Bigtech, platform geopolitics, and the industrial platform economy

As a year, the two most prominent themes in 2018 were (1) the dark side of platforms and regulation of big tech and (2) the increasing importance of platform strategy in geopolitics. We also saw the growth in importance of B2B platforms as more industrial sectors started to get transformed in the platform economy. 

This final roundup collection of the year consists of two sections:

  1. Big ideas in my work on platforms in 2018
  2. What to watch out for in 2019

 

Big ideas in 2018

1. The future of creative industries in the platform economy

Platforms are changing the economics of the creative industries. We’ve seen three distinct ways in which platforms have upended the creative industries:

  1. Reintermediation: Amazon’s impact on publishing, as a marketplace with huge negotiating power. The entire publishing industry in the US was forced to consolidate as a result of Amazon’s margin pressures.
  2. Technical lock-in: Amazon, again, has created huge technical lock-in by making the Kindle format proprietary. This concentrates even more of the market in its direction.
  3. Value chain migration: Netflix moved from distribution into creation and we may very soon see Spotify launching its own label for independent artists as well.

The third point, in particular, is hugely compelling. Movies and music are high risk, high investment sectors and both Netflix and Spotify have been learning from consumer data while letting studios and labels take the risk of funding content. Now that they’ve learnt enough, they can themselves enter the studio and label game while taking more informed risks. 

I was commissioned to work on this research by the UN’s World Intellectual Property Organization (WIPO) and presented this in a keynote at the WIPO’s annual global conference. The video below summaries these ideas and lays out a larger narrative for the impact of platforms on the creative sector.

2. Regulating work in the platform economy

As more work gets intermediated by platforms, it will be important to understand which platforms empower workers and which ones exploit workers. This has been a big theme with the UN’s International Labor Organization (ILO) this year and I was commissioned to work on an exhaustive research on this topic. The full report is long but juicy with detail. Worth reading, in particular, are Section 7 (how platforms like Uber exploit workers) and Section 8.3 (how to regulate platforms). 

And if you’d like a quick overview, my speech at the Danish Parliament in March captures many of these ideas. 

Country-level platforms will determine winners in future trade wars and create a new model for public-private partnership.

 

3. Country as a platform

By far, the most far-reaching idea this year was the idea of country-as-a-platform. I first proposed this in February, taking Singapore as an example, but have since extended it to explain India’s strategy with the India stack and China’s strategy with the Belt and Road initiative as well (Video awaited from the European Platform Economy Summit).

Here’s the original article on Singapore’s platform strategy. 

This will become an increasingly important theme in the coming year from two perspectives. First, more countries will begin to apply the country-as-a-platform strategy. I already see this beginning to take hold in the EU. Asian giants – China and India – as well as smaller countries like Singapore will continue to lead the charge. Second, beyond geopolitics, this will become the new framework for public-private cooperation. In country-as-a-platform strategies, the private sector plugs into the country platform but continues to maintain its unique control points. 

What to watch out for in 2019

1. China’s growing impact and overall strategy

One of the most interesting themes to follow at the moment, China is pursuing a multi-dimensional strategy to increase its influence globally but platform strategy is one of the key pillars involved. Companies like Alibaba are very strategically putting together the pieces for a global platform for trade and payments, by focusing on markets that lack a traditional financial stack. Worth reading: Chinese fintech planning a global coup 

But this is much larger than this. Over the last year, most of the discussion in the EU has shifted from “How do we think about GAFA?” to “How do we think about Alibaba and WeChat?” 

China’s experiments with social credit systems will also be worth watching. While I’m not a fan of data-driven reputation systems that punish users or inhibit their access, I do believe there’s a lot of value to be created by increasing access for reputable users without punishing the others. 

2. Unintended consequences of BigTech’s advertising business models

Advertising – and making users click – continues to be the dominant model of funding the bigtech firms. And 2018 was the year when a lot of the unintended consequences of optimizing ad revenue came to the fore. We’ve already seen how Facebook and YouTube increasingly polarise users through their efforts to increase clicks. Worth reading: YouTube’s dark side  As investigations increase, we’ll see more of this coming up. 

If you’re really keen on the larger impact of BigTech, two reports I’d highly recommend for your Holiday reading: 

Australia’s Digital Platforms Inquiry 

OPEC on rethinking antitrust 

3. Platforms in the industrial world

Finally, we’ll see even more of B2B platforms in logistics, manufacturing, heavy engineering etc. Over the years, I’ve been asked by executives whether platforms are a consumer phenomenon only. Those questions have markedly decreased over the last few months with many execs in traditional industries realising the value of platforms to organise their industry ecosystems. Many companies will move beyond basic digitization and sensor-network installations to platform business models. Blockchain and DLT based initiatives will be an important starting point to creating interoperability in traditional industries and over the coming years, we will see new platforms coming up around these initiatives. 

TWEETABLE TAKEAWAYS

Country-level platforms will determine winners in future trade wars and create a new model for public-private partnership. Share this

Netflix and Spotify demonstrate how tech firms can migrate up the value chain with relatively lower risk capital. Share this

Work is moving to platforms and we need to identify which ones empower workers and which ones exploit them. Share this

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