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A look back at our

Change is the only constant in business today. The rise of platforms, changing consumer expectations, and companies with almost no tangible assets are dominating the business landscape.  In the world of connectivity, it’s about collaboration, interaction, participation, and connection.   

Our CEO and Founder Dr. Erich Joachimsthaler recently released his new book, The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers and Society.  The book presents a new business model and operating model for the future – one that creates shared value for all. Companies that embrace this new model – called interaction field companies – generate, facilitate, and benefit from interactions and data exchanges among multiple people and groups–from customers and stakeholders, but also from those you wouldn’t expect to be in the mix, like suppliers, software developers, regulators, and even competitors. And everyone in the field works together to solve big, industry-wide, or complex and unpredictable societal problems. 

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The 3 Eras of Connectivity  

The first era featured information, with the birth of the internet, Google search, and e-commerce. The second era entailed connections between people through digitized relationships, facilitated by social media and mobile phones. Now, we are in the era of everything being connected – the Internet of Things, blockchain, 5G, Artificial Intelligence and machine learning are all coming to maturity. And never before have all of these major technologies matured at the same time at a rate like this. 

From a World of Walls to a World of Webs 

We’ve been living in a World of Walls for the past 100 years. In this world, competition is based around the business of better, faster, cheaper production. It’s a constant cycle of design, make, sell, use and reuse. Customers are on the receiving end of the traditional supply chain. But in the World of Webs,  uber-disruption creates exponential growth for businesses. In thinking collectively of all opportunities and leveraging value created by interactions, a business or brand can greatly benefit from this re-framing. Consumers become active value creators and, in this world, you gain competitive advantage in the digital space. This shift is ultimately from a world of transactions to a world of interactions.   

Guidelines on How to Compete in the Era of Disruption 

There are four main principles to follow when competing in the modern world – the world of disruption characterized by the connectivity of everything.  

1 – Compete head-on 

Just like you can’t outrun a bear, you can’t outrun disruption. Target well-exemplifies this principle as it invested to build out it’s advantage against Amazon – it’s storefront presence and proximity to consumers. It also added value through exclusive brands and is on its way to beat the disruptor at its own game – in this case, Amazon and its extreme convenience. Target is building online/offline interactions by encouraging online browsing but store buying. 

2 – Identify new ways of creating value 

Another case study – Best Buy embodies this principle as it is competing with Amazon and Target, though it has had an outdated business model for quite some time. So it is leveraging its advantage by not only offering in-store pickup of online orders but also investing in adjacent in other opportunities, such as in healthcare. Also, it is solving for important consumer pain points that disruptors can’t through its Geek Squad, which helps customers with troubleshooting technology.  

3 – Create interactivity that builds the brand 

The many different ways to practice this principle are seen in the evolution of Burberry’s brand. First, Burberry returned to its brand by communicating what it is not – it is not a company that makes trench coats, instead it is about all things British, from art and entertainment to British royalty. It also adopted a millennial mindset – though the ideal target market may seem to be the posh lady with the purse who “does lunch,” it is instead the millennial. Third, Burberry democratized luxury. This is best shown through a quote from the former CEO of Burberry, Angela Ahrendts: “I grew up in the physical world and I speak English, the next generation is growing up in the digital world and they speak social.” Ultimately, as seen with Burberry, taking social media seriously drives commerce and sales. 

4 – Personalize and integrate into people’s lives 

Though Apple is often considered to be the world’s largest retailer, it is second to Chinese supermarket giant, Hema. The key to Hema’s size capture is its fully personalized and convenient shopping experience, with an entire retail value chain completely digitized. The secret? Behind every single interaction, there’s data collection. From the moment you open Hema’s app, it collects massive amounts of data to leverage in personalizing and making more convenient every experience with Hema.   

So while there is a World of Walls that we compete in with other brands in particular categories and segments, there is also a World of Webs – and with it, a whole new world of opportunities. With the combination of technologies that enable interactivity and connections with consumers that are both emotional and functional, the future of business is changing the way we live our lives. 

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The Interaction Field describes an emerging phenomenon that can be glimpsed in a handful of wildly successful companies such as Alibaba, Vitality, GoPro, and LEGO. It can also be found in some traditional industries, from farming to steel to fashion. The one thing that these companies have in common is that they understand and leverage their interaction field. The Interaction Field is a new way of structuring a company that thrives on the participation in value creation by many different groups. A key feature of an Interaction Field company is that it builds velocity to improve an entire industry or solve a larger societal problem and can create a self-perpetuating virtuous cycle. 

Value chain business models are a thing of the past and platform businesses aren’t enough. 

It is clear to us that a new model is needed to create value for all participants within the field and society at large. In his new book, The Interaction Field, our CEO and Founder Erich Joachimsthaler, explains that the only way to thrive as a company is through the Interaction Field model. An Interaction Field company generates, facilitates, and benefits from data exchanges and interactions among multiple people and groups – not only customers and stakeholders, but also suppliers, software developers, regulators, and even competitors. The company creates shared value for everyone in the interaction field, well above and beyond the benefits it brings to its direct users, and everyone collaborates to solve big, industry-wide or complex and unpredictable societal problems. The future is going to be about creating value for everyone. Businesses that solve the immediate challenges of people today and the major social and economic challenges of the future are the ones that will survive and grow.  

The three levels to an Interaction Field:  

Nucleus: The nucleus of participants is typically the company and the customers—anyone who contributes to the core interactions on a regular basis. 

Ecosystem: The ecosystem of contributors is composed of partners in the company’s business activity. Data is shared between the nucleus participants and the ecosystem participants. They are built on relationships that have been established over years. 

Market Makers: These are entities that exert influence and enable the velocity in the interaction field. There are many types of entities that can be market makers, and the types differ from one interaction field to another.   

Reviews:

 “The Interaction Field is a thrilling new way of looking at a successful business model for the future. This fascinating book contains great business stories as well as important thinking today’s CEOs should become familiar with.” 

Vijay Govindarajan, Coxe Distinguished Professor at Tuck at Dartmouth and NYT and WSJ Best Selling Author, Three Box Solution: A Strategy For Leading Innovation 

“Undeniably compelling…a timely source for leaders who want to be relevant in the next decade.” 

Beverly Anderson, President, Global Consumer Solutions, Equifax 

“In this powerful and groundbreaking book, Joachimsthaler clearly demonstrates how platform thinking can be utilized to create shared value and drive new growth for companies and brands.” 

David Collis, Adjunct Professor at Harvard Business School and Author, Corporate Strategy: Resources and the Scope of the Firm 

“A fascinating, practical and insightful book that brilliantly examines the value that platform thinking can bring to companies and brands in today’s hyper-connected world.” 

Sangeet Paul Choudary, CEO of Platformation Labs and International best-selling co-author, Platform Revolution and author of Platform Scale 

“An engaging, insightful and immensely practical book on building strong brands and businesses delivering not just shareholder value but also shared value for companies, customers and society.” 

Vince Hudson, Senior Vice President, Enterprise Marketing Strategy, American Express 

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We all live in an interaction field. When waking up in the morning, most of us check the mobile phone first (about 80 percent of us).[1] Whether you only look up the weather or you go over to LinkedIn or flip through Flipboard to read the morning news, or if you move over to Google and search or check the Dow Futures for the day’s expected swings in the stock market, you generate data about your every move. Your weather app connects to the Nest network that regulates the temperature of every room in your house and sends an alert to the electrical company and other providers who advise you to improve utilization or conserve energy.

As you go through the day, you leave a trail – a digital trail – that consists of data. If you drive a Tesla, 8 video cameras, 12 ultrasonic sensors, and a front radar will track your driving. The toll booth records your time, and when you stop by the grocery store, a geofence captures your arrival. The Starbucks nearby readies your favorite latte as you approach within a few hundred feet based on your mobile phone location – no need to wait in a queue or even pay, just drive up and get your daily fix.

I call this digital trail “interactions.” I see an entire field of interactions, a world of hyper-connectivity where everything connects anywhere and anytime. I don’t mean that we are being tracked and we all should be worried about our privacy now. No, I mean we quickly approach a world where everything connects – companies, brands, consumers, and things. As Douglas Rushkoff says, “We don’t ‘go online’ by turning on a computer and dialing up through a modem; we live online 24/7.” [2]

And it is already happening because of technology. An example is the Internet of Things (IoT). IoT is the technology that connects everything from thermostats, cars, your toaster or refrigerator, lights in your home, the alarm clock, or your Bose stereo system. Social media technologies connect people, and APIs connect different computer systems from different companies.

In the future, the physical world will seamlessly merge with a fully flushed-out digital world. It is called the “Mirrorworld” by Kevin Kelly.[3] Kelly describes a future where converging technologies create a mirror world that sits on top of the physical world, the mirror world being a complete digital replica of the real world. I think this world already has arrived in parts.

In China, 1.1 billion people live and work on the WeChat app. Oh, it would be ridiculous to call this an app. It is more like an operating system. Users rarely, if ever, leave it throughout the course of the day. You can do everything on WeChat including messaging your friends, buying groceries, hailing a ride and even booking a doctor’s appointment or getting married, if you wish. Its stated purpose is “to embed itself in every moment of the user’s daily life, from morning till night, anytime, anywhere.” Already today, WeChat is so interwoven in people’s daily life – you practically can’t do anything without WeChat.

If you are a company or a brand, and you want to grow your business, drive new innovation or build a brand, you need to understand the interaction field of consumers and you need to define the field that is relevant for you. It does not matter whether you are in the grocery business, the fishing business, if you sell laptop computers or accounting software, or if you provide tax services in Deadwood, South Dakota. Yes, there are people living in Deadwood. Here are a few things that I would consider:

Framing the Interaction Field

The first question to ask yourself is, “what am I solving for? What challenges am I solving, and what frictions am I removing in the lives of consumers? What jobs are to be done? What pain points really matter today and over time to consumers and society at large?”

It isn’t helpful here to start thinking about your products, services, or assets and capabilities. You won’t see the opportunities if you think from the inside-out.[4] Luckily, a lot of good sources exist that can help you define the right problem to solve for.[5] There is more than enough written on framing and writing a purpose. A good recent source can be found here: [6]

Define the Participants who Create Value

The next step is to define the full set of companies, brands, institutions and people who create value and solve the challenges, pain points, jobs to be done – or, shall I say, the needs and wants of consumers. I look at interactions in three ways, those in the nucleus. In a platform business model, this would be the two sides of a marketplace like riders and drivers in the case of Uber. In a traditional pipeline business, it would be the company or brand and existing customers. The next level are the ecosystem participants, and finally there are market-makers.

I also define the core interactions that create value between ALL the participants. This helps to define the relevant interaction field. If you are a company like John Deere, your nucleus consists of farmers riding John Deere tractors. They are the core participants. In the ecosystem are participants like crop manufacturers or fertilizer companies that all contribute to the job to be done – to increase the profit per acre of farmland or to reduce water usage. But there are also market-makers who influence value creation in the field – both the actual land and the interaction field. The Department of Agriculture strongly influences it, as do other participants in the food chain including consumers like you and I with our nuanced food preferences, the retail trade and food companies.

Make it easy to participate and share

In this step, I look at technologies and other ways that enable interactions and in particular the frequency and quality of interactions. It is very important to understand how interactions create value, which participants create value and how value is not just captured but shared out to the larger interaction field. GoPro is a camera company that helps amateur surfers make videos of their exploits on the water much like pro surfers do (hence the name GoPro). It invested significantly in technologies that makes it incredibly easy to capture, edit and share videos on the GoPro channel and all major social media networks. Today, the GoPro channel has one of the highest levels of engagement, participation, and interaction among social networks. The higher the frequency and quality of interactions, which I call velocity, the more the participants in the interaction field benefit – everyone shares, and everyone benefits.

Define the value that can be created and how it can be shared

To maximize the interaction field, it is necessary to determine how the interactions in the field create value and how everyone benefits. This requires understanding the role of network effects, viral effects, and learning effects. It is a difficult challenge. This also requires defining proper governance mechanisms between the participants. MoviePass is an example that failed because its service benefited moviegoers but not movie theaters. At $10 a month for a relatively large number of movies, it was a deal too good to be true for frequent visitors, and for participants who ran concessionary stands, but theater owners had lower admission revenues. This is called “negative externalities” and is a good example of a flawed governance mechanism.

Ultimately, the entire system – the interaction field that you choose to build, manage or orchestrate, needs to benefit everyone including companies or businesses, customers and society. It’s about shared value, not just shareholder value.

Conclusion

If we understand the relevant interaction field where a company or brand seeks to create value, we have a much better foundation to solve some of the challenges, problems, and jobs to be done that matter today. There can be goodness in digital, in data, analytics and technology. Interaction fields don’t pigeonhole consumers into segments. They don’t create artificial boundaries or barriers between categories or industries to build monopolies and protect or preserve them. Interaction fields transcend these groupings or clusters of same products or services and set the sights on the interactions that create shared value for everyone.

If you are interested in more information about this approach, please feel free to contact us.

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Brand purpose is on everyone’s mind and it has been like that for over a decade now. And there are only two sides you can take. You either think and believe it is a lot of baloney or you believe in the purpose of brand purpose. Evidence abounds that make both sides’ positions and argumentation valid and many times laughable. I love to read about the latest news or quibbles on brand purpose because it always is, in some ways or another, rather thoughtful or rather amusing, or both.

Reading about brand purpose sometimes makes me think of reading a few paragraphs from Marcel Proust’s monumental tome In Search of Lost Time, and his description of the childhood experience of tasting an ordinary madeleine. And so it is with brand purpose. Purpose is so obviously important for any business, just like the daily ritual of dipping a madeleine in tea in France. Yet, the writing on purpose takes on different proportions and qualities, weak efforts of being a bit Proustian, with authors waxing on forever, touting its importance and relevance for our times.

Brand purpose is in a crisis of gargantuan proportions.

There is no need for me to dive into my own opinions on brand purpose or which side I come out; it depends on the time of the day. There is so much wonderful writing on it. The latest article that I read by Tom Roach was so beautifully written – I can only urge you to read it – “The Biggest Lie the Ad Industry Ever Told”:

https://thetomroach.com/2020/06/23/truth-lies-and-brand-purpose-the-biggest-lie-the-ad-industry-ever-told/amp/

The large Association of National Advertisers (ANA) has even launched a Center of Brand Purpose. The center has an objective and it published already a comprehensive essay on, you guessed it, the power of brand purpose for advertisers, agencies and society.[i]

The ANA research and the Tom Roach article might help solve the dilemma for you, in favor of or against brand purpose. If that does not help, you can just choose a third way to think through brand purpose. You can decide not to take sides, but to just say, “SWWC (So What Who Cares), do we really need a purpose at all?” For that discussion, you can follow Tom Goodwin, who struck that conversation on LinkedIn. See the following link, and don’t forget to review the 130 comments made by others following his post:

https://www.linkedin.com/feed/update/urn:li:activity:6683092418981572608/?commentUrn=urn%3Ali%3Acomment%3A(activity%3A6681709910360678400%2C6683092410395852801)

In my opinion, all that vivid, elegant writing and opining on the value of brand purpose is highly shaped by our own perspective – the little box we all live and work in. We write either from the brand strategy perspective or the advertising perspective; we write as consultants or as agency staffers, or as staffers anywhere in the hierarchy inside companies. One side will say that agencies should never touch brand purpose because they merely create a pithy slogan, based on a creative brief, and look at brand purpose from a communications perspective and they really don’t understand the strategy of the business – purpose is so much more.

Consultants get called out because they purport to create purposeful brand strategies, and in support of brand purpose, they cite questionable studies or surveys, or cherry-pick cases studies and anecdotes. They fill PowerPoint presentations by trotting out the traditional examples of TOMS Shoes, Unilever, or Patagonia, or a set of case studies that nobody knows about but that sound really, really good.

What I find astounding is that not a single article or opinion in the last 20 years on brand purpose has approached brand purpose from a broader systemic perspective – the perspective of shared value for everyone including consumers, companies, and society at large. No, I don’t mean a business model to sell more shoes like in TOMS one-for-one model: for each pair of shoes sold, the company gives one pair to kids in developing countries. I am also not talking about the profit with a principle business of the Godfather of purpose, Patagonia, or the company’s crusade over the years or how a large multinational company like Unilever became the Champion of the Earth and was able to differentiate based on sustainability. Shareholders rejoice.

In all of these examples, the company decides to “be purposeful,” and they do something about it, for the most part. That’s a good thing, but it makes purpose an afterthought of the business and mostly a communications exercise. The company is healthy, makes profits, delivers value to shareholders, and, well, of course, there is an opportunity of doing more, so let’s fund something that matters to society. Amazon donates 10 million dollars to support social justice and equity.[ii] Yes, we live in days and times of protests and daily demonstrations, and Amazon donates $10 million. How good of a gesture this is. Real action – not just statements of goodness from the CEO. Right? Well, remember the CEO is worth north of $100 billion. That’s what is called the “net worth” of Jeff Bezos that makes him the richest man in the world, even after his recent divorce. The company is worth over $1 trillion, one of the most valuable companies in the world. I love Amazon, but spending merely $10 million on an important cause such as social justice? Is that living a purpose? The rabid media is quick to report on the latest commitment made by the company and the announcement goes viral. The announcement has helped the Amazon brand.

The problem with this way of thinking about brand purpose is that purpose is an afterthought. Business has been good, consumers have been generous, and shareholders are happy, so let’s pour some money back into society. It is good for business and good for society.

Build an Interaction Field Company NOT a Purposeful Company

There is another way to think about brand purpose. That is to build the purpose of the brand or company in the company’s vision, operating model and operating processes – to build a purposeful business, not a business with a purpose. Here is how.

It starts with platform thinking. Platform thinking is a revolutionary new way of thinking about how markets work – how consumers, companies or brands, competitors and others, interact and create value.[iii]

The traditional way of thinking of markets is in terms of producers and consumers. Producers create value by optimizing a range of activities from procurement, design, manufacturing, branding, marketing to sales and service. The differences in the activities of competitors create their competitive advantage. A BMW becomes the ultimate driving machine or ultimate driving experience relative to Mercedes, Audi and others. The producer creates value for which the consumer is willing to pay a price. This is also called a “pipeline model” or “pipeline thinking” because a company competes by controlling and adding value along with the activities or along the pipeline or value chain. Brand purpose in this model is about adding or enhancing the company’s vision, mission, and values through a purpose. It makes brand purpose an afterthought.

The new way of thinking about markets is in terms of participants who interact to create and consume value. Consumers are not just recipients of value but active producers or participants of creating value, as are one or more producers. Value is created through collaboration, engagement, and interaction between participants.

This new way of thinking about markets gives rise to three types of business models. If there is one group of producers and consumers, the business model is typically called a “platform.” Uber is an example. The participants are riders and drivers who create value which, in turn, is orchestrated by Uber through a set of rules of governance. With Airbnb, there are travelers and hosts. A platform, in this case, is an open architecture with rules of governance designed to facilitate interactions.[iv] With more than one producer and consumers, we typically talk about a digital ecosystem.

A digital ecosystem may be defined as interacting organizations that are digitally connected and enabled by modularity, and are not managed by hierarchical authority.[v] It is a way of providing adjacent products or services by collaborating with other companies or business units. One mechanism to create value is to share data generated on the platform. Uber entered food delivery with Uber Eats, which adds restaurants as an additional participant in the Uber ecosystem, and then built out the ecosystem to include Uber Health, Uber Freight, and Jump bike and scooter sharing, for example. The data and analytics applied to the sheer number of transactions help optimize the platform and ecosystem and create value.

Digital ecosystems change the nature of competition from being firm-focused to being ecosystem-focused.[vi] Strategically, the decision is either to create an ecosystem and orchestrate it or to join an existing ecosystem. The Android ecosystem competes against the Apple ecosystem, a typical example of ecosystem competition.

A third business model is the interaction field.[vii] Unlike platforms and digital ecosystems, an interaction field is not transactional but interactional. It feeds on continuous engagement, participation and collaboration between multiple groups, not just discrete transactions such as another ride with an Uber, or another booking on Airbnb. It delivers shared value to everyone, not just the platform owners or ecosystem partners. It creates new value that solves entirely new problems; it does not just solve existing problems better or more efficiently or merely takes out frictions or pain points in commerce or shopping experiences.

These business models are three examples of platform thinking as compared to traditional pipeline thinking. What is common among these three models is that they are built through three mechanisms: interactions, architecture, and governance. If you would like to read more about these three mechanisms of designing a business, I suggest this source:[viii]

These business models build brand purpose into the governance of how the business creates value. The mechanism defines how interactions create value, how the business captures value, and how it shares out value. Sharing out value to the participants of the ecosystem or interaction field is not a single act of goodness, such as spending $10 million on social justice and equity, but it is part of the daily business operations, part of the operating mindset, and part of the operating model and process.

Brand purpose isn’t about doing something good for society; the traditional way of thinking about maximizing shareholder value and recognizing that society is also important in the end, but it is about building an interaction field company that creates value and shares out value for everyone. Everyone, including consumers, are participants of value creation and also beneficiaries of that value creation.

If we start thinking of brand purpose in terms of designing the business and its interactions in a larger interaction field properly in the first place, we can make sure that purpose isn’t only a communications exercise. I have tried to address this issue in my new book.[viiii]

[i] https://www.ana.net/miccontent/show/id/ii-ana-discovering-brand-purpose

[ii] https://blog.aboutamazon.com/policy/amazon-donates-10-million-to-organizations-supporting-justice-and-equity

[ii] The first use of the term can be found in: Sangeet Paul Choudary (2014), “A Platform-Thinking Approach to Innovation,” Wired.com, https://www.wired.com/insights/2014/01/platform-thinking-approach-innovation/

[iii] Marshall Van Alstyne, Geoffrey Parker and Sangeet Paul Choudary (2016), “Pipelines, Platforms, and the New Rule of Strategy,” Harvard Business Review, vol. 94, no. 4, pp. 54 – 62. Geoffrey Parker, Marshall Van Alstyne, and Sangeet Paul Choudary (2016), Platform Revolution: How Networked Markets Are Transforming the Economy – and How to Make Them Work for You, W. W. Norton & Company.

[iv] Michael G. Jacobides, Arun Sundararajan, and Marshall Van Alstyne (2019), “Platforms and Ecosystems: Enabling the Digital Economy,” World Economic Forum Briefing Paper, February, p. 14.

[v] Michael G. Jacobides (2019), “In the Ecosystem Economy, What’s Your Strategy?” Harvard Business Review, September-October.

[vi] Erich Joachimsthaler (2020), The Interaction Field: The Revolutionary New Way to Create Shared Value for Companies, Customers and Society, Public Affairs, New York.

[vii] http://www3.weforum.org/docs/WEF_Digital_Platforms_and_Ecosystems_2019.pdf

[viii] https://www.amazon.com/-/es/Erich-Joachimsthaler/dp/1541730518?language=en_US

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I built my work on this conceptualization of platforms.[iii] Let’s look at the three factors:

Interaction

It is the starting point of platform design since interactions are the source of value. When a GoPro surfer uploads an image or video to the GoPro site and shares it with other like-minded action sports enthusiasts, the simple transaction creates value. The simpler the transaction, the easier it is to scale the platform, but I believe that to solve many of today’s challenges, more complex transactions are necessary.

Van Alstyne distinguishes between volume and value of a set of interactions. A single internet search has trivial value but trillions of occurrences. By contrast, a single stay at Airbnb has far more transaction value but far less frequency.[iv] Without frequency, there is no value creation.

I conceptualize an interaction in terms of volume or frequency and in terms of quality.[v] Three characteristics contribute to quality: meaning, reciprocity, and value/benefit. Meaning is about the degree to which the interaction expresses the intent of the business, its mission or purpose, or its brand. Take John Deere as an example. The collection of data from a farmer is a transaction that occurs with relative frequency on farm fields today, but it is not an interaction that has a lot of meaning. However, when the data is being collected by a company like John Deere whose brand promise is to create shared business value and whose mission is to improve farm profitability, the interactions around data collection take on much greater meaning.

The quality increases as the meaning grows deeper. Deere has a mission of “serving those close to the land.” As they say, the company is for those who cultivate and harvest the land, for those who transform and enrich the land, and for those who build upon the land. In this regard, the interactions that the company enables have a good deal of meaning for farmers but also for other participants in the ecosystem. This is a company that has been involved in farming for nigh on two centuries, has a brand trusted by farmers, and is committed to goals beyond its own corporate growth and profit.

Reciprocity is about the mutuality of the exchange. Is it truly an interaction? Do all the participants actually participate? Do they take and give? When the farmer contributes data to Deere, does it share data of similar significance in return? (Yes, it does.) Or is the interaction more like a disguised transaction? For example, when I do a lot of transactions with a credit card company, an airline, or a bank, I accumulate points in what seems like an interaction. But when I take a look at what the points are worth, the amount seems insignificant and almost insulting. That is all the company thinks of me and my information?

The third attribute of interaction quality is value, in terms of the benefit to participants. An interaction might have a good deal of meaning and reciprocity but not much value. Deere, for example, might provide the farmer with a lot of information that looks interesting, but is actually generic or doesn’t have much relevance or applicability to the farming operation. The question here is, how does an interaction create value of improving farm yield?

There is also the prospect of new value. FBN, together with Deere, enables higher price transparency for corn and soybean seeds, which lowers the overall seed costs. Interactions, therefore, can create negative externalities for some participants in the interaction field. If Deere offered an electric tractor with fewer mechanical parts, this would have a negative impact on the revenue that dealers could earn by providing maintenance services. The farmer will always be calculating the value of the interaction. If Deere’s analytics enable him to reduce costs, cut the time spent in operation, or increase yield, it has value.

We must also look at value in terms of how many participants it affects. If it benefits the community, the industry or other participants in the farming ecosystem, and the society—as well as the company and the farmer—it is of higher value. The more cohesive and tightly connected or linked the interaction is—that is, the higher the number and greater the quality of interactions—the more velocity it will achieve and the more everyone will benefit from the three effects: virality, network effect, and learning.

The number of interactions increases through virality. As word spreads about the Deere offering, participants join at a faster rate and the number of interactions climbs. A large number of interactions is also essential to gaining the network effect; that is, the product or service becomes more valuable as more participants join. Finally, the learning that results from the work of an interaction field is plowed back into the company and its activities. When the whole system is thriving—the number and quality of interactions is growing — a virtuous cycle is created that keeps the field healthy and sustainable.

Architecture

Van Alstyne describes various types of architecture.[vi] There are those with a narrow versus broad focus and an open versus closed architecture. These are important tradeoffs especially when starting a platform from scratch. Van Alstyne describes the initial failure of Alibaba that started too broad but found success with a narrower vertical structure. Lyft launched in San Francisco and got traction there before it expanded in other cities.

I think of architecture in terms of three different layers since the interactions are very different from layer to layer and hence value creation is different as well. These are the nucleus, ecosystem, and market-makers.

The nucleus of participants is typically the company, like John Deere or GoPro, and the customers—anyone who contributes to the core interactions on a regular basis. The traditional company has already established a business relationship with the participants in the nucleus, which is the foundation of the interactions. The ecosystem of contributors is composed of partners in the company’s business activity. It is not uncommon that some data is shared between the nucleus participants and the ecosystem participants. Business ecosystems are built on relationships that have been established over years. An example is the supplier relationship between Bosch, the automotive electronics company, and Daimler, the car manufacturer. They have a well-established supplier-buyer relationship based on the development, manufacture, and sale of electronic components for Mercedes-Benz vehicles.

The third group of participants, or layer in a platform architecture, is the market-makers. These are entities that exert influence and enable velocity – namely, the frequency and quality of interactions. There are many types of entities that can be market-makers, and the types differ from one interaction field to another. The US Department of Transportation, for example, regulates the automotive industry and is one type of market-maker in an automaker’s interaction field. Consumers who could potentially be attracted to the platform because they want to solve their transportation needs, but have not yet purchased vehicles, are another type of market-maker. Daimler has merged the Car2Go carsharing interaction field with that of BMW’s DriveNow. Potential drivers who don’t currently use the offerings of these two companies are important market-makers. The better the merged service is positioned to pull new drivers toward it, the more velocity the field gains.

Market-makers can also be entities such as research institutes, like the Fraunhofer Institute, or university researchers who develop automotive technology. Velocity depends greatly on the market-makers. Whether they are new consumers attracted to the field, competitors, government agencies or regulators, or participants in other platforms, market-makers can significantly determine the success or failure of the company in creating value. High interaction velocity is achieved when the three elements of the field work together to create network effects, learning effects, and virality.

Governance

Governance provides the rules of who may participate, how they create and divide value, and how to resolve conflict.[vii] The success of a platform business rises and falls with proper fair governance and regulation. One of the most recent discussions on regulation that facilitates data sharing that delivers value for all participants in a platform business can be found here: [viii]

Designing a platform business requires a complex set of decisions or choices regarding three areas: first is the governance structure which is about defining the participants, the roles and responsibilities, defining decision right and powers, etc. Second is the definition of the decision-making structure. If John Deere builds the platform, should John Deere be making the decisions or should the ecosystem participants be included in the decision-making? Third is, how will the rules be enforced? Amazon has penalized many third-party sellers for their acts and deeds, for example. Sometimes these rules are reinforced automatically through bots or AI, and sometimes they are monitored through employees or third-party contractors.

Flatiron Health is an example that shows that governance be managed even in complex industries such as healthcare, where patients share incredibly sensitive information for the greater benefits of everyone. Flatiron Health is now a Roche Pharma company that brings together patients, care providers in cancer hospitals, and even competing pharmaceutical companies and regulators like the Food and Drug Administration. Over two million cancer patients, and 2,500 clinicians in 800 unique sites of care share “research-grade” data with the larger healthcare and pharmaceutical community regulatory bodies such as the FDA or the National Cancer Institute. Competitors such as 14 of the top 15 life sciences companies participate. The success of Flatiron Health has significantly cut the average years of FDA approval of new therapeutic solutions and has let to much more effective treat cancer patients. The success wouldn’t happen without a well-thought-out governance structure.

Three Types of Platform Businesses

The three factors of a platform lead to three types of platform businesses: platforms, digital ecosystems, and interaction fields. I believe platforms and digital ecosystems are transitory models. Ultimately, these models need to evolve toward interaction fields models. What, then, is an interaction field business model or company? Let me describe three major features:

First, interaction fields are interactional and not just transactional. Platforms are known to be a powerful force of competition. They build an infrastructure to orchestrate transactions between providers and consumers, between riders and drivers (Uber or Lyft are examples), between hosts and travelers (Airbnb), between buyers and sellers of books, for example.

They learn a great deal from the frequency and number of transactions. They make markets more efficient; they remove frictions and create value for customers and consumers. They are so successful in competing against incumbents, they become incredibly disruptive across a swath of categories and industries.

In New York City, where I live, driving a taxi used to be a way to make money for many immigrants. It was a way to establish a new life and earn a living as an entrepreneur. Long hours were required to catch enough fares, but there was also the value of the license or “taxi medallion.” This license would go up in value and could be sold by a driver at the end of his career, much like an entrepreneur could sell his or her restaurant, retail store, or small business after many years of labor.

If you started early in the 1960s, you could get a license for $25,000. By 2005, the license cost $325,000. Five years later, it was $600,000 and in 2013, the value was over a million dollars. Then, suddenly the price dropped by 45% over two years. By 2019, a medallion license was worth nearly nothing. In one auction, sixteen medallions were offered; three sold for less than $140,000 and 13 medallions had no bidders.[ix]

What happened? Uber and Lyft and other ridesharing platforms had come to the city. There are now about 80,000 for-hire vehicles on the road. Two-thirds are from ridesharing platforms. 13,500 are traditional medallion taxis.[x] There is now a lot more congestion in midtown New York City, and most drivers don’t make enough anymore since there aren’t simply enough fares out there. Economists call it “negative externalities.” Taxi drivers have lost their investments. If you now need to make a living in the city by driving a for-hire car, you join the gig economy. That means, minimum wage (if any at all), and no benefits, you need to take care of those for yourself. As Douglas Rushkoff writes, they turn lifelong jobs into the temp jobs for the gig economy.[xi]

Uber and the other ridesharing companies have moved on and have become digital ecosystems. There is now Uber Eats, which delivers food from restaurants, and dozens of other businesses, for example.

Platforms are about disruption. They see opportunity in frictions and inefficiencies or lack of innovation. It is often said that taxis were not innovative. The last innovation in the taxi industry was the taxi meter, which was introduced soon after World War II.

Platforms do two things when they are done with an industry. They evolve toward ecosystems like Uber, and in the process look for disruption in adjacent markets, or they move on to another market. I could tell the same story about Amazon starting with book retailing, and when that industry was kaput, it moved to other categories, one after the other. Some people say that’s the nature of business. Tough luck.

But I don’t think that is correct. Platforms and digital ecosystems can be good when they are interaction field models. Interaction field models build on collaboration and participation. They are not just transactional but interactional. An example is Alibaba. Alibaba’s mission is, “Our mission is to make it easy to do business anywhere. With our platform model, we are bringing buyers and sellers from all over the world together, and are best placed to partner with them to meet the needs of the nearly 700 million users on our platform.”[xii] Alibaba is not in the business of disrupting small retailers; they are in the business of making them efficient, removing frictions and enabling them to sell more. In China, there are 6 million small retailers, mom-and-pop shops who sell locally and operate at a relatively basic level. Alibaba offers them a retail management software called Long Shou Tong for free, which helps the stores to become more efficient, optimize the assortment, and sell more across many more parts of China.

Everyone gains; Alibaba gains valuable data from millions of small stores and earns a fee for any online sales. Hundreds of thousands of merchants also can now sell their millions of products locally. Alibaba builds on collaboration, not disruption – it is interactional and benefits everyone.

Second, interaction fields solve new problems that are often intractable challenges or pain points that often haven’t been solved before. Platform and digital ecosystems also do that, but they typically focus on narrow, often existing, problems. GM tried it with Maven, a subscription service to compete with Zipcar. It started in 2016 solving for more flexibility of transportation or mobility. It closed the business in 2020. GM is not an exception; I could now spend the rest of my day describing other car companies’ attempts to do the same.

Tesla is, in my mind, a company that isn’t about a platform or a digital ecosystem. It wants to be an interaction field company. It solves for a lot more than just electric cars, as you know. Besides, it is not even just a car company. It solves for some degrees of autonomous driving and for lower CO2 emission. It is well known that a car is 95 percent idle and so Tesla built its own network where you can post your car while you travel globally. Others can pick up the car and use it during that time. It solves for lower cost of ownership of a car among a horde of other issues. I don’t need to tell much more; the story has been told so many times. Some things are still vision, and some are reality, but the direction is apparent. If Tesla has it, it will have a much more significant share of our lives, solving for multiple problems and challenges we have daily, rather than just selling us a lease of a new Model 3 every three years.

Third, interaction fields are platforms and digital ecosystems that are open and welcome other participants. They propagate being inclusive rather than being exclusive. In today’s discussion of digital ecosystems, the term “ecosystem competition” has become popular.[xiii] This is the notion that ecosystems compete now against other ecosystems and that you as a company need to decide which ecosystem you join if you can’t build your own.

This idea is exactly what was once the dated idea of competition between firms, which came down to the disruption of industries and categories for over hundreds of years, and the same logic applies to platforms and digital ecosystems.

We should be wiser. Is it really about competition between ecosystems? Is it really all about who wins and who loses? Should we really, in this day and age, just think about capturing or extracting value, driving more shareholder value through ecosystem competition?

I don’t think so, I think we need to build interaction fields with healthy governance to ensure fair value distribution – as Marshall Van Alystne says, a situation where you create more value than you take.

[i][i] Platforms and Ecosystems: Enabling the Digital Economy, page 9.

[ii] Parker, Geoffrey, Marshall Van Alstyne, and Sangeet Paul Choudary, Platform Revolution: How Networked Markets Are Transforming the Economy – and How to Make Them Work for You, W.W. Norton & Company, 2016.

[iii] Erich Joachimsthaler, The Interaction Field: The Revolutionary New Way to Create Shared Value for Companies, Customers and Society, Public Affairs, 2020, forthcoming.

[iv] Ibid, p. 10

[v] Erich Joachimsthaler, ibid p. 41 ff

[vi] Ibid, p. 10

[vii] Ibid, p. 10, Parker, Van Alstyne, and Choudary.

[viii] Parker, Geoffrey and Petropoulos, Georgios and Van Alstyne, Marshall W., Digital Platforms and Antitrust (May 22, 2020). Available at SSRN: https://ssrn.com/abstract=

[ix] Wikipedia entry: Taxi Medallion, accessed June 6, 2020. https://en.wikipedia.org/wiki/Taxi_medallion#:~:text=The%20price%20rose%20steadily.,around%202013%20at%20over%20%241%2C000%2C000.

[x] https://www.wired.com/story/new-york-city-flexes-extending-cap-uber-lyft/

[xi] Douglas Rushkoff, Team Human, W.W. Norton, New York, 2019.

[xii] Statement by Terry von Bitra, General Manager, Europe, Alibaba Group, Germany, page 9 of this excellent report

http://reports.weforum.org/digital-transformation/wp-content/blogs.dir/94:/mp/files/pages/files/digital-platforms-and-ecosystems-february-2019.pdf

[xiii] https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/competing-in-a-world-of-digital-ecosystems

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The traditional way of thinking of markets is in terms of producers and consumers. Producers create value by optimizing a range of activities from procurement, design, manufacturing, branding, marketing to sales and service. The differences in the activities of competitors create their competitive advantage. A BMW becomes the ultimate driving machine or ultimate driving experience relative to Mercedes, Audi and others. The producer creates value for which the consumer is willing to pay a price. This is also called a “pipeline model” or “pipeline thinking” because a company competes by controlling and adding value along the activities or along the pipeline or value chain.

The new way of thinking about markets is in terms of participants that interact to create and consume value. Consumers are not just recipients of value, but active producers or participants of creating value and so are one or more producers. Value is created through collaboration, engagement, and interaction between participants.

If there is one group of producers and consumers, the business model is typically called a “platform.” Uber is an example. The participants are riders and drivers who create value which is orchestrated by Uber through a set of rules of governance. With Airbnb, there are travelers and hosts. A platform, then, is an open architecture with rules of governance designed to facilitate interactions.[ii] With more than one producer and various consumers, we typically talk about a digital ecosystem.

A digital ecosystem may be defined as interacting organizations that are digital connected and enabled by modularity, and are not managed by hierarchical authority.[iii] It is a way of providing adjacent products or services by collaborating with other companies or business units. One mechanism to create value is to share data generated on the platform. Uber entered food delivery with Uber Eats, which adds restaurants as an additional participant in the Uber ecosystem, and then built out the ecosystem to include Uber Health, Uber Freight, and Jump bike and scooter sharing, for example. The data and analytics applied to the sheer number of transactions helps optimize the platform and ecosystem and create value.

Digital ecosystems change the nature of competition from being firm-focused to being ecosystem-focused.[iv] Strategically, the decision is either to create an ecosystem and orchestrate it or to join an existing ecosystem. The Android ecosystem competes against the Apple ecosystem, a typical example of ecosystem competition.

A third business model is the interaction field.[v] Unlike platforms and digital ecosystems, an interaction field is not transactional but interactional. It feeds on continuous engagement, participation and collaboration between multiple groups; not just discrete transactions such as another ride with an Uber, or another booking on Airbnb. It delivers shared value to everyone; not just the platform owners or ecosystem partners. It creates new value that solves entirely new problems, rather than merely solving existing problems better or more efficiently, or merely taking out frictions or pain points in commerce or shopping experiences.

Flatiron Health, a Roche Pharma company, enables an interaction field that brings together patients, care providers and even competing pharmaceutical companies and regulators like the Food and Drug Administration (FDA) in a continuous interactions of millions of patients, care providers sharing data about every single instance of cancer treatment. The interactions are rich exchanges of learning with depth that has enabled a larger network of companies like pharmaceutical companies and life science companies to collaborate with the FDA to approve therapeutic solutions earlier and more effectively treat cancer patients.

Like all new business models that have emerged in recent years, this new model creates value through three major effects: network effects, virality and learning effects. Network effects kick in when a product or service on offer becomes more valuable as more people contribute to it. Think Airbnb. The more Londoners offer their spare rooms or stately homes or canal barges to travelers through Airbnb, the more valuable the service becomes—greater selection, increased availability, more variety and choices.

Second is virality – as people find value in the offering they voluntarily become advocates for it and encourage others to join. Think GoPro, the action camera that has a commanding market share among extreme sports enthusiasts, surfers and snowboarders. GoPro benefits from the viral effect. It encourages surfers to share their pictures or videos on the GoPro channel which posts them on many social media sites and other channels. This creates virality because like-minded surfers share the content with others, which makes more people want to shoot videos or content, with translates to more sales of cameras, hopefully via GoPro cameras.

Third, as the brand applies human knowledge and artificial intelligence to the great amounts of data being collected, the learning effects emerges – that is, the more information the brand or product gathers and synthesizes, the more valuable it becomes. Tesla cars collect more data through sensors and cameras than other manufacturers which enable machine learning in its Autopilot software which increases driver safety. Tesla gets smarter as you drive. And even smarter the more Tesla drivers there are.

Platform thinking, hence, is a way to rethink, reimagine, and reset how companies and brands create value, and how to build and scale companies and brands. Platform thinking is a new way of how companies innovate. Innovation is no longer an exclusive effort within a larger array of companies, startups and a financial system of venture capitalists, etc. Platform thinking makes the much-hyped open innovation movement a reality in an agile and efficient way.

Platform thinking also impacts how customer experiences are created and delivered. Consumers or customers are no longer just recipient of customer experiences, but experiences are cocreated and shaped by consumers.

Platform thinking changes how we connect with consumers or customers. No longer is marketing or communications about pushing messages on to audiences. No longer is selling about converting consumers along the various stages of the funnel toward purchase. Marketing, communications and selling are about connection – engagement and interaction, and creating a gravitational force that pulls consumers in and empowers them.

Platform thinking affects every function of a business, every department of an organization, and every stakeholder in a society. It even changes the nature of the firm, what Marshall Van Alstyne calls the “Inverted Firm” which shifts “production” from the inside to the outside.[vi] It is a form of rethinking capitalism from focusing on shareholder value to shared value maximization.

[i] The first use of the term can be found in: Sangeet Paul Choudary (2014), “A Platform-Thinking Approach to Innovation,” Wired.com, https://www.wired.com/insights/2014/01/platform-thinking-approach-innovation/

[ii] Marshall Van Alstyne, Geoffrey Parker and Sangeet Paul Choudary (2016), “Pipelines, Platforms, and the New Rule of Strategy,” Harvard Business Review, vol. 94, no. 4, pp. 54 – 62. Geoffrey Parker, Marshall Van Alstyne, and Sangeet Paul Choudary (2016), Platform Revolution: How Networked Markets Are Transforming the Economy – and How to Make Them Work for You, W. W. Norton & Company.

[iii] Michael G. Jacobides, Arun Sundararajan, and Marshall Van Alstyne (2019), “Platforms and Ecosystems: Enabling the Digital Economy,” World Economic Forum Briefing Paper, February, p. 14.

[iv] Michael G. Jacobides (2019), “In the Ecosystem Economy, What’s Your Strategy?” Harvard Business Review, September-October.

[v] Erich Joachimsthaler (2020), The Interaction Field: The Revolutionary New Way to Create Shared Value for Companies, Customers and Society, Public Affairs, New York.

[vi] Michael G. Jacobides, Arun Sundararajan, and Marshall Van Alstyne (2019), “Platforms and Ecosystems: Enabling the Digital Economy,” World Economic Forum Briefing Paper, February, p. 8.

The post What is Platform Thinking? appeared first on Vivaldi.

I believe this business model is the interaction field model. There are three features that distinguish interaction field models from platforms or digital ecosystems.

First, interaction fields are interactional and not just transactional. Platforms are known to be a powerful force of competition. They build an infrastructure to orchestrate transactions between providers and consumers, between riders and drivers (Uber or Lyft are examples), between hosts and travelers (Airbnb), between buyers and sellers of books, for example.

Platforms learn a great deal from the frequency and number of transactions, which is why they are kind of obsessed with frequency numbers like MAU or DAU. They make markets more efficient; they remove frictions and create value for customers and consumers. They are so successful in competing against incumbents, they disrupt swaths of categories and industries.

In New York City, where I live, driving a taxi used to be a way to make money for many immigrants. It was a way to establish a new life and earn a living as an entrepreneur. Long hours were required to catch enough fares, but there was also the value of the license, called the “taxi medallion,” that would go up in value. A driver could sell this license at the end of his career, much like an entrepreneur could sell his or her restaurant, retail store, or small business after many years of labor.

If you started early in the 1960s, you could get a taxi license for $25,000. By 2005, the license cost $325,000. Five years later, it was $600,000 and in 2013, the value was over a million dollars. Then, suddenly the value of the license dropped by 45% over two years. By 2019, a medallion license was worth nearly nothing. In one auction, sixteen medallions were offered, three sold for less than $140,000 and 13 medallions had no bidders.[i]

What happened? Uber, Lyft and other ridesharing platforms had come to the city. There are now about 80,000 for-hire vehicles on the road. Two-thirds are from ridesharing platforms. 13,500 are traditional medallion taxis.[ii] There is now a lot more congestion in midtown New York City, and most drivers don’t make enough anymore since there simply aren’t enough fares out there. Economists call this phenomenon “negative externalities,” a cost that is suffered by a third party due to an economic transaction. Taxi drivers have lost their investments. If you now need to make a living in the city by driving a for-hire car, you join the gig economy. That means, minimum wage if any at all, and no benefits. As Douglas Rushkoff writes, they turn lifelong jobs into the temp jobs for the gig economy.[iii]

Uber and the other ridesharing companies of course have moved on and have become digital ecosystems. There now exists Uber Eats, which delivers food from restaurants and dozens of other businesses, for example. What is your best guess what will happen to many restaurants?

Platforms are about disruption. They see opportunity in frictions and inefficiencies or lack of innovation. It is often said that taxis were not innovative. The last innovation in the taxi industry was the taxi meter, which was introduced soon after World War II.

Platforms do two things when they are done with an industry. For one, they evolve toward ecosystems like Uber and either look for disruption in adjacent markets or they move on to another market. I could tell the same story about Amazon starting with book retailing, and when that industry was kaput, it moved to other categories one after the other. Some people say that’s the nature of business. Tough luck.

But I don’t think that is correct. Platforms and digital ecosystems can be good when they are interaction field models. Interaction field models build on collaboration and participation. They are not just transactional but interactional. An example is Alibaba. Alibaba’s mission is: “Our mission is to make it easy to do business anywhere. With our platform model, we are bringing buyers and sellers from all over the world together, and are best placed to partner with them to meet the needs of the nearly 700 million users on our platform.”[iv] Alibaba is not in the business of disrupting small retailers – they are in the business of making them efficient, removing frictions and enabling them to sell more. In China, there are 6 million small retailers, mom-and-pop shops who sell locally and operate at a relatively basic level. Alibaba offers them a retail management software, Ling Shou Tong, for free. This software helps the stores to become more efficient, optimize the assortment, and sell more across many more parts of China.

Everyone gains – Alibaba gains valuable data from millions of small stores and earns a fee for any online sales. Hundreds of thousands of merchants also can now sell their millions of products locally. Alibaba builds on collaboration, not disruption, it is interactional and benefits everyone.

Interaction fields solve new problems that are often intractable challenges or pain points that often haven’t been solved before. Platform and digital ecosystems also do that, but they typically focus on narrow, often existing, problems. GM tried it with Maven, a subscription service to compete with Zipcar. It started in 2016 solving for more flexibility of transportation or mobility. It closed the business in 2020. GM is not an exception; I could now spend the rest of my day describing other car companies’ attempts to do the same. There are several hundreds of meal kit solutions like Blue Apron and over 175 mattresses companies like Casper, many of them solving the same problem.[v]

Tesla is, in my mind, a company that isn’t about a platform or a digital ecosystem. It wants to be an interaction field company. It solves for a lot more than just electric cars, as you know. Besides, it is not even just a car company. It solves for some degrees of autonomous driving; it solves for lower CO2 emission. It is well known that a car is 95 percent idle and so it built the Tesla network where you can post your car while you travel globally. Others can pick up the car and use it during that time. It solves for better utilization, lower cost of ownership of a car, and so much more. I don’t need to tell much more; the story has been told so many times. Some things are still vision some are reality, but the direction is apparent. If Tesla has it, it will have a much more significant share of our lives, solving for multiple problems and challenges we have daily, rather just selling us another lease of a new Model 3 every three years.

Third, interaction fields are platforms and digital ecosystems that are open and welcome other participants. They propagate being inclusive rather than being exclusive. In today’s discussion of digital ecosystems, the term “ecosystem competition” has become popular.[vi] Ecosystems compete now against other ecosystems, and you as a company need to decide which ecosystem you join if you can’t build your own.

This idea is exactly what was the old idea of competition between firms, and the notion that existing companies in industries and categories need to be disrupted. In other words, existing competitive companies need to be driven into bankruptcy or some form of demise and the same logic applies to platforms and digital ecosystems.

We should be wiser. Is it really about competition between ecosystems? Is it really all about who wins and who loses? Should we really, in this day and age, just think about capturing or extracting value, driving more shareholder value through ecosystem competition? Marshall van Alystne, Geoffrey Parker and Sangeet Paul Choudary have spoken so many times about how platform firms are skilled at creating and capturing value, but not all of them are really good at sharing value or dividing up value among participants.

An interaction field company builds the governance in such a way that there is fair value distribution. As Marshall van Alstyne says, a situation where you create more value than you take.[vii]

Flatiron Health, a Roche Pharma company, enables an interaction field that brings together patients, care providers and even competing pharmaceutical companies and regulators like the Food and Drug Administration (FDA) in continuous interactions between millions of patients and care providers sharing data about every single instance of cancer treatment. The interactions are rich exchanges of learning with a depth that has enabled a larger open network of companies like pharmaceutical companies, competing drug companies, and life science companies to collaborate with the FDA to approve therapeutic solutions faster and to more effectively treat cancer patients.

Everyone in the interaction field benefits – in Flatiron Health’s case, mostly patients because the organization has made it possible for everyone to learn from the interactions that its platform captures. This has allowed for faster approval of drugs for certain cancer conditions by the FDA. Trust me, when you are one of the 1.8 million Americans who will be diagnosed with cancer in 2020 and you know that over 600,000 American die (six times more than COVID-19 deaths) this year and every year thereafter, faster approval of a cancer drug is enormously good news for you.

So, let’s stop building self-serving platforms or digital ecosystems that seek to compete, to disrupt and enrich distant shareholders, and let’s start building interaction fields.

For more details on interaction field companies and business models, I recommend my book: https://www.amazon.com/Interaction-Field-Revolutionary-Businesses-Customers/dp/1541730518

[i] Wikipedia entry: Taxi Medallion, accessed June 6, 2020. https://en.wikipedia.org/wiki/Taxi_medallion#:~:text=The%20price%20rose%20steadily.,around%202013%20at%20over%20%241%2C000%2C000.

[ii] https://www.wired.com/story/new-york-city-flexes-extending-cap-uber-lyft/

[iii] Douglas Rushkoff, Team Human, W.W. Norton, New York, 2019.

[iv] Statement by Terry von Bitra, General Manager, Europe, Alibaba Group, Germany, page 9 of this excellent report

http://reports.weforum.org/digital-transformation/wp-content/blogs.dir/94:/mp/files/pages/files/digital-platforms-and-ecosystems-february-2019.pdf

[v] https://www.cnbc.com/2019/08/18/there-are-now-175-online-mattress-companiesand-you-cant-tell-them-apart.html

[vi] https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/competing-in-a-world-of-digital-ecosystems

[vii] watch is excellent four minute video by Marshall van Alstyne. This point here has been made around minute 4:07 https://www.linkedin.com/feed/update/urn:li:activity:6674110820328243200/

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I understand platform thinking to be a revolutionary new way of thinking about how markets work – how consumers, companies or brands, competitors, and others, interact and create shared value. The traditional way of thinking of markets is in terms of producers and consumers. Value is produced upstream by producers and consumed downstream by consumers. Producers create value by optimizing a range of activities along the pipeline or value chain from procurement, design, manufacturing, branding, and marketing to sales and service. The activities create actual differences between products or differences in perceptions, which is where branding comes in. BMW is an example of a strong brand that optimizing the value chain activities, engineering, technology, and design. It’s well known to be the ultimate driving machine or driving experience compared to competitors such as Mercedes and Audi. The producer (in this case, BMW) delivers value for which the consumer is willing to pay a price.

The new way of thinking about markets is in terms of many participants who interact to create and consume value. Consumers are not just recipients of value, but active participants of creating value, and so are one or more producers. Value is created through collaboration, engagement, and connection between participants. Airbnb is a platform that brings together guests or travelers, hosts, property managers, providers of cleaning services and many other producers; for example, manufacturers of toiletry products or providers of financial services for hosts. Everyone can be a producer and consumer of value. Travelers consume value but also create value by providing travel preferences, by rating hosts and posting reviews which helps Airbnb to better match demand and supply. Airbnb orchestrates value creation. Value is created through interactions between all participants which builds the brand.

How to define a brand?

Platform thinking requires a reassessment of how to define a brand and how to build a brand. A brand is what you stand for in consumers’ or customers’ mind. That’s how my co-author David A. Aaker and I defined a brand in the Brand Leadership book in 2000.[i] A brand then is defined by the associations that consumers hold in their minds linked to a name or logo or any other tangible element. The stronger the linkages, the stronger the associations that can be anything – including attributes, feelings, emotions, thoughts, experiences, even a gesture – the more a brand influences preference, liking and purchase.

In the platform world, though, defining a brand in this way is no longer sufficient. It is also necessary to define how a brand connects with every participant in a network. I call this network an “interaction field” in my new book because the value of connections, and hence the power to build brands, is determined by interactions in a larger field that a brand needs to define for itself.[ii] The more frequent the interactions, the more they influence perceptions. Twenty-two percent of consumers shop on Amazon once a week, and 79 percent shop at least once a month.[iii] That’s a lot of frequency. The quality of interactions matters too. It is about how the interactions reinforce the meaning of the brand. Amazon stands for convenience. As a Prime member, I get most deliveries within a day if not within the hour. Every purchase strengthens or reinforces the meaning of the brand in my mind. It is also of value to me and I get more value from Amazon because Amazon marches on to set the perceptions and expectations for speed of delivery for everyone else. Value increases as my engagement and interaction with the brand increases. The interactions are reciprocal. The brand, then, is also the sum of all the interactions that have meaning, create value, and are reciprocal.

As a brand strategist, it is necessary then to think of a brand in terms of its identity, as I wrote many years ago. Identity is not limited to what you stand for in terms of attributes or qualities, values, and beliefs, but also how you behave, collaborate, and/or interact with participants in an interaction field. A brand is not just a noun; it is also a verb. Neil Parker said so well, “A brand lives in the moments of action and interaction between your business and the world around it, and great ones generously invite people in to contribute.”[iv]

How do brands become strong?

Clearly, brands become strong because consumers learn to understand what a brand stands for over time. This happens through the usual mechanism of communications, behavior, and experiences. The more differentiated a brand is on relevant attributes, feelings, emotions, and other brand associations, the stronger a brand becomes over time. See, for example, Kevin L. Keller’s brand resonance model.[v]

But there are three additional effects that are typically not discussed in branding. These three effects have a powerful impact on building strong brands in the platform world. They are network effects, virality and learning effects. Let’s look at each of these effects one by one:

Network effects kick in when a product or service becomes more valuable as more participants or people contribute to it. Think Airbnb. The more Londoners offer their spare rooms, stately homes, or canal barges to travelers through Airbnb, the more valuable the service becomes—greater selection, increased availability, more variety and choices. It also affects the brand.

Airbnb wants to create a world where you belong anywhere and where people can live in a place, instead of just traveling to. That’s why its slogan is: belong anywhere. Ask yourself – who builds the Airbnb brand? The travelers and hosts do – those Londoners who offer their spare rooms. Those hosts also reinforce key attributes such as selection, availability and variety. There are over 650,000 hosts who build the brand by offering over 6 million ways to stay or “to belong.” Add to this the millions of Airbnb travelers who interact with hosts and Airbnb, and you have a very powerful brand-building machine through network effects.

Second is virality – as people find value in the offering, they voluntarily become advocates for it and encourage others to join. Clearly, there is a lot of virality on Airbnb – how did you hear about Airbnb the first time? But let’s look at another example: GoPro is the action camera that has a commanding market share among extreme sports enthusiasts, surfers and snowboarders. That Hero 8 camera is so good, it doesn’t need much advertising. GoPro benefits from the viral effect because it makes the owners of GoPro cameras actively participate in brand-building. You can witness this when taking into consideration GoPro’s campaigns encouraging surfers to share their pictures or videos on the GoPro channel. What’s growing like wildflowers in springtime in the social media world lately? You name it – TikTok – the short-format video site. GoPro can use this new channel to show off its best content which creates GoPro impressions and views with viewers and builds the brand. Some of those share the videos and some even want to shoot content like you can only do with GoPro – effectively building the brand and translating into more sales of cameras.

Third, as the brand applies human knowledge and artificial intelligence to the great amounts of data being collected as part of its business, the learning effects emerge – that is, the more information the brand or product gathers and synthesizes, the more valuable it becomes. Airbnb also benefits from the learning effect as it learns about hosts and travelers. Here is another example. Tesla cars collect more data through sensors and cameras than other manufacturers which enable machine learning in its Autopilot software which increases driver safety. Tesla gets smarter as you drive and becomes even smarter the more Tesla drivers there are. In short, Tesla drivers are the active participants in building the Tesla brand. It makes Tesla safer, which is an important attribute, often called a point of parity association in building an automotive brand.

We believe that the combined power of network effects, viral effects and learning effects on brand building is sadly ignored in most discussion of building strong brands today. These effects will become more important for brands, as I write about in The Interaction Field book.

If you really want to build strong brands today in a world where everything connects, where technologies from machine learning to social media and artificial intelligence to cloud computing have converged and reached relative maturity that enables the platform world, also called a platform economy, then you must enhance your ways of thinking about brands, and build your expertise in platform thinking.

[i] David A. Aaker and Erich Joachimsthaler (2000), Brand Leadership: The Next Way of How to Build Strong Brands,” The Free Press, New York. Republished in 2009, Pocketbook, London.

[ii] Erich Joachimsthaler (2020), The Interaction Field: The Revolutionary New Way to Create Shared Value for Companies, Customers and Society,” Hachette Book Group, PublicAffairs, New York, forthcoming, September 15.

[iii] https://www.statista.com/forecasts/1011650/shopping-frequency-at-amazon-in-the-us

[iv] Neil Parker, “Your Brand is Not an Asset. Think of it as an Action Instead,” Inc Magazine, August 9, 2019.

[v] Kevin L. Keller brand pyramid, summarized here: https://medium.com/@keatonhawker/kellers-brand-equity-model-what-it-is-how-to-use-it-84e42d562299

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