The products and services that we use are developing in two seemingly opposite directions:
On one hand, we are demanding solutions that are much more personalized and adapted to fit the exact context that we use them in.
Technology has given us powerful tools to co-create and configure what we want. The conventional, top-down, one-size fits all solutions that we have been provided with so far seem to be losing their ability to solve our current challenges and to create the next level of value.
Mass customization and 3D printing, Quantified self in healthcare, and the millions of privately owned solar panels contributing to the energy supply are examples of the movement towards decentralization and user-involvement.
On the other hand, companies and organizations are growing to unprecedented dimensions. The same products and brands are sold worldwide, the issues we face are global, supply chains are long and crisscrossing the world, and it is clear that we are increasingly connected, interacting and interdependent. There are currently 4,5 billion mobile phone users on the planet, and the number is rising rapidly – as is the bandwidth of our connections.
These two movements: Towards the global and unified, and towards the hyper local with value creation at the periphery, are driven forwards and shaped by three strong trends:
- There are increasing resource and environmental constraints, which dictate that solutions be ever more efficient, making more with less, or completely substituting our current ways of meeting demands.
- Increasingly, every action and condition will be registered and analyzed. Big data will create transparency as to demands and preferences, and the availability of resources. The intense use of data should enable a much more precise allocation of resources, and a better understanding of costs and consequences – also in a wider and more long-term perspective.
- As always in a market economy, there is pressure to reduce cost in order to compete. That pressure will be particularly high in a world economy driven mainly by a new developing-world middleclass that’s coming up out of poverty and looking for affordable solutions, and by a stagnating western economy, with companies challenged by a new class of low cost competitors from the emerging markets.
All told, a new model for value creation is taking shape – and it seems to be happening in almost any sector. Rather than companies and organizations providing ready made solutions on a mass scale, focus is on creating broad platforms that enable a number of stakeholders: consumers and other companies, to participate in co-creating highly contextualized solutions.
Examples of such platforms are Apple’s App-store, the crowd-funding site Kickstarter, Ebay, Airbnb and Wikipedia.
These platforms can be global and they can accommodate both very large players and small, individual contributors. It’s a model that bridges the seemingly opposite trends towards the global and the local.
To the extent that the economy moves towards platforms, which function as enablers and brokers, it will create some important new patterns in business.
The solutions that are created will be highly integrated, using input from several, hitherto separate industries and combining very different types of players in the value creation: corporations, small businesses, volunteers, users, public sector institutions etc.
The interaction will be highly complex, and like any complex system, results can be unpredictable and develop in non-linear ways, even more open to fads and sudden successes and crashes than the current marketplace.
There will be very strong monopoly tendencies. Once a company has developed a well functioning platform, the marginal costs of letting in new users are low. At the same time, there are strong network effects: The more that use a platform, the more valuable it becomes for all users.
Likewise, global platforms can tend to be ”winner-take-all” systems. Consumers can pick the best available from the superstars on the platform – while everyone else will find it hard to attract users. Furthermore, on a platform that includes contributions from amateurs and volunteers, professionals and companies will find that they are competing against solutions that cost next to nothing. Whether you are a rental car company, a photographer, a designer or a hotel, you will feel a much harder pressure on prices.
The platform model will enable a much more efficient use of resources, it will mobilize competences and capacities that are currently not utilized, and it will allow users to co-create and configure highly individualized solutions from a global supply.
It will also increase competition and challenge the way businesses are currently making money.