Platforms Overrunning Traditional Pipeline Businesses by Human Capital Alliance Inc
Edwin Sim looks at how platforms are transforming business strategy.
Apple, Uber and Airbnb are overrunning incumbent product-push pipeline businesses by exploiting platforms and leveraging new rules of strategy.
In a recent Harvard Business Review article, “Pipelines, Platforms and the rules of strategy”, the authors said in today’s digital internet environment, scale trumps differentiation.
“Platform businesses bring together producers and consumers in high-value exchanges.”
Platforms – major assets
In contrast to traditional product pipeline sales organizations, platforms chief assets are information and interactions, the sources of the value they create and their competitive advantage.
Using these innovative digitally-enabled concepts, HBR said Apple conceived the iPhone and its operating system as more than a product or conduit for services.
“It imagined them as a way to connect participants in two-sided markets – app developers on one side and app users on the other – generating value for both groups.”
Network effects
As participants on each side increase, network effects, which are central to any platform, begin occurring.
Apple conceived iPhone and its operating system as a conduit that could distribute numerous products and services.
By January 2015, the company’s App store offered 1.4 million apps and had cumulatively generated $25 billion for developers
Critical lessons
Apples success in building a platform business within a conventional product firm holds critical lessons for companies across industries.
Firms that fail to create platforms and don’t learn the new rules of strategy will be unable to compete for long.
Major environmental change
Today all businesses must understand that platform businesses such as Uber and Airbmb bring together producers and consumers, are gobbling up market share and transforming competition.
Moreover, traditional pipeline product-selling businesses that fail to create platforms and learn the new rules of strategy will suffer.
Today’s new rules
With a platform, a business’ critical asset is the community and its members’ resources.
Its strategy shifts from controlling to orchestrating resources, from optimizing internal processes to facilitating external interactions, and from increasing customer value to maximizing ecosystem value.
Read: The New Environment
Bacall Investment Tips: What Is Missing From 2016 Investment Advice? Optimism And 'Cool' Stocks
Lots of advice, but it is focused on lackluster/tepid expectations. It seems 2015’s negative surprises and poor performance set the tone for 2016’s outlooks. Even articles that include “bull market” in their titles restate what went wrong and end up asking the question of whether stocks can rise again. The only certainties offered are that the U.S. stock market will be volatile and that it will not generate a double-digit return in 2016. A good example is the AP article, “Expect less and buy antacid: 2016 investment forecasts.”
Investing is becoming more of a grind. Expect it to stay that way.
Analysts, mutual-fund managers and other forecasters are telling investors to expect lower returns from stocks and bonds in 2016 than in past years. They’re also predicting more severe swings in prices. Remember that 10 percent drop for stocks that freaked investors out in August? It likely won’t take another four years for the next one.
That brings us to what is missing from most advice: Optimism and “cool” stocks. When attitudes and advice center in one area, taking a contrarian stance by focusing on overlooked or dismissed areas can often reward investors with lower risk and/or higher returns.
Disclosure: Author is fully invested in U.S. stocks and actively managed U.S. stock funds. Holdings include the five stocks mentioned below.
Contrarian investing using optimism
Contrarian investing is often linked to troubled, deeply discounted stocks. However, “contrarian” simply means going against a popular trend. Thus, selling a popular investment or buying stocks that others are ignoring are also examples of contrarian investing.
So, what is so special about adopting an optimistic attitude? Because it means having confidence in the future, and that shifts the investing strategy to future growth. Are the uncertainties and reversals revealed last year still at work? Of course. However, everybody knows about them, so today’s stock prices fully reflect that information. What is not yet included in the pricing is the expectation that today’s problems will be corrected by tomorrow’s actions. Instead, the 2016 advice says or implies that, because the solutions are not currently visible, we should not count on them occurring. This “wait until the dust settles” procrastination is the surest way of missing out on the largest, safest returns from stock investing. When the good news is obvious, prices are already up.
And now to that “cool” portfolio
If we are going to be optimistic, then we can focus on the companies that delight. These are the companies that have something special, unique and desirable to offer. Happily, they are obvious, so it is just a matter of having the confidence that their futures can be bright. To succeed, investors can focus on what they know and like, or they can use advisers or actively managed funds to perform the selection. (Personally, I prefer a combination of my own choices and funds managed by organizations in which I have confidence.)
Below are my five favorite “cool” companies. Their shared characteristics are leading developers of top end products and services that can support high pricing and profitability. In addition, the companies are well structured and managed to succeed in evolving growth areas.
- Apple AAPL -6.22%
- Goldman Sachs Group GS +0.65%
- Starbucks SBUX -1.40%
- Time Warner TWX -0.14%
- Walt Disney DIS +0.37%
The bottom line
The current market environment has investors and advisers focusing on risk, uncertainties and low expectations. It is this caution that gives us the right and incentive to be optimistic and confident, buying leading companies for the brighter days ahead.
Richard (Rich) S. Isaacs, MD, FACS
Physician in Chief, Kaiser Permanente Medical Center South Sacramento, Alpine Member at National Ski Patrol
Current: University of California Davis School of Medicine, The Permanente Medical Group, National Ski Patrol
Previous: Awards, Kaiser Permanente, University of California Davis, School of Medicine
Education: University of California, San Francisco - School of Medicine
Websites: Personal Website
Summary
Rich joined Kaiser Permanente in 1995 and he has Advanced Certification in Head and Neck Oncologic Surgery. His specialties include: orbital, nasal, and maxillofacial surgery, as well as thyroid and parathyroid surgery. Additionally, Rich is trained in Facial Plastic and Reconstructive surgery and has an interest in post-tumor facial reconstruction and facial reanimation surgery. He is a Fellow of the American Academy of Otolaryngology-Head and Neck Surgery and also a Fellow of the American College of Surgeons. Rich has published several articles in national publications.
Role as Physician-In-Chief
In April of 2005, Rich was appointed to the Physician-In-Chief position for the South Sacramento and Elk Grove Medical Facilities. He provides leadership for the 450 physicians and more than 3000 nurses and staff who care for the 210,000 Kaiser Permanente members in the South Sacramento and Elk Grove areas. Rich functions as the Medical Director of operations, including all inpatient and outpatient arenas. He also functions as the Chief Medical Officer for the 220 bed Acute Care Hospital and ACS Level II Trauma Center.
About Rich
Rich was born and raised in Detroit, Michigan. As an undergraduate, he attended The University of Michigan in Ann Arbor, and graduated with honors. He attended Wayne State University School of Medicine in Detroit, and graduated with honors.
Rich enjoys education and he trains medical students, residents, and fellows from the University of California, Davis, School of Medicine, Drexel University College of Medicine (Philadelphia), and Northstate University School of Medicine (Elk Grove) where he is a Professor of Otolaryngology.
Experience
Scholarship Chair, UC Davis School of Medicine Alumni Association
University of California Davis School of Medicine
January 2012 – Present (4 years 3 months)
Dr. Richard Isaacs - Wellness facility coming to Elk Grove
On June 16, Kaiser doctors and area leaders broke ground at what will eventually be the new Promenade Medical Office Building in south Elk Grove.
The two-story, 67,000- square-foot Kaiser Permanente facility will be designed to focus on matters affecting patients’ mind, body and soul.
It will feature a 50-meter outdoor sports track that will be part of a 4,000-square-foot Sports Medicine Center where athletes can be evaluated and rehabilitated.
In addition to the sports center, the medical office will also house adult medicine, pediatrics, women’s health, health education, radiology, laboratory and pharmacy services.
The building is scheduled to open in late 2011.
Elk Grove Mayor Sophia Scherman, Vice Mayor Steve Detrick, city council member Pat Hume, Dr. Richard Isaacs, M.D., and Dr. Lisa Liu, M.D., broke ground where the new facility will be built.
“Your presence in Elk Grove means more quality health and wellness for our residents,” Scherman said in a speech before they broke ground.
Dr. Isaacs and Dr. Liu also addressed the crowd.
Liu said the building will be “thoughtfully designed” with soothing colors, local artwork and a coffee bistro inside.
“We’re committed to making our facility a one-stop shop,” she said.
The new office will have a Healthy Living store where members can buy health and wellness equipment.
“We’ve been looking forward to this for quite some time,” Isaacs said. “Driving through the community, we’re aware of the economic impact in this area.”
Liu echoed that statement in her speech, saying, “I’m sure it won’t be long until this facility is surrounded by retail stores and restaurants.”
The building will be adjacent to the vacant Elk Grove Promenade Mall site where construction halted due to developer General Growth Properties undergoing bankruptcy.
