/university/curriculum teaches. How to see an opportunity before others?

Some starting points...

- be open

- ignore all assumptions/rules/general practices. also what people call 'risk'

- think disruptively and not incrementally

-  be ready and able to pivot

The experience of a failure makes you much stronger than any 'teaching' can!

Stop holding the safety rail.

Simpli fly

Changes in business and technology are not just disruptions anymore but continuous permutations!!   Coupled with the information overload, it's easy to get lost or get 'busy'!!!

Will getting busy this way make business sense? 

Mostly not. It is likely to cause distractions, money and time losses and poorer quality of life in general.

The right thing to do is to simplify. Choose very very few ideas and pursue them to be the best in class. 

For entrepreneurs and leaders, this will result in the following:

-  Expertise and IP that's hard to replicate and will give the true 'moat' to business 

- Quality revenue growth

- Better quality of life for the people involved since you are not chasing 1000 things to be busy all the time!!!

Good luck with that ' one in a million idea'!!!

Ideas to Unicorns

Everyday tons of ideas on generated ,copied ,experimented  and go through their own life cycle. 

Very few of them scale up, become big enough to make an impact, sustain themselves. 

Every Hype cycle idea creates hundreds of startups ,many of them wither and fall by the wayside.  Why is the mortality rate so high?

With no shortage of funding and societies' newfound respect for startups, shouldn't more of those be thriving? 

Ideas need passionate teams to commit, pivot, persevere and focus deeper. With sustained focus comes expertise, innovation , differentiation and business survivability. 

It's a long term game. Learn from Amazon!

Power of Open End

Many people open a thriller and first read the end, before starting the book.

Corporates put up quarterly goals and make their employees work towards a known end.

People read reviews/see photos of the place they want to visit, well before they even leave their home.

Stock investors punish a stock/country that does not have 'predictability'!

Humans ( most of them ) by nature do not seem to prefer surprises and want a known end.

There is a flip side. The power of open end.

Its the power of 'Open Endedness' that lets creators make something none imagined before. 

It enables algorithms with 'unsupervised learning' to identify patterns that none thought existed.

It enables travellers 'discover' places/people that they never read/seen before.

It enables 'seekers' to delve into the 'little known' in their search for truth and self inquiry.

Do not be 'close ended' all the time! You might be replaced by a Robot very soon!!!

Innovation at fringes!

Organisations spend tons of money to keep innovating - to stay ahead of competition, win new deals, get more efficient and in some cases just to survive.

There is no analyst call/management review/press release /advertisement that does not speak of innovation by companies.

Then why is it that it is said to happen at fringes?

Is it organisational lethargy and comfort with the status-quo?

Is it urgent overtaking the important?

Is it the pressure for quarterly results ( there are no 3 year or 5 year results apparently :-) ?

Is it the gap between intent and execution?

Is it the gap between the senior management vision and ground level appreciation ?

Perhaps its all the above.

Organisations encourage innovation at floor level but most tend to be incremental improvements that shine in pockets/ are known in small corners/ have marginal impact on the mainstream revenue engine.

An Amazon has taken over a decade to perfect itself and is now beating not just competitors but industry categories altogether ( Brick and Mortar retailers, Fashion stores, Groceries, Book shops, Music and Entertainment industry.... ).

A platform like that has billion customers who can easily be provided services such as financial services at little or no cost of acquisition and maintenance.  What will that do to traditional large established banks and financial institutions?

What would it take Amazon to become an insurance service provider ( offering the same level of customer orientation minus the complacency ) ?

True disruptors need time and focus to develop into killers. Those disruptor ideas need different mindset and unleashed creativity to pivot and perfect. The expectations from all stakeholders including the creators/stakeholders are different.

Are the traditional organisation structures/models amenable to these disruptors?