Haydn Shaughnessy on Platforms and Ecosystems

Haydn Shaughnessy is an authority on economic change and business transformation. He has written several books that examine business and finance in the 21st century. These include The Elastic Enterprise, co-authored with Nicholas Vitalari, Shift and Platform Disruption Wave.
He discussed his ideas and future platform trends in conversation with Jane McConnell. This case study was first published in “The Organization in the Digital Age” in December 2016.

In 2017, Haydn and co-author Fin Goulding published Flow: A Handbook for Change-Makers, Mavericks, Innovation Activists and Leaders.

Jane: In your writing and public speaking, you have observed that companies need to consider how to either transform themselves into platforms or compete with platforms. Do you see this happening in all industries? What time frame are you thinking of? Is this a top management challenge or can the workforce be mobilized?

Haydn: We can see it happening pretty much everywhere now. GE in industrial manufacturing creating a data platform, consumer services like Uber and Airbnb, developer ecosystems, Zalando in fashion, Soundwave in music, SAP in finance, blockchain if it ever happens. Soon much of the world’s Internet of Things (IoT) manufacturing will pass through the Chinese IoT platform, IngDan.
GE’s recent successes show it is a top management challenge to look at the economic environment and ask: what assets are underutilized and why? Can we mobilize third parties to exploit those assets under our leadership?

Jane: You argue that unlike traditional organizational structures, platforms can grow without limits, with much of that growth happening externally in the broader ecosystem. What skills are necessary to manage these huge external environments?

Haydn: In the West, we are still focused on third-party ecosystems like developers and content creators. The game has moved on. We see in China that it is often a reflex of the consumer audience. Consumers just want to be involved. As long as the entrepreneur keeps a sense of adventure and perspective, attracting these third parties seems straightforward. I think of this now as participatory capitalism, exemplified by an organization like Moovel.

It is essential that top managers put a compelling case to the public for their participation in new products. It is essential that they convert their style to a more peer-like form of management.

They also need to frame their approach to market so that they become the payment engine for their ecosystem. That way they will control the cash flow. It is essential that there is a direct feedback loop with customers to drive product innovation. That can be via a third party such as a developer company. But we see in China that direct consumer participation really accelerates product to market time frames.

Jane: Does the rise of the platform create a new form of hierarchy dominated by the digitally literate?

Haydn: That is exactly what it has done, no question. It polarizes business.

Jane: To what extent are platform owners creating ecosystems that are built on one-way dependencies?

Haydn: I do not think they are one-way, but ecosystem members rarely seem to recognize that power exists for them, in numbers. They often let the platform owner dictate too many terms of business.

Jane: Can the small players—developers, consultants, freelancers—survive without the platform owners?

Haydn: No question; there are plenty of niches. Personally, I would like to see ethical platforms that build ecosystems of equals and deal equitably with them. Then I think we would enjoy this development more. If you take any area of intense entrepreneurial activity—IoT, AI or machine learning, Fintech, energy, health—there is still massive scope to define what the platform play will be. Look at any area of retail and there are still massive opportunities for platforms to be defined—and they can be defined in a much more equitable way.

Jane: Have you seen evidence of increased responsiveness and adaptability among the small players? If so, how has this been demonstrated?

Haydn: Not really. My sense is most people do not articulate the changes going on around them and continue as if business were as normal.

Jane: Do you believe established companies can develop entrepreneurial cultures?

Haydn: They are entrepreneurial within prescribed limits. To remove those limits and become more effective takes years. But large companies only have to hit pay dirt a few times. Just look at Cisco. Hardly an innovative company, but its last big unicorn was simply selling phones and dominating the world market for phone applications, like call centers. It does collaboration software, but who doesn’t? It is enterprising nonetheless. Where companies suffer is in their inability to loosen their constrained practices and enable smart people to make entrepreneurial judgments. But that is not a big leap to make.

I should add, in place of permitting smart people to make process innovation the goal, they tend instead to separate innovation out—into labs, incubators, accelerators, skunkworks, and so on. By doing that they make it more and more unlikely that smart people will change the business. They are too far away from it.

Jane: How can traditional organizations recreate themselves? What different forms do you see? Is it a question of becoming a platform? Should every company be aiming for this?

Haydn: Every company abhors process change or process model innovation. But we know that. It is not a big insight, I generally find within a company that the talent to make process change is there and can be very effective, rewriting the rules of how business gets done. The ability is often there but the owners struggle with the politics. Very often the necessary process model innovation lies in how software is developed or how IT cooperates with other parts of the business. Here again there is no great insight but getting constructive IT–Business dialogue is difficult. Yes, platforms are also vital. They need to be in the strategy mix.
But I am more and more driven to the conclusion that enterprises need to create the right teams in the core of the business, teams that are mandated to make change happen, teams that seek out the right learning model to bring key people along on that journey.

Jane: What conditions are necessary for organizations to learn? Is it even possible at a holistic level?

Haydn: We are headed towards an era of business when learning will be part of the everyday agenda—that is what machine learning is all about. My contention is that the whole organization will not keep up with this. A few people will, and those people will gather teams around them whose main priority will be to ensure that they keep on learning and keep on educating.

Only by emphasizing the learning capability of the team can companies be effective as a whole.

Jane: There have been many shifts in the economy, politics and organization, which reflect the evolution of human community and behavior. Can we determine whether the technology involved leads change or simply serves as an enabler?

Haydn: We see plenty of enablement in social networks. We will see more in AI. Smartphones are fundamentally enabling. I happen to believe the compulsion to change comes before the technology that enables it. We are evolving towards more participatory forms of capitalism; in fact, a more experimental form of capitalism. The resource we are now drawing on is continuous interaction, which is very human. It is perfectly natural, and technology is now catching up with us.