Amazon and Whole Foods expose an ecosystem gap – the last mile

In case you were hibernating or out of range of cell cover or WiFi during the last few days, you know that Amazon has made an offer to acquire Whole Foods.

This places the largest online merchant in direct competition with some of the largest retailers in the US – grocery stores – and continues Amazon’s move into “bricks and mortar” businesses.

On this blog Paul and I have been writing about the importance of innovation in platforms and ecosystems.

With this acquisition, Amazon is attempting to extend its platforms into the “real” world and link up its power in the online world with physical stores.  Amazon understand a lot about attracting customers to its site, and does a reasonably good job at distribution.  Amazon gains a trusted “bricks and mortar” company that is respected (or sneered at) by consumers.  Whole Foods isn’t nicknamed “Whole Paycheck” for nothing, and there are some interesting dynamics between a company that isn’t concerned with profits and a company well-known for top of the line products and good customer service.  But we aren’t here to evaluate the integration of these companies, as much as to identify an ecosystem gap.

Amazon and the last mile problem

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Blockchain and distributed ledgers as innovative platforms

It had to come to this eventually.  The emergence of Blockchain and distributed ledger systems illustrates how innovation is moving from focus on products and services, which are interesting but don’t provide a long-lasting competitive advantage, to a focus on platforms and ecosystems.

Over the last few weeks this need for a lasting competitive shift in focus was emphasized as Ford pushed out its CEO because he wasn’t changing the company fast enough. As discussed in this blog previously, the automotive sector must rethink its competitive position.  Increasingly, people want flexible transportation – from cabs, Uber, public transportation and/or their cars.

The automotive manufacturers (Ford, GM, Fiat, Mercedes, etc) must shift their focus from building physical cars to providing transportation – a shift in thinking and strategy.

In a very similar manner we can see that banking and financial services are moving from offering discrete services (mortgages, loans, checking/savings accounts, etc) and are considering how to either own or integrate with larger platforms and ecosystems, because the older conventions are less attractive to emerging customers and technology is advancing so quickly that soon many different companies and industries can offer banking-like services.

Distributed ledgers and Blockchain may point out a new competitive platform that some firm is going to capitalize on.  For example, we can imagine a time in the not too distant future where a large company that supports and relies on an extended supply chain – the automotive industry for example – could dictate that all of its supply chain participants must interact using Blockchain.  Then we’d have a company spanning, industry wide ERP like platform.  If this sounds crazy, don’t laugh.  The government of Dubai just announced that within five years every entity that interacts with the government must do so using Blockchain.

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No walled gardens in B2B platforms

Walled Garden Illustration by David Simonds

Paul and I have noted throughout our writings on platforms and ecosystems the key differences between companies that interact primarily with consumers (B2C) and companies that interact primarily with other corporations (B2B).  This difference is especially important when we begin to think about platform dominance.

You see, Facebook interacts primarily, almost exclusively, with customers (B2C) as such it’s platform serves to provide almost the entire interaction between Facebook and its customers.  We could almost return to the days of old, when AOL was your conduit to the internet, when we talked about “walled gardens”, because that’s what many of the pure play B2C platforms are – walled gardens, meant to provide as much of the platform as possible.  Their goal is “stickiness”, attracting you and keeping you plugged into their platform, consuming their content.

On the other hand, industrial companies are definitely as engaged in platform development, but their solutions require more than one platform. Continue reading

Recapping our ecosystem and platform thoughts

For those of you following our posts about ecosystems and platforms and their importance to innovation, this is the 30th post. We thought it made sense to take a breather before pushing on to other ideas, to stop and recap what we’ve been writing about, and perhaps to place some of these ideas in context.

Paul Hobcraft and I first began talking about ecosystems and platforms several years ago, as it became more evident that innovation is often focused too narrowly, considering only a discrete product or service as its end result.

Increasingly, we believe, innovators must become first more aware of the platforms and ecosystems that exist in their markets or segments, and secondly must become more willing to innovate with regard to the platform or ecosystem, and eventually must innovate to change or disrupt the platforms and ecosystems.

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When a platform becomes an operating system

In the last post Paul wrote about Bosch, and its focus on the industrial internet of things (IIoT).  Bosch, GE and other industrial companies are attempting to create industry leading or at a minimum industry standard platforms to link industrial organizations and create standards, with the hope that new ecosystems and new solutions are built on top of those platforms.

Each of their goals is to capture, manage and exploit information generated from thousands of activities and sensors throughout the industrial platform.

Here we can the see opportunity and the challenges associated with an IIoT play:  building a platform and managing the data of an industrial giant means managing (and harvesting) a tremendous amount of data.

But it also means plugging into or interfacing with other systems and platforms, as none of these companies can create a holistic platform or replace all of the platforms and systems in a large company.  Bosch, GE and others can create really powerful and important platforms in sections or functions, but must integrate and share data with other platforms.  While they can create really powerful and compelling platforms, these platforms are by necessity limited to specific capabilities or functions.

Now for something completely different

Let’s examine then, the power and flexibility that an Amazon, for example has in its quest to build platforms through its AWS offerings.  First, it is focusing on business to consumer (b2c) or in many cases a category that Paul has coined:  consumer to consumer (c2c). Continue reading

Services, channels and experiences matter in old economy industries

old-economy-vs-new-economyIn my last post I spent some time examining the opportunities and challenges of innovating in an old economy industry – the railroad industry.

For some industries, especially those that are asset-light, innovation can seem so simple.  Creating another compelling feature, service or product on top of an already agile set of capabilities can be pretty straightforward.

For old economy companies with infrastructure, equipment and assets, trying to innovate can seem very difficult, because of the history you have to bring along, and because of the standards, platforms and ecosystems that define your value proposition.

So here’s where both asset light new economy companies (Uber, AirBnB, etc) and old economy, asset rich industries can find common innovation ground.  Continue reading

Old economy ecosystems signal innovation opportunities

rail-crossover-points-2Paul and I have been writing mostly about ecosystems and platforms in the abstract to date, not spending a lot of time talking about specific companies or industries.

We took this approach because we wanted to establish a firm foundation about ecosystems and platforms generally, that wasn’t subject to debate about their applicability to one industry or another.

In the next several posts we will be looking at two diametrically opposed industries and the importance of ecosystems and platforms to both of these industries. Fittingly, I’ll be looking at the importance of innovation in ecosystems and platforms for an “old economy” industry – the railroads, while Paul looks at the importance of platforms and ecosystems in a new economy company – Alibaba.

On the (rail)road again… Continue reading