We have reached an inflection point right now, not least due to the pandemic, which has accelerated digitization and companies need to consider a different, more agile strategic approach and different business models not only to survive but also to grow. Here are the four recommendations about innovation, transformation, value creation, and cultivation that our experts left us with:

INFLECTION POINTS – YOUR BUSINESS IS NOT DESTINED TO FAIL  

Innovative companies need to discover when and how to pivot their businesses, especially in the current social and economic climate. Building resilience for companies against the known and the unknown requires planning techniques and leadership recommendations. Rita McGrath gave us insights into avenues of innovation opportunity, the centricity of trust in value creation, and salvation from the discovery-driven approach.

THE INVERTED FIRM – PLATFORM IS THE NEW NORM 

As consumerism migrates online en masse as a result of the inflection point, businesses turn to digital transformation as an imminent need. The movement promotes the idea of the inverted firm and how Platform Strategies can allow swift responsiveness and adaptation. Geoff Parker gave us insights into looking at scaling your business with a different lens, how traditional metrics of evaluating business growth may not apply in the platform economy, and how businesses can learn to operate in this Post-COVID world.

BRINGING STRATEGY BACK TO LIFE  

Transforming to the digital platform through the inverted firm presents new obstacles that the old practice of Strategy does not address. Harvard Business School professor with research emphasis on corporate strategy, industry analysis, and global competition, David Collis invited us to think about the different value types and what strategy really is today. He shared insights into modernizing strategy, tackling digitalization problems, and how value should not just be about capture but also creation and realization to achieve business success.

IS YOUR BUSINESS SMART ENOUGH TO GROW? 

Growing your company while acclimating your business to the digital platform may seem impossible, but you may come out a champion if you know the paths to get there. The key element of what helps the best companies grow today is taking advantage of internal and external levers to position themselves for explosive growth. Tiffani Bova taught us the importance of focusing on getting the job done, fostering company culture, working with competitors, and the positive business outcomes of social responsibility.

CONCLUSION 

Adapting to the modernization and digitalization of businesses requires new approaches, leadership, and strategies— especially in the pandemic era. Identifying inflection points is critical for leadership to steer the ship towards innovation through phased trial and error. As businesses join the digital platform economy, shifting traditional to digital strategies provides new opportunities for production alterations, rapid reception, and customer reach. With a growing progressive audience, thinking in different value structuring types will allow businesses to become resilient as the landscape continually evolves. Growing during digital development may seem daunting, but by positioning your business in the ecosystem through co-opetition and customer co-creation, your business will successfully transform and dominate the field.

This was the recap of The Interaction Field Series of our LinkedIn Live Events. Please connect with us on our LinkedIn page to stay updated with our upcoming conversations.

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Here are some of the key principles from Geoff Parker:

1. Organizations that adopt the platform model are those types of companies scale a lot faster. Traditional firms with relatively stable supply-chain do not pivot as quickly as a platform company could. When they have their supply or demand side disrupted, it is more difficult to navigate where to start addressing the problems. Platforms enable working with a broader set of ecosystem partners on both the supply and demand side. The digital platform provides a better overview of solution pathways.

“The important idea is that a lot of the value add starts to take place outside the four walls of the platform sponsor firm, and it’s really being executed by an ecosystem partner in a much more kind of decentralized way.” – Geoff Parker

2. There are numerous reasons for the high failure rate of digital transformation and platformization of companies. The metrics typically used to evaluate digital transformation initiatives in non-platform businesses are derived from standard linear models and practices that historically do not have a high success rate. Before these initiatives reach the scale or growth they need to succeed, the traditional metrics and initiatives shut down. It is difficult for these initiatives to succeed within big companies because “anti-bodies” exist that stamp out digital transformation initiatives. Communicating the importance of this transformation to the organization helps align initiatives.

“It’s a big management challenge for leadership to explain organization-wide why this makes sense-why cannibalizing our a revenue stream is within everyone’s best interest.” – Geoff Parker

3. The inverted firm is achieved by shifting the production from inside the company to its ecosystem partners. Network effects cannot occur internally and within standalone companies, but it becomes easier if companies look within their business frame in the ecosystem. If companies start organizing towards shared value, then the deep-rooted system could be addressed while benefiting multiple players. An open system allows for more opportunities and orchestration to innovate and solve problems.

“In order to do the inverted firm model, there are a lot of assumptions. And a lot of that is going to be this end-to-end digital kind of visibility. That assumes a common data model that assumes we have sort of worked horizontally across the enterprise, and then we’re able to plug in at different points. A lot of times it just doesn’t work that way.” – Geoff Parker

There is a lot to gain from Platform Strategies:

• Platforms allow for accelerated response: Platforms can detect new consumer patterns and immediately sync to automate, inform, and dictate the supply and demand shifts. The responsiveness of platforms allows businesses to innovate and adapt quickly and with ease.
• Investing in digitalization is investing in visibility: Complete visibility from end to end allows the firms to connect with different players through intersection points in varying application services and interfaces. Network effects take place accordingly. As the number of users increases, the value of the overall system to the individual users also increases.
• Understand the benefits of inverted firms: Companies must look across all operations to find opportunities for other players to build from and to layer digital value. The ecosystem partners consequently scale, execute, and develop the added value that provides facile advantages to your company

Conclusion

Companies that leverage platform thinking and ecosystem partners are more resilient and adaptable in this economy because they are used in scalable business models. It is not that the Porter’s 5 forces model is incorrect, it is just incomplete. Strategy today is not just about finding out where to play and how to win. Making an impact with agility and leveraging the shared interests of your ecosystem bolsters dominating the field. 

Watch the full event here:

• 7:58 – Communicating Digital Transformation to your company 
• 10:10 – Willingness of manufacturing companies to rapidly experiment and change their business models 
• 12:22 – The Inverted Firm 
• 15:06 – Food truck platform example 
• 17:19 – Traditional vs Platform Strategy 
• 18:39 – Network effects 
• 25:35 – Digital visibility 
• 27:41 – Enabling infrastructure 
• 33:55 – Copycats in network effects 
• 38:36 – Advantages of omni-channels 
• 42:16 – First step for inverted firms 

This segment was part of The Interaction Field Series of our LinkedIn Live Events. Please connect with us on our LinkedIn page to stay updated with our upcoming conversations.

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Here’s just one example: Vitality, the health insurer, has thought more broadly about consumer health beyond traditional healthcare delivery. Creating an ecosystem of fitness and nutrition providers to improve customer health habits works out better for the customer, Vitality, and the other providers – all whilst increasing loyalty and engagement. 

This is what we call an interaction field – where value is created through a network of business and brand relationships and realised through customer participation. To compete in the 21st Century, leading businesses will transform themselves, their relationships and their interaction field to create value for their brand’s customers. 

When you consider the overwhelming cost of customer acquisition, it’s easy to see why companies are investing in ways to grow loyalty through experience. From checking the status of online orders to making decisions about your healthcare, there are millions of brand interactions each day. This allows participants in the whole ecosystem to improve the way services and products are consumed and delivered. Brands that harness the power of positive experience generate excitement in their audience, but they may not do it alone.  

Companies are actively creating opportunities that scan beyond the business walls, pulling together interested partners, vendors and collaboration platforms to encourage customers to spend more and stay longer. A recent study by Gallup shows that companies that have active efforts around improving their performance management systems are seeing 26% jumps in margin. It’s impossible to point to a single action taken by brands that are providing an improved customer experience. Instead, companies are finding partnerships in unexpected places — and taking advantage of the value this interaction field brings for internal operations and for customers. 

Prospective buyers are regularly looking for trust cues. These cues help ensure that purchases from a specific brand will result in true value. Consumers are more likely to trust websites and mobile applications that are associated with a known brand. This type of authentic interaction often grows organically over time for major brands. Deep engagements are not out of reach for smaller organizations, either. 

Today’s consumers expect to have a degree of participation in their interactions with brands. This encourages business leaders to find ways to ensure consistency to the brand message and business standards. Finding strategic opportunities to engage in customer interactions is a powerful competitive advantage for your brand. 

Look Beyond Your Business Ecosystem for Opportunities for Change 

Business ecosystems are often built on years of interactions between vendors, partners and your brand. Business transformation requires looking for partnerships or ways to shift the paradigm so you can outpace the competition. This could mean bringing together multiple vendors to brainstorm new service delivery models. Another option includes pulling together data to improve insights and provide greater transparency into your processes. 

Companies that are able to successfully drive change are those that will create interactions with business partners to improve product and service consistency. Your business partners and vendors are an integral component of your business ecosystem. These companies offer unique opportunities for collaboration and conversation between your brand and your customers. 

Adopt a More Fluid and Agile View of Competitive Advantage 

In a world where products are reviewed on a regular basis, a competitive advantage no longer relies only on micro improvements or lowered costs. Brands need a holistic view of competitive advantage, one that provides weight to all customer interactions. Managing these interactions requires extensive trust from the community. This trust must be earned over time and through positive brand-to-consumer engagements. 

According to Frédéric Mazzella, CEO of BlaBlaCar France, “The building block of society — interpersonal trust — has been transformed from a scarce (one) to an abundant one. Our potential to create value is also transformed.” This shift provides brands with a powerful competitive advantage if business leaders redesign customer interactions. Use this as an opportunity to reinforce brand principles and satisfy consumer needs. 

One key way to enhance your business is to work with your suppliers to create a shared ecosystem that benefits each partner. When companies see that you are truly looking for ways to enhance both business models, it opens the floodgates for collaboration. By designing programs that add value to each entity, you are often able to define options that will expand market opportunities. This reduces the need to pry away small pockets of market share from competitors. 

John Deere is redefining their market through partnerships with IoT device leaders. These interactions allow the brand to reach outside the realms of equipment manufacturing. Tractors and other heavy equipment helped the brand grow to serve a global impact. Now, these machines are now used to gather proximity data that can be utilized by companies throughout their ecosystem. The additional information helps farmers be more productive in their efforts. These engagements also increase the overall productivity of the system by encouraging greater interactions between market partners. 

Explore Ways to Create Cultural Context 

One way to explain this connectivity is through the idea of interaction fields. Interaction fields create a gravitational pull of interactions that draw consumers closer to your brand. Creating this type of interaction field requires a strong understanding of psychology and behavioral economics. This understanding allows you to build a frame of reference for your brand that will entice consumers to deeper interactions. 

Defining an interaction field often requires deeper analysis and reinvention of business processes to aid customer engagement. This often goes far beyond brand messaging or traditional marketing campaigns to process transformation. A few of the considerations for brand strategists include: 

• The motivation of key audience segments 
• Ties that can be woven between the brand and audiences 
• The collective intelligence that is likely to influence prospective buyers 
• Identification of idea carriers: influencers, mavens and individuals with strong personal networks 

• General stickiness of the idea being shared, resulting in quality interactions with audience members 
• Tight definition of context, allowing ideas to be spread within close personal networks 
• The personal social currency that participants gain by sharing your brand or message 

Customers must be satisfied with the value delivered by your brand before they are willing to recommend products to their network. These recommendations are incredibly valuable as they expand your brand’s circle of influence. The success of this effort is often defined by a brand’s ability to create an exchange of value with customers. 

Providing real and substantial value to customers can take a variety of forms. This could include improving the quality of life or improving a customer’s ability to make decisions. You can also find that reducing costs, energy and time of a product or service helps consumers engage with your brand. 

It’s vital to expand these customer interactions from surface emotional attachments to a particular brand or business. The concept of an interaction field connotes a more collaborative approach to brand development. This allows customers to have a voice in defining the future value provided by the brand. 

Successful brands will not only provide value to their customers, but they will also derive value from customer interactions and participation. This happens as the brand is fully integrated into the daily life of consumers. This alliance between brand and customer creates a full circle of benefits that provides significant advantages to all parties. 

We ALL Live in an Interaction Field 

Creating shared value and social benefit through an interaction field may be a new concept for business leaders. However, a closer analysis of your day-to-day personal interactions with various brands may quickly allow the idea to resonate. Collaboration is encouraged between complementary brands, participation and a free flow of engagement with consumers. 

Brands can truly disrupt the current status quo and define new market opportunities for growth with these strategies. Consider the connected nature of your daily life, where individual smart devices and mobile applications mesh together seamlessly. These streamlined activities seem to simply fade into the background while saving time and adding perceived value to your life. 

There are digital trails left throughout your day. This can include data captured by Google maps or mobile traffic apps or ordering your favorite coffee online. These interactions are proof that we are living our lives in interaction fields — defined by our trusted and favorite brands. 

Defining Interaction Fields for Your Brand 

Finding ways to enhance these opportunities requires brands to focus on the quality and frequency of potential interactions. Brands are using a mix of experience design and social engagement to accomplish this task. Strategists look for ways to quantify the value that brands deliver to their audience. This allows businesses to amplify the impact of their message to reach a broader and more diverse base. 

Brands need to define a full ecosystem experience that offers benefits to each of the participants and allows for evolving conversations. Look beyond artificial barriers or boundaries and instead look for alternatives that offer a holistic view of the business ecosystem. Look for ways to deliver value to customers, prospects, vendors and your brand. Think less of conserving a monopoly, and this is where you will find true and lasting competitive advantage. 

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Click here to watch the full LinkedIn Live event and below find key highlights of the discussions: 

Why Esports matter from the following three perspectives: 

• Personal Perspective: 50% of kids today are playing competitive video games. As Tom Ajello discussed from his perspective as a parent, kids rely on these games to connect and chat with their friends. Video games provide a platform for kids to participate and learn social behavior.  
• Demographic Perspective: Esports as a demographic is an incremental consumer. Many of its users are people that don’t activate or monetize in other types of channels because more of these games are looking more like social networks and platforms. 
• Brand Perspective: Esports companies are purely digital brands building for the next generation of digital consumers. They are highly innovative and build clever and nuanced approaches for customer acquisition and retention that any business can learn and benefit from.  

Common Misconceptions of Esports 

It’s a larger business than people think. Esports is a $27 billion-dollar industry that continues to scale, attract and retain new participants.  

Competitive gaming looks more like professional sports than it does kids sitting in a basement. They require casting, analysts, coaching, and production and for players at high levels, demand an extraordinary amount of skill. There are also massive tournaments that draw in hundreds of millions of users – some of the top Esports events will get more viewers than the Superbowl.  

Esports Effectively Engage with Fringe Consumers 

There exists many strategies to manage consumers who already have high affinity and loyalty to the brand. The challenge that Esports has solved is with engaging the people at the fringes, those who are not yet directly involved in Esports. The key is – while conventional brands are built through communications and messaging, modern brands are built through interactions. From becoming a social platform to hosting live concerts and events, the Esports industry has mastered the creation of value through interactions.  

GoPro’s Adoption of Esports Brand Strategy 

GoPro applied Esports principles to connect and engage with its audience as its entire business model is about discovering content and sharing it with others. The value of GoPro is not in the camera itself but in the community, GoPro has built around its product. Just as Esports companies make it easy and effective to share gaming moments with others, GoPro makes it easy and convenient to share action and adventure videos made by its users.    

Implications for the future of advertising within Esports 

The traditional sense of control that marketers have elsewhere is lost in the world of Esports. This is because so much of Esports is about long unfiltered messaging that occurs on livestreams for 4 or 5 hours, as opposed to the conventional 30 second ad spot. The combination of everything being interactive, the prevalence of social media, and content as unfiltered viewer messaging makes loss of marketing control inevitable.  

As William Collis said, “You really lose control of the message as soon as it leaves your mouth. And so, you need a different set of tools and activations for a more modern approach to brand building.” 

 The Esports industry is too big of an opportunity to ignore – click here to watch the full event. 

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I leave the conference every year with lots of insights and inspiration and also some practical tools about how to build platform businesses.

One of these practical tools presented this year was by Marshall Van Alstyne who briefly mentioned the case of Quibi, the high profile launch by Jeffrey Katzenberg and Meg Whitman, and Quibi has so far failed to live up to expectations of subscriber growth.

Van Alstyne defines a platform as an open architecture with rules of governance designed to facilitate interactions.[ii] He explained that in designing a platform you either want to have high-value interactions, examples are Games of Thrones, Breaking Bad or Sopranos or high volume interactions, examples are YouTube or TikTok.

Quibi is the “watch bite-sized content on your phone” streaming platform that offers entirely new content, dramatic shows, comedic shows, reality TV and news bites intended to be watched while on a subway, between breakfast and your daily exercise, or while riding a Peloton bike, any brief breaks from the activities of the day.

Courtesy of MIT Initiative on the Digital Economy

In the introductory speech of the 2020 MIT Platform Summit – Platform Review and Forecast, about minute 39:50 onwards, Van Alstyne explains how to use this tool for designing interactions.[iii] Quibi, unfortunately, chose a low value, low volume interaction strategy. They are neither “fish nor fowl” as he explains.

I have used this tool in a number of applications over the years. It is really useful when designing a platform and having to make the three key decisions: Interactions, Architecture and Governance.

I found the tool useful not just to designing interactions but also deciding on the type of architecture for the platform. For example, Van Alstyne mentions that TikTok and YouTube have the added advantage that third-parties are creating the content which is the “inverted firm” concept of Van Alstyne and Parker.

How to define value of interactions

In my work on platforms and digital ecosystems, I find it helpful to think of at least three steps: framing, designing, and building the platform or digital ecosystem. Until now I have described the digital tool that Van Alstyne presented in terms of the Designing phase: Interactions, Architecture and Governance.

I also think that the tool helps in the other two phases, namely framing the platform business and in building the platform business. Framing is about what problem you are solving for the customer, the industry or society. From a customer perspective, it is defining what you aspire to stand for, how you connect in their lives, and what meaning you intend to create. In short, it is about the value proposition or brand promise that you deliver or intend to deliver.

Quibi might have missed a beat here. Did it really solve a problem that consumers have by pushing out one episode a day over weeks, when consumers have become used to binge watching entire seasons or watch movies all in one sitting. For more on this, see here.[iv]

The third phase also matters, that of actually building the platform. BCG in a study of 100 platform businesses for example found that seven of ten failed in this phase.[v] That is, a key part of building is scaling the platform in an efficient way. Van Alstyne and Parker discussed this issue as well in numerous articles and books.

I find that it is important that building the platform business requires carefully weighing how to take advantage of network effects, learning effects and viral effects.

Therefore, when I look at the value of interactions, I look at them in three ways: meaning, shared or new value or benefits, and reciprocity. A few examples:

·      Meaning

o  LEGO’s brand promise is about the joy of building and the pride of creation. When LEGO launched its LEGO Ideas platform where fans of LEGO can submit their own creations and share them with a large network of other LEGO fans, LEGO builds interaction value that reinforces the meaning of the overall brand promise of LEGO.

o  Mars Petcare is about creating a better world for pets. Mars launched Kinship which is a business division of Mars and collaboration platform for entrepreneurs, innovators and industry partners to create new products and services to further pet care. The interactions that Kinship creates a meaning for Mars Petcare.[vi]

·      New and shared benefits

o  When John Deere collects farm data on soil condition and farm productivity data from thousands of farmers, it can use data, analytics and technology to improve productivity per hectare for farmers, but it also can make the data available to Bayer or Dow to optimize crop and fertilizer utilization that creates shared benefits for the industry.

o  When Kloeckner, a metal trading firm in Germany introduced XOM, a trading platform, it creates price transparency and also solves for major inefficiencies and frictions in the industry concerning inventory management, hence delivering shared value or benefits for everyone.[vii]

·      Reciprocity

o  GoPro is best known for its action cameras but its continued success has less to do with camera technology and more with its mobile apps and video-editing capabilities that enables a content platform among millions of passionate GoPro users who create content, upload and share content on the GoPro network. It is the reciprocity of the interactions between users and GoPro that creates enormous value.

o  Vitality is an insurance company and program that rewards members for better living, more healthy living. This South African company has figured out that in order to reduce health costs, it isn’t just about cost reductions among providers, payers or pharmaceutical companies, it can also be done by actively involving its members. That is the interactions are designed so that all major participants including patients engage in reciprocal ways to improve health outcomes and reduce overall healthcare costs.

In short, in order to get the maximum impact from network effects, learning effects and viral effects, and to maximize the chances that a platform business is successful, its worthwhile to look at the value of interactions in terms of meaning, benefits, and reciprocity, and frequency or volume, as discussed by Van Alstyne.

For more details, see my new book: https://www.amazon.com/-/es/Erich-Joachimsthaler/dp/1541730518?language=en_US

[i] http://ide.mit.edu/events/2020-mit-platform-strategy-summit

[ii] https://www.weforum.org/whitepapers/platforms-and-ecosystems-enabling-the-digital-economy, page 9

[iii] https://www.youtube.com/watch?v=CUQaqMILuKQ&list=PLNmZUX7tW6t-iapgvuNhHInsUhgu7JyV8&index=2&t=2461s

[iv] https://www.forbes.com/sites/scottmendelson/2020/06/15/why-jeffrey-katzenberg-and-meg-whitman-quibi-was-always-doomed-to-fail/#85d12fb745e9

[v] Ulrich Pidun, Martin Reeves, and Maximilian Schuessler, Why Do Most Business Ecosystems Fail, BCG Henderson Institute whitepaper, https://www.bcg.com/publications/2020/why-do-most-business-ecosystems-fail

[vi] https://www.prnewswire.com/news-releases/first-of-its-kind-coalition-launches-to-drive-pet-care-innovation-300823376.html#:~:text=Kinship%20is%20a%20business%20division,About%20Mars%20Petcare; see also: Thomas W. Malnight, Ivy Buche, and Charles Dhanaraj (2019), “Put Purpose At the Core of Your Strategy,” Harvard Business Review, September – October.

[vii] See for example, Rita Gunther McGrath and Ryan McManus, Discovery-driven Digital Transformation, May-June 2020, Harvard Business Review, https://hbr.org/2020/05/discovery-driven-digital-transformation

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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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Most businesses today focus on competition and disruption instead of collaboration, participation, and engagement. They focus on transactions instead of interactions. They seek to optimize or extract value rather than share it. They build assets and thrive on enormous scale, huge distribution networks, and brand recognition. But then along comes a rival that doesn’t care much about your brand and your other assets, and it either rushes past you or mows you down.

In The Interaction Field, Vivaldi CEO and professor Erich Joachimsthaler explains that the only way to thrive in this environment is through the Interaction Field model. Companies who embrace this model generate, facilitate, and benefit from 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.

The future is going to be about creating value for everyone. Businesses that solve immediate challenges of people today and also the major social and economic challenges of the future are the ones that will survive and grow.

The Interaction Field is now available to order wherever books are sold.  

Amazon | Barnes & Noble | Bookshop.org  

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White Claw’s communications try to make it clear that they are THE beverage of choice for younger drinkers. But their success isn’t only the marketing – it was really the market insight.

White Claw catches several waves of shifting consumer mindset. It mirrors the move in soft drinks from synthetic fizzy drinks to carbonated water. It uses natural fruit flavours, and it’s low in sugar.

It’s effective. It has hastened the decline of alcopops and it has taken share from light beers. According to IWSR, by the end of 2019, hard seltzers were already larger in terms of volume consumption than the entire vodka category in the US[1].

The trends towards simple, healthy, natural and light are already well developed in food and fashion. White Claw’s success is aided by these adjacent categories. The messaging and social reinforcement that will come from other brands – as well as customers and influencers – in advocating these attributes across categories – will make White Claw feel like the drink of a generation.

These interactions between categories and consumers in forming and reinforcing trends are one aspect of what we call ‘Interaction Fields’. Multiple touchpoints, across multiple brands in multiple adjacent and non-adjacent categories define modern customer experience and shape perception. Successful brands must be distinctive but they cannot stand in isolation.

Now, nearly every big-name beverage brand has launched, or is planning to launch, their own hard seltzer. When a new sub-category emerges, it’s understandable that established brands would respond with me-too products. It’s a predictable move but, in a category that is often rife with clichés, this is itself also a cliché.

Emulation is not innovation. Businesses and brands should aspire to lead. Just copying White Claw is looking at it through the wrong end of a telescope. The business innovation challenge is not ‘how do we make a similar product?’ but ‘how do we develop a similar level of insight-driven innovation?’

A Sea of Change in the Beverage Market

According to WiseGuyReports, the global market for the alcoholic beverage market is expected to grow at 4.09% (CAGR ) over the next six years. The array of choices available to today’s consumers makes it much harder for alcohol brands to fight for their attention. People live their lives differently today than they did even ten years ago. They’re checking out the labels and making sure the ingredients used to create the product don’t conflict with their ideals.

Crafting an effective alcohol brand experience for customers involves building interaction fields that speak directly to them, finding opportunities to add or create value at every point in the customer journey. There should 360-degree engagement between the brand, the customer, and other stakeholders. How can a brand consistently bring value to customers and to its broader ecosystem? Thinking of brands as a platform for interaction, engagement and experience should be at the top of everyone’s mind when crafting strategies for alcohol brands.

This kind of platform thinking helps brands create a consistent architecture for sensing and learning about the needs of customers. Considering the entire interaction fields between consumers and brands allows businesses to innovate beyond products to create entirely new categories of customer experiences.

Let’s look at how interaction fields work and then examine some different ways of applying this approach to create new and stronger brand connections in line with the social, cultural and market trends shaping the beer, wines and spirits (BWS) sector.

What Are Interaction Fields?

Think of interaction fields as a way of encompassing an entire experience ecosystem for consumers. Each interaction should build equity for the brand and create value for the consumer and do the same for ecosystem partners and adjacent businesses. Thinking in terms of creating and shaping interaction fields helps marketers see beyond their latest communications strategy and to encourage, enable and equip consumers to build their brands into their lives.

You see all the potential links between customers and the different ways they interact with the world. More importantly, you gain a better understanding of their needs within the current marketing environment, which helps you create more agile business and brand strategies.

The consumer should be the key consideration in any interaction field. However, interaction fields also help you see the connections between brand products, vendors, and even those producing the raw materials. Interaction fields describe how your own commercial network can meaningfully combine with your consumers’ social, family and digital networks. Value may be realised in transactions, but it is created, shared, and sustained through interactions.

Three Essential Elements of Interaction Fields

1. Data Insights

It’s important to know who’s buying your products and their reasons for choosing you over a competitor. Data gathering helps you understand important details about consumers. Qualitative tools like focus groups always help, and quantitative surveys and data analysis of consumption patterns and purchase behaviours are an invaluable part of classic marketing.

With interaction fields, the approach to data can be broader in three important ways. The first is essentially a form of ethnography. Understanding social behaviour of consumers helps to identify new opportunities to innovate at different points in the value chain or with different experiences by identifying new usage occasions, locations, social rituals and purchase habits.

Secondly, interaction fields consider other brands and businesses that connect with consumers alongside your own, and this can surface new opportunities for partnerships or new platforms for delivery. Research therefore encompasses much more than simple usage and attitudes towards one brand in particular, but a wider understanding of a set of brand relationships that are important to consumers.

Thirdly, interaction fields recognise that consumers are not ‘dumb targets’ of marketing. Instead they are active participants in a network of relationships – contributing and sharing insight and content that, when listened to attentively, can create new opportunities for innovation or to deepen brand relationships and engagement.

2. Customer Experience

Use the information collected through your analytics efforts to understand how to improve and personalize the alcohol brand experience. Create different concepts to test with a brand’s target audiences. Understand the differences in what customers in different brackets expect when it comes to engagement. How can you demonstrate to them the positive impact of the product in their life? That should be a top concern of all alcoholic or non-alcoholic beverage brands.

The information collected on the behavioral patterns of consumers helps you understand the impacts of your products in the lives of customers. Use that data to inform future campaigns for new or revamped products. Your interaction fields should incorporate the marketing channels best suited to connecting to your audience. That should help in focusing efforts on spaces more likely to encourage customer engagement.

3. Market Strategy

Your alcohol market strategies should tell customers exactly where you stand when it comes to issues important to them. Values matter. It makes a difference to customers when trying to decide which alcohol and non-alcohol beverage brands fit their lifestyles or belief system. Make sure to expand that level of engagement when creating a brand architecture for related products.

For example, Red Bull has taken its energy equities and built up a strong association with sports and extreme activities. That kind of market segmentation could be essential when it comes to crafting innovative new marketing strategies that tie a brand’s products to experiences that engage an audience.

Don’t limit your interaction fields to digital spaces. Use your knowledge to add depth to all aspects of marketing. That includes setting up alcohol marketing events or other off-line efforts to interact directly with customers.

Having a better understanding of customers and their interaction fields allows beverage businesses to come up with ideas that lead to true brand innovation in the alcohol market.

The questions you should ask as you build out your brand as an interaction field include:

1. How can you continually make your business valuable to each new customer?
2. How can you influence partners within your brand ecosystem to buy into your vision?
3. How can you successfully create value within that ecosystem while generating growth?

We call this approach to creating interaction fields ‘platform thinking’. It creates a brand space which welcomes customers and partners, and which is engineered to create value through interaction.

Six Strategies for more radical innovation

1. Enlarge “Share of Life” From Product to Solutions

An interaction field should help you see potential ways your brand brings value to customers. That means knowing what that audience experiences each day. Your customer research should give you the minutiae of their lifestyles, key to avoiding the mistake of building marketing campaigns based on outdated assumptions that miss their target.

Alcohol brands must establish the role and worth of their products in a customer’s life before successfully selling them on the benefits. As you think through how your product figures into the day-to-day routines of customers, avoid hasty expansions that take your brand from its roots. The key is to keep your product consistently relevant in the lives of your target audience.

One example of this is the explosion of ready-to-drink (RTD) products taking over the craft beer market. A segment that used to be dominated by the presence of 750ml bomber packaging has shifted to 4-pack tallboy cans. The lightness and convenience of cans over glass bottles makes them a prime choice for consumers to take with them on hikes or other outdoor activities.

It’s much easier to take a canned beverage into a park, pool, or other public areas versus a wine bottle. Wine, cocktails, and hard seltzer are just some of the drinks that now come in a can. If you’re a brand looking to move away from glass bottles, focus on showing your customers how their lives would be better because of that move. Demonstrate the ease of using cans over bottles and how they provide the kind of instant satisfaction expected by today’s consumers.

2. Strengthen Your Narrative by Competing on “Purpose”

What does your brand want to accomplish beyond hitting your target KPIs? You need to tell your brand’s story in a way that speaks to their values. How is your brand doing a better job than the competition on issues like the environment? Interaction fields can provide clarity on staking out your purpose in a way that’s distinct from other alcohol brands in the market.

For example, environmentally conscious customers want clarity on the term conditions under which  brands operate. They’re thinking about things like getting rid of excess packaging and reducing the use of single-use products, like plastic water bottles. Brands should make sure their advertising reflects the ways they keep the environment in mind for the production and distribution of their products. UK Supermarket Sainsbury’s has committed to halve plastic packaging by 2025[2]. Brands that don’t respond to this will soon like sit on their shelves looking like they’re from a previous era.

If you’re still converting to more environmentally friendly products, don’t be afraid to say that. One way of connecting to customers is by showing your willingness to listen to their concerns and change any practices that could be potentially harmful to the environment. Are you open to alternative packaging that’s more eco-friendly like aluminium cans or paper boxing?

Focusing on sustainability also provides an opportunity for alcohol brands to display their dedication to using sustainable packaging materials for the long-term benefit of our planet. Use your consumer research on this audience to anticipate questions customers might have on various topics like alternative packaging. That helps your marketing team prepare campaigns that speak directly to that audience concerned.

3. Create Solutions Relevant to a Specific Segment

“The world is polarized and averages are truly meaningless. The task of CPG companies and brands is to stay relevant by still keeping a certain critical scale.” – Alan Jope – CEO Unilever

The risk with all ‘me too’ product-led innovation is that, whilst there’s merit in getting a slice of the pie, the pie itself isn’t getting any but your product portfolio is getting increasingly unmanageable.

To succeed, global brands must achieve sufficient margin and/or volume. Some niche products simply don’t scale. Relentless product variants can clutter a market rather than serve it. The challenge is how to achieve segmentation at scale.

One answer is premiumisation. Even during economic uncertainty, premium alcohol brands can deliver affordable luxury. In fact, economic uncertainty may even encourage some consumers to keep affordable premium brands as a treat when cutting back elsewhere. Estimates show that the sales of premium spirits like tequila, vodka, and whiskey – priced at $25 and up – have increased by 12% over the past 12 months.

A related strategy is to associate a premium alcohol brand with gifting – so that a relatively expensive bottle of something becomes the gift of choice to people when they get their new home, promotion, engagement or addition to the family. These examples are a different take on segmentation from targeting smaller and smaller niches – they are about making really specific brand associations yet connecting them to what are actually fairly universal experiences. It is thanks to De Beers’ marketing that we link diamond rings to getting engaged[3].

Segmentation here is not necessarily about smaller and smaller target groups, but instead about increasingly precise specificity of the brand.

In this way, premiumisation can deliver margin and still drive volume. But to create new associations, new opportunities and even new drinking occasions requires two things: Firstly, a comprehensive understanding of how consumers engage with their world of brands – their interaction fields. Secondly, an ability to think laterally about all the possible brand partnerships and adjacent categories that can be enlisted to create a meaningful new drinking occasions.

One category outside beers, wines and spirits is leading the way. Coffee has achieved a kind of mass-connoisseurship that alcohol brands should study closely for inspiration for bar and in-home premiumisation. Coffee lovers all over the world  visit their local coffee shop for a cup of pour-over coffee, even though it might be double the cost of a regular drip coffee. For home brewing, they buy single origin, whole-bean coffees that often retail for more than twice as much as the traditional mainstream brands.

4. Stimulate Disruptive Alcohol Brand Innovation

Innovation should start from the ground up. Avoid the temptation of slapping a fresh coat of paint on a rusty old marketing campaign. Look at the partnerships you’ve formed with other partners. What potential changes could you implement that help you push beyond an incremental mindset?

Today’s alcohol brands must have the flexibility to shift with the current times. Look at what’s going on in the world today. Where does your brand fit into the lives of customers navigating an abrupt shift in what is considered normal? Open for innovation at every point in the customer journey and your value chain from the outside and inside, by initiating the right partnerships externally and making your company receptive for change internally. Keep the following concepts in mind as you work through creating your interaction fields.

• Brand Architecture — Organise all related products, services, and brands in a way that shows you the distinct ways components connect to an audience and each other. Use that to gather information on consumer preferences.
• Marketing Planning — Let the data gleaned from your interaction fields inform how you establish marketing goals and implement different strategies

Don’t limit yourself to what’s worked in the past. You should consistently update and refine the interaction fields for each segment to stay up to date on what consumers desire now. It also gives you insights into what they may need in the future, which helps keep your brand relevant to current and new customers.

We’ve seen these kinds of changes pay off with the growing popularity of low-alcohol and no-alcohol beverages on the market. There’s also been a shift toward reducing the amount of sugar contained in various products. Many brands also focus more on incorporating natural ingredients into their beverages to appeal to health-conscious customers.

Lighter wines with less sugar and calories are another way of appealing to consumers looking out for their health. An example of this is FitVine, a brand of wines focused on serving an audience looking for products with low sugar, carb, and calorie content. Michelob Ultra now offers a macro light lager that appeals to customers with an active lifestyle.

Beverage brands should also try thinking up new flavor combinations and healthier recipes for their products. For example, the Briska label in Sweden came up with a cider with a high fruit-juice content that combines mango and apple flavors. Another new emerging trend is sparking cocktails to draw in customers looking for new non-alcoholic beverage options.

5. Make Your Employees Part of Something Bigger

Empower your workers by allowing them to contribute to the way you come up with interaction fields. Fresh eyes encourage novel ideas and could push you in directions you might not have considered with your standard marketing team. Establish an environment that makes the best in the field want to be part of the experience. Stop and think about how your company measures up in the following areas:

• Employer-Value Proposition — How trustworthy is the appeal of your brand to potential employees? Would top talent be proud of being associated with your company?
• Capability Assessment — How ready is your organization to adapt quickly to changes in customer preferences?
• Employee Engagement Initiatives — How is your company going about staying connected to individual employees and their future career goals?
• Agile Digital Transformation — Have you put in the work to make your company technologically and culturally ready to compete in the digital age? Are you able to engage directly with customers in ways that drive growth? Are you prepared to use next-generation technology to fulfill your brand’s vision?

One example of building up your beverage brand’s employer-value proposition is through charitable contributions to causes important to your workers. Take the time to ask them about where they would like to see improvements in their local community. They can give your company ideas on different events to sponsor that work to make a difference in the lives of residents in need.

The Brewdog brand created a charitable foundation in the UK to help fund various philanthropic endeavors around the goal. They direct funds to initiatives selected by their workers. Campari UK joined forces with The Drinks Trust to help hospitality  workers suffering due to the coronavirus epidemic by creating the Shaken Not Broken Fund. It supports employees in hard-hit fields like bartending, serving, dishwashing, and restaurant management. William Grant & Sons have created #standfast to support the on-trade[4].

Happy employees create a more harmonious workspace. Ask workers where they’d like to be five years from now and help them find a path toward achieving that goal. That could be through initiatives like tuition reimbursement or providing an opportunity to receive additional training in a specific field.

You want people at all ends of the company with the capabilities needed to deliver on the ideas produced through your interaction fields. It also encourages an atmosphere of platform thinking throughout the organization. Invest in committing to agile digital transformation to improve the technology at your company and help employees be more efficient in completing their job functions and satisfying your customer base. The more you invest in building up these areas of your company, the more likely you are to attract the talent needed to promote continued success.

6. Enable Constant Two-Way Consumer Communication

The value of your brand depends on the perception of consumers. You should look for different ways to encourage connections with your audience through innovative marketing for alcohol brands. Let’s examine some concepts that help in that effort.

• Customer Experience Design — How easy is it for consumers to navigate your website or take advantage of a recent promotion? Track the journey customers take when interacting with your brand, both online and in stores.
• Customer Relationship Management (CRM) Tools — Make sure you have architecture in place that gives you a 360-degree view of everything from your most successful marketing campaigns to data analytics on optimal marketing channels.
• Marketing Funnel Optimization — Find out what’s most successful in encouraging customers to follow the path from an initial contact to a conversion.

How convenient is it for consumers to receive your products? Does your website provide a way for customers to find a convenience store that delivers to their doorstep? Does your marketing tunnel include linking up with subscription services that allow customers to subscribe to regular deliveries of your products?

Don’t limit yourself to the traditional retail model when it comes to getting your beverages to consumers. For example, Drizzly is a two-sided market that connects retailers with interested beverage drinkers to have drinks delivered directly. They also opened up a new monetization channel by charging participating retail stores a membership fee versus collecting an additional fee or taking a cut of sales to customers.

Get Help Building Better Alcoholic Branding Strategies

Vivaldi have helped some of the world’s most forward thinking businesses create innovative brands and experiences for today’s consumers. If your brand or business is looking to develop more radical approaches to innovation, let’s start a conversation. We’ll look at how platform thinking might work for you, and work towards creating a dynamic interaction field for your consumers.

[1] https://www.thespiritsbusiness.com/2020/06/hard-seltzers-bolster-rtd-growth-in-2019/

[2] https://www.about.sainsburys.co.uk/news/latest-news/2019/13-09-2019-sainsburys-to-halve-plastic-packaging-by-2025

[3] https://www.insider.com/why-do-we-propose-with-diamond-rings-2017-4

[4] https://www.williamgrant.com/gb/legacies/our-standfast-campaign-to-support-the-on-trade/

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