Dynamic Competition in Digital Transformation and Disruption · • In 1977, deal with Schwinn to...
Transcript of Dynamic Competition in Digital Transformation and Disruption · • In 1977, deal with Schwinn to...
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Dynamic Competition in Digital
Transformation and Disruption
January 2020
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• Platforms vs. Pipelines
• Network Effects
• Economics of Digital
• Competitive Advantage: Digital vs. Traditional
• 6 Digital Superpowers
and / or
• Regular Digital Business and Dynamic Competition
Main Ideas
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• Three Simple Digital Rules (Part 1)
• Case: Mobike vs. Ofo vs. Giant
• Three Digital Rules (Part 2)
• There Is No New Chinese Sharing Economy: 5 Questions
• Digital Transformation Frameworks Are Everywhere
• Break
• How Platforms Evolve (Sometimes)
• Case: Didi vs. Uber vs. Geely
• Review
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Rule 1: Give Customers EXACTLY What They Want –
Or Someone Else Will
Rule 2: Digitize and Re-Imagine Operations ASAP
Rule 3: Get Ready for Super-Platforms – and for
Industry Boundaries to Move and Fall
3 Simple Rules for Chinese Digital
Transformation
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Jeff Towson photo
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Bike-Sharing Surprised Everyone
• Launched in 2016 by Mobike in Shanghai and Ofo in
Beijing.
• Over 30 competitors quickly jumped into the space.
• The two market leaders put over 12M bikes on the streets.
• It happened very fast. And created an overwhelming
presence.
• Nobody saw it coming.
• It left bike OEMs stunned. And docked bicycles
systems obsolete.
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What Other Physical Product or
Service Has Become This Pervasive
This Quickly?
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What Was the Engine of the Bike-
Sharing Phenomenon?
• It wasn’t a new technology or invention.
• It wasn’t a new fad.
• It wasn’t even a big change in consumer behavior.
• It’s just a bike rental business.
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It Doesn’t Have the Advantages of Big
Retailers or Asset-Heavy Consumer
Services
• No stores. Location doesn’t matter
• No sales staff.
• No marketing spend, at all.
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Is This a Software Company?
• It isn’t sharing, ride-sharing or the sharing economy.
• No network effect
• No big R&D
• No viral marketing
• No data network effect, personalization or other data /
usage benefits
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It Was About Convenience and
“Purification of Demand”
• Software and digital tools can give consumers exactly what
they want, when they want, where they want & how they want.
• Steve Jobs did this. So did Netflix.
• It can change the equation between ownership and access
businesses in particular.
• And demand-side scale is critical in the age of abundance.
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Bike-Sharing Disrupted with
Increased Convenience
• Chinese bike-sharing offered convenience and a low price. It
gave consumers what they never knew they always wanted.
• And unleashed a sea of latent demand for bike-riding.
• Faster in China due to enthusiasm, mobile payment,
urbanization and price effect.
• This is a common line of attack on both access and ownership
businesses in China right now.
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Rule 1: Give Customers EXACTLY
What They Want – Or Someone Else
Will.
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Other Examples of This Approach?
- Media / Entertainment
- E-commerce
- Communications
- Healthcare
- Finance
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• This especially applies to retail and e-commerce
• Customer has to go and get the product or service.
• A time lag between when you buy and receive.
• User experience doesn’t match global best practice.
Companies Not Giving Customers Exactly
What They Want Are At Risk
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• Also if:
• One group of customers subsidizing another.
• Must buy whole thing and not just parts you want.
• Physical products without connectivity – or with high
gross margins?
• Anything that can be embedded with social media.
Companies Not Giving Customers Exactly
What They Want Are At Risk
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• The smart bikes are independent assets that have the
ability to market, sell and deliver the service
themselves.
• As they are mostly independent assets, they can be
released in great numbers.
• Releasing independent “assets into the wild” is a really
unusual approach.
They Also a Re-Imagined Business
Model Based on “Independent Assets”
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Photo by Jeff
Which Company Is Paying for
Advertising in this Picture?
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• Marketing and advertising
• Retail operations – real estate, shelf-space
• Sales staff
• Manufacturing
***
• What capabilities (tech, people, processes) do these
companies have that traditional bike-rental and
manufacturing companies lack?
What Ops Were Digitized or De-
Materialized?
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Rule 2: Digitize and Re-Imagine
Operations ASAP
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• This especially applies to retail and e-commerce
• Integration of physical retail sites
• Cross-border capabilities
• Data-driven, seamless consumer experience (online,
offline, big data, AI)
Companies Not Digitizing and Re-
Imagining Are At Risk
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Can You Think Of Another Physical
Product or Service That Has Become
This Pervasive This Quickly?
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Question: Is Bike-Sharing
Sharing?
Is It a Platform?
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27www.jeffreytowson.com
• Three Simple Digital Rules (Part 1)
• Case: Mobike vs. Ofo vs. Giant
• Three Digital Rules (Part 2)
• There Is No New Chinese Sharing Economy
• Digital Transformation Frameworks Are Everywhere
• Break
• How Platforms Evolve (Sometimes)
• Case: Didi vs. Uber vs. Geely
• Review
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Case: Mobike vs. Ofo vs. Giant
Bicycles
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• Founded by late 2015 by Hu Weiwei, Davis Wang, Xia
Yiping
• Hu studied at the Department of Journalism of the
Zhejiang University (2000–2004) and graduated with a
bachelor of communication.
• Hu worked for the Daily Economic News (每经网), a
Chinese business newspaper, mainly covering tech
news on cars. She then worked for The Beijing News
and for Business Value in technology news.
• In 2014 Hu founded the media platform GeekCar.
• Hu assembled a team in late 2015 to start a bicycle-
sharing company and launched company in January
2016.
• Co-founder Wang Xiaofeng, the general manager for
the Shanghai office of Uber also known by his English
name Davis Wang, became Mobike's CEO.
Group 1: Mobike
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• Launched in Shanghai. Focused on last mile problem. Too far too walk and
too close for taxi.
• Built to be on the streets for 3 years. Anti-rust aluminum. Reinforced kick-
stand. Shaft instead of chain. Airless tires.
• Originally required deposit and then 1rmb per ride. Discontinued deposit
(ouch for ofo). Only mobile payment. Scoring system based on usage and
behavior.
• Invested by Tencent.
• Now the largest bike-sharing company. +200 cities in 19 countries.
• International expansions included SE Asia, Latin America, Europe.
Mostly in 2017.
Group 1: Mobike
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• Founded by 2015 by Dai Wei and 4 other members of the Peking University
cycling club focused on bicycle tourism. Became bicycle sharing. Launched in
June 2015 in Beijing, gaining 20,000 users and 2,000 bicycles by October
with investment funding from a Peking University alumnus.
• In 2016, raised $130 million in funding, including Xiaomi and Didi Chuxing. A
Series D funding round in February 2017, led by Didi Chuxing and Russian
investor Digital Sky Technologies, raised $450 million for ofo and valued the
company at $1 billion
• In 2017, it had deployed over 10 million bicycles in 250 cities and 20
countries. The company was valued at up to $2 billion and has over 62.7
million monthly active users.
• In July 2017, ofo announced $700 million of additional funding in a round led
by Alibaba, Hony Capital and Citic PE.
• 2018 massive decrease in operations. Lawsuits by suppliers for non-payment.
Didi buys Bluegogo and has own bikes. Meituan buys Mobike.
Group 2: Ofo
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• Established in 1972 in Taiwan by King Liu and friends.
• In 1977, deal with Schwinn to manufacture bikes as an OEM, sold
exclusively under other brand names.
• In 1980, bike sales increased in the U.S. and workers at the Schwinn plant
in Chicago go on strike. Giant became a key supplier, making more than
two-thirds of Schwinn bikes by the mid-1980s, representing 75% of Giant’s
sales.
• In 1987, Schwinn signed a contract with the China Bicycle Company to
produce bikes in Shenzhen. Giant, under new president Bill Austin
(formerly vice-president marketing at Schwinn), established its own brand
of bicycles to compete in the rapidly expanding $200-and-above price
range.
• By 2018, Giant had sales in over 50 countries, in more than 12,000 retail
stores. Total annual sales in 2017 reached 6.6 million bicycles with
revenue of US$1.9 billion.
Group 3: Giant Bicycles
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• Rule 1: Give consumers what they want.
• Revenue and pricing plan? Can you purify demand?
• Rule 2: Digitize and reimagine operations.
• How digitize customers?
• What operations would focus on first?
• What are your competitive strengths / differentiation?
• Do you have any digital superpowers? Does your competitor?
Question: What Do You Do?
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34www.jeffreytowson.com
• Three Simple Digital Rules (Part 1)
• Case: Mobike vs. Ofo vs. Giant
• Three Digital Rules (Part 2)
• There Is No New Chinese Sharing Economy: 5 Questions
• Digital Transformation Frameworks Are Everywhere
• Break
• How Platforms Evolve (Sometimes)
• Case: Didi vs. Uber vs. Geely
• Review
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Is Renting Bikes vs. Electric Scooters
That Different for Consumers?
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How About Renting Electric Karts or
Cars?
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Shenzhen Subway -
2003
37
Taking The Metro?
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Shenzhen Subway - 2017
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• Bike-sharing combined online and physical assets into one
seamless consumer service for mobility.
• The same is happening in car rentals, car sales/leases,
ride-sharing, self-driving cars and other type of mobility.
• Didi Chuxing has just entered bike-sharing.
• Mobike has been bought by Meituan-Dianping.
• Ctrip and others have entered ride-sharing.
Bicycle Rentals Are Quickly Becoming
Part of a Mobility Super-Platform
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• Software, data and digital tools are changing the frictional
costs and asset structures that have created boundaries
between industries.
• Tech companies Apple, Google and Baidu are starting to
make self-driving cars.
• Didi Chuxing is working with automakers to develop ride-
sharing cars.
• Alibaba is pioneering car test drive and sale vending
machines. And is putting Tmall voice into cars.
• Bike manufacturers never saw these competitors coming.
Industry Boundaries Are Moving and
Falling
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Chart by McKinsey & Co
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Workflow and Needs on the
Enterprise Side Will Likely
Determine Eventual Industry
Boundaries
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• This especially applies to retail and e-commerce
• Combination of consumer products and services
(O2O, financial services, healthcare?)
• Combination of consumer products and
entertainment (i.e., Alibaba)
• Combination of e-commerce and social media
(Tencent, Pinduoduo, etc.)
Companies Not Crossing Industries Are At
Risk
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Rule 3: Get Ready for Super-Platforms
– And for Industry Boundaries to Move
and Fall
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• Rule 1: Give consumers what they want.
• Revenue and pricing plan? Can you purify demand?
• Rule 2: Digitize and reimagine operations.
• How digitize customers?
• What operations would focus on first?
• What are your competitive strengths / differentiation?
• Do you have any digital superpowers? Does your competitor?
Do Super-Apps Change Your Answers?
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• Initially:
• Digital disruption based on increased convenience and low prices.
• Plus subsidized prices in short-term (price effect).
• Scalable, very creative operations. Big deployment which increased
convenience of larger player (a money war + independent assets models).
• First mover – and against unsuspecting incumbents.
• Over time:
• Increase switching costs? Increasing consumer habit? Mostly with mobile
app / software.
• Economics likely viable. But too small an animal. Join a platform.
My Explanation for Bike-Sharing
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It’s A Lot About Who Has the
Customers, Participation and Data.
Simple Services Are Pretty Easy to
Add to That.
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Rule 1: Give Customers EXACTLY What They
Want – Or Someone Else Will
Rule 2: Digitize and Re-Imagine Operations
ASAP
Rule 3: Get Ready for Super-Platforms – and for
Industry Boundaries to Move and Fall
3 Simple Rules for Chinese Digital
Transformation
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49www.jeffreytowson.com
• Three Simple Digital Rules (Part 1)
• Case: Mobike vs. Ofo vs. Giant
• Three Digital Rules (Part 2)
• There Is No New Chinese Sharing Economy: 5 Questions
• Digital Transformation Frameworks Are Everywhere
• Break
• How Platforms Evolve (Sometimes)
• Case: Didi vs. Uber vs. Geely
• Review
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52
• Putting a room in your apt on Airbnb is considered “sharing” in the most
traditional sense. It is a peer-to-peer transaction and uses an asset outside of
the traditional hotel market.
• But if you list 5 contracted apartments on Airbnb is that still sharing? It is
pretty similar to a small hotel or rental business.
• Are Spotify and other music or video streaming services sharing? The customers
are not buying the songs. Can you share products that are intangible like digital
media?
• Can you share labor instead of assets? If you contract a designer through a
company like Elance, is that sharing? It’s peer-to-peer.
• The sharing terminology is fuzzy.
• And sharing implies a physical product or asset, when so much of what is going
on in these businesses is with changing the available supply in a market
(including services, data, labor and intangible assets).
Forget the Term “Sharing Economy”
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53
• The question a consumer asks him or herself at the point of purchase
is should I buy this or rent it? Or should I own it or access it?
• The decision between ownership and access is where consumer
behavior and business strategy diverge. Michael Porter (and others)
refer to these new companies as part of the “access economy”.
• If you want to own a bicycle, you consider price; style / look, brand /
reputation, premium vs. economy product; new vs. used, and so on.
What bikes are available at your local retailer (route to market)? What
are my storage requirements, frequency of usage; and so on?
• Bicycle manufacturers are structured to compete on these ownership
factors. So they focus on design capabilities, manufacturing cost and
scale, sales and marketing, securing access to retail space, etc.
Think Access vs. Ownership Businesses
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54
• If you just want to access (i.e., rent) a bicycle for a while, you ask
what is the price per hour? Can I rent by the hour or do I need to take
the whole day? Is there a bike rental store near where I want to go?
Where do I drop it off when I’m done? Do I need a lock and helmet?
What if it breaks down? And so on.
• Consumers and businesses are mostly about price and convenience.
They can also sometimes compete on greater selection (think Spotify, a
type of access business based on large music selection).
• In all these new China sharing businesses, I actually think the right
question is access vs. ownership. And two common success factors are
price and convenience.
Think Access vs. Ownership Businesses
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55McKinsey & Co
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56
• In the past 1-2 years in China, we have seen the arrival of
smartphones, mobile payments, GPS and a very dynamic mobile app
ecosystem.
• And per the previous McKinsey slide, digital disruption can impact
demand, supply or both. And it can be mild or extreme in each of these.
• Much of what we have been seeing is China with companies like Didi,
Ofo, and the micro-rentals is new digital tools being used to disrupt
Chinese access businesses – and mostly via increased
convenience on the demand side. Plus low price.
These Are Mostly Digital Disruptors in
Access and Convenience
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57
Question 1: Is this an ownership or access business?
Question 2: On the demand side, are new digital tools and processes
improving convenience and / or reducing price?
Question 3: On the supply side, are new digital tools and processes
uncovering latent supply and / or making capacity available in smaller
increments?
Question 4: On the supply side, is the business leveraging non-owned
assets? Are these large or small assets?
Question 5: Is there a network effect or other competitive advantage,
such as switching costs or economies of scale?
Five Questions for Mobike, Basketballs,
Airbnb, Umbrellas and Batteries
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58
Question 1: Is this an ownership or access business?
• Most are access businesses. They all offer an alternative to ownership –
and they are directly competing against existing access businesses.
• These businesses also often impact ownership businesses. Will fewer
people buy apartments because they can now stay in Tujia and Airbnb?
Probably not. Will Chinese buy fewer cars because of Didi? Possibly. Will
Mobike have a major impact on bicycle ownership? Definitely.
• Short-term rentals of umbrellas, batteries and basketballs, don’t even have
existing competitors in the access economy. These are only competing with
ownership of these products.
These new access businesses are changing consumer behavior with
regard to some of these products.
Five Questions
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59
Question 2: On the demand side, are new digital tools and processes
improving convenience and / or reducing price?
• On the demand side, digital disruptors “make it easy and make it now” (Jay
Scanlan, McKinsey). They unbundle. They remove the need to wait. They
remove the need to go to a store. They let you buy in smaller increments. These
are usually forms of increased convenience.
• They can also decrease price, which is discussed below.
• Convenience is where Mobike and Ofo have changed things dramatically and
permanently. People have discovered they really don’t want to store a bike in
their apartment. They don’t want to have to lock it up around town when they use
it. They don’t want to have to take it home later. Just try selling a traditional bike
rental contract in Beijing now. Their model also requires them to blanket cities
with bicycles (i.e., make it convenient).
Five Questions (cont.)
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60
• But taking a Didi or Uber vehicle is not usually cheaper than taking a taxi. In fact,
when Didi and Kuaidi first launched they offered taxi hailing, which was a pure
convenience offering.
• Similarly, Tujia and Airbnb are not actually cheaper in China as there are lots of
low cost hotels. Airbnb in San Francisco and Paris is a lot about being cheaper
than local hotels.
Five Questions (cont.)
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61
Question 3: On the supply side, are new digital tools and processes uncovering latent supply and /
or making capacity available in smaller increments?
• On the supply-side, digitization can make accessible supply that was previously impossible or
uneconomic to provide.
• For example, Airbnb brought tons of apartments into the market that were too difficult and expensive to
contract individually. Similarly, Amazon Web Services has made huge new storage capacity available to
anyone who has any part of their business digitized (i.e., no more need to buy your own servers). The
big red flag on the supply side is any time you see an asset that is only partially used, such as idle cars,
empty bedrooms, half-full servers, and empty parking spaces.
• The supply side is where we see the big difference between Mobike / Ofo and Didi / Uber. Didi is
seriously disrupting both demand and supply. It is bringing private cars (i.e., underused assets) into
the market in ride sharing (not in taxi hailing). And it is disrupting the demand side, as mentioned above,
via increased convenience. Plus it is then making a new market between these supply and demand
changes.
• Mobike, Ofo and most of the micro-rentals (basketballs, batteries, etc.) are not bringing unused supply
into the market. They are buying new bicycles themselves and making them available in smaller
increments. They do this by focusing on smaller assets (you could never buy 10,000 cars and put them
around Shanghai) and then using GPS, smartphones, smart locks and kiosks.
Five Questions (cont.)
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62
Question 4: On the supply side, is the business leveraging non-owned
assets? Are these large or small assets?
• Does the company have to own the assets or can it just leverage them from
others? Not having to own the assets is one of the reasons the asset-light
economics of Uber, Airbnb and Didi are so powerful.
• Mobike and the micro-rental businesses get around this problem to some
degree by focusing on small, fairly inexpensive assets. They can actually scale
up pretty fast but placing bicycles, maintenance and theft are problems.
Five Questions (cont.)
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63
Question 5: Is there a network effect or other competitive advantage, such as
switching costs or economies of scale?
• The competitive advantage most software companies and other platform-type
businesses are usually going for a network effect. Most of the most ridiculously
profitable companies have this (Tencent, Alibaba, Alipay, Airbnb outside of China,
Uber, Microsoft, Google, Facebook, Match.com, Expedia (in hotels, not airlines) and
others).
• Didi is mostly a two-sided network which means it has to have both drivers and rider
populations. Capturing both groups is very hard for a new entrant against an
entrenched player like Didi. Plus the larger the captured populations, the superior the
service (to a point).
• Mobike, ofo and the new micro-rental businesses lack this. They are not multi-sided
platforms and they do not have network effects. They are traditional rental
businesses that have become much more convenient by virtue of new digital
tools. So they are very disruptive to existing businesses (both ownership and access
types), but they, as of yet, don’t have a clear competitive advantage.
Five Questions (cont.)
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64
Forget the sharing economy.
What we are seeing is digital
disruption in the access economy –
mostly by increased convenience.
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65www.jeffreytowson.com
• Three Simple Digital Rules (Part 1)
• Case: Mobike vs. Ofo vs. Giant
• Three Digital Rules (Part 2)
• There Is No New Chinese Sharing Economy: 5 Questions
• Digital Transformation Frameworks Are Everywhere
• Break
• How Platforms Evolve (Sometimes)
• Case: Didi vs. Uber vs. Geely
• Review
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Rule 1: Give Customers EXACTLY What They
Want – Or Someone Else Will
Rule 2: Digitize and Re-Imagine Operations
ASAP
Rule 3: Get Ready for Super-Platforms – and for
Industry Boundaries to Move and Fall
3 Rules for Chinese Digital
Transformation
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• Platforms vs. Pipelines
• Network Effects
• Economics of Digital
• Competitive Advantage: Digital vs. Traditional
• 6 Digital Superpowers
and / or
• Regular Digital Business and Dynamic Competition
Main Ideas
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My Opinion
80
• Absent a competitive advantage, business is usually an endless
marathon in operational scale, effectiveness and efficiency.
• Digital is destroying some traditional competitive advantages and
creating some new ones.
• This operational marathon is being combined and sometimes replaced
with marathons in:
• Rate of learning
• Innovation (tied to rate of learning)
• Ecosystem shaping and management
• The best players are fast in their marathons but also have strong
competitive advantages that give them structural advantages in these
races.
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New Competitive Dimensions (BCG)
81
Classical models of competition were based on:
- Competition advantages in pipe businesses in well-defined industries.
- Ongoing competition based on operational scale and efficiency in pipe business in well
defined industries.
- Lots of analysis, planning and execution.
- Coasean transaction costs led to concentrating of assets in vertically integrated firms.
This approach is having more and more problems.
- Does not really address platforms. Definitely not digital platforms. Nor the ability to
shape ecosystems. Michael Porter left out complements.
- Does not address decreasing transaction costs that weaken Coasean logic.
- Does not address the innovation aspects of both pipes and platforms.
- Does not address the increasing speed and dynamic nature of business. The need to
be adaptable.
- And ignores the world has a lot more economic, technological and political uncertainty.
- Overall, there are shorter product lifecycles and changing business models.
Competition success has become less permanent.
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New Competitive Dimensions (BCG)
82
In many businesses, you now need to have the ability to:
Compete in ecosystems.
• You can be a platform. You can do viral and other network-centric strategies.
• Pure digital platforms grow the fastest. Tangible aspects can slow this. But can also protect.
• Transaction costs are dropping and disrupting industry barriers.
• The distinction between the firm and ecosystem is blurring.
• You can sometimes shape the ecosystem. Can influence development of the market in your favor.
This requires working with other ecosystem stakeholders.
• What is your role? Not everyone can be the orchestrator.
• Cooperation vs. competition.
• Strategy based on external orientation, common platforms, co-evolution, indirect monetization,
emergence
• You may need to create value for the ecosystem broadly, not just yourself.
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Competing on Rate of Learning (BCG)
83
This is a good adaptation to increasing uncertainty. It also helps with rapid product
innovation and market changes.
• Learning Type 1: BCG’s Bruce Henderson showed marginal production costs
decrease with accumulated experience. Learning to improve a static process (for a few
products). This is traditional learning.
• Example: the Model T cost fell about 25% for every doubling of cumulative
production (due to cumulative experience).
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Competitive on Rate of Learning (BCG)
84
Type 2: Dynamic learning.
• You learn to create new products or the next generation of products all the time.
Jump to the new curve before old one has played out. This has always existed.
Now it is just faster. Netflix jumping from DVD to streaming.
• You need to do both type 1 and 2 of learning.
• This naturally ties to data-driven innovation. See TMIC.
Type 3: Sensors, AI and real-time reactions.
• Learn at the speed of algorithms. Time scale is really compressed.
• Need to adopt digital tools related to learning: AI, data, sensors, ecosystem /
collaborations, and automated decision-making.
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Competing on Rate of Learning (BCG)
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Competitive on Rate of Learning (BCG)
86www.jeffreytowson.com
• Autonomous Learning Loop:
• How does learning relate to making decisions? Automated execution? Changing
pricing instantly.
• Traditional hierarchies make decisions slowly.
• Virtuous cycle: get data, learn, decide, sell more, get more data. Hands off the
wheel at Amazon. Self-tuning at pace humans cannot do.
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Human + Machine Learning?
87
• Humans need to think faster (dynamic learning, algorithmic) but also longer-term.
• Don’t just get to top of local peak with fine-tuning / data. Also may need intuition to
move to new location. See the long-term threats coming. They can be social,
regulatory, consumer.
• Humans: set the end points and goals. Create the guardrails for the machine. Use
imagination to create new products, create the human-machine platform.
• Humans focus on discovery and adaptation more than forecasting, planning and
execution. Good for dynamic & uncertain times.
• Data can do correlation. Cannot do imagination and most causal inference.
• Need integrated learning architecture. Learn at the rate of data, not organizational
hierarchy. Increasingly automated learning and decision-making.
• Imagine and harness new ideas rapidly.
• Old learning advantage was from more volume. Now from more data.
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Human + Machine Learning (BCG)
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89www.jeffreytowson.com
• Three Simple Digital Rules (Part 1)
• Case: Mobike vs. Ofo vs. Giant
• Three Digital Rules (Part 2)
• There Is No New Chinese Sharing Economy: 5 Questions
• Digital Transformation Frameworks Are Everywhere
• Break
• How Platforms Evolve (Sometimes)
• Case: Didi vs. Uber vs. Geely
• Review
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• Level 1: Digital is overwhelmingly granular.
• There are lots of new digital and data technologies being developed
and these can be used in lots of ways within businesses.
• The best approach to digital strategy is to just look at the use cases.
McKinsey has good reports that take this bottoms-up approach.
• Normal dynamic competition.
• Level 2: Bubbling up out of all these use cases are at least 6 digital
superpowers that can happen that really change a company.
• Level 3: At an even higher level, we can see platforms evolve in certain
patterns. Becoming conglomerates and other powerful structures.
• So you want to look at all of this at at least 3 levels.
Digital Transformation Happens At At 3
Least Levels
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6 Digital Superpowers
91
1. Dramatically improved user experience and journey. You need sufficient delta of
improvement (vs. pain of adoption)
2. Creates a platform (and gets complements or soft MSP advantages). Including without
NE.
3. Captures network effects, including data network effect. Including 1-sided without MSP.
4. Captures other competitive advantages - including switching costs and digitally-
enhanced share of consumer mind (habits, behavior, etc.).
5. Viral or other powerful customer acquisition and/or retention mechanism.
6. Scalable. Especially if gets massive demand-side scale. Global scale is best.
• Also awesome is recurring revenue, freemium and pre-pay if you can get it. Slack has this and all of above.
• B2B criticality is also great (Microsoft has)
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Online Retailer
or Marketplace
92www.jeffreytowson.com
Consumers
Demand-Side
Scale (early)
Phase 1: Build Basic Demand-Side Scale Around
1-2 Core Interactions.
• Users
• Participation
• Data
Network Effects:• Primary Interactions
Merchants / Brands
/ Online Retailers
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Platforms Are Made of Components
93
• User groups
• Key interactions – is the business. Between user groups.
• Think about quality and quantity of these interactions.
• Can be multiple types.
• LinkedIn was professionals connecting with professionals, then job-
seekers and recruiters. Now readers and influencers.
• Network effects and demand economies of scale.
• They run the business for you.
• Can be network effects and data network effects.
• Machine learning -> winners get data -> better at machine learning
• Other competitive advantages.
• Revenue advantages. Such as switching costs and share of the consumer
mind.
• Cost advantages
• Government advantages
• Soft MSP advantages. Such as subsidies, proprietary data, non-NE feedback loops
and linked business models.
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Online Retailer
or Marketplace
94www.jeffreytowson.com
Consumers
Demand-Side
Scale (early)
Phase 1: Build Basic Demand-Side Scale Around
1-2 Core Interactions.
• Users
• Participation
• Data
Network Effects:• Primary Interactions
Merchants / Brands
/ Online Retailers
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Online Retailer
or Marketplace
95www.jeffreytowson.com
Consumers
Data NE
Demand-Side
Scale (Middle)
Phase 2a: Keep Adding Demand-Side Scale.
Add Other Advantages.
• Users
• Participation
• Data
• Share of consumer mind
• Switching costs
• Limited options
• Subsidized pricing. Free?
Chicken-and-egg? Data?
• Search costs
• Switching costs
• Limited options
• Subsidized pricing. Free?
Chicken-and-egg? Data?Network Effects:• Primary Interactions
Merchants / Brands
/ Online Retailers
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Online Retailer
or Marketplace
96www.jeffreytowson.com
Consumers
Data NE
Demand-Side
Scale (Later)
Phase 2b: Keep Building Demand-Side
Scale. Add New Users and Use Cases.
Merchants / Brands /
Online Retailers
• Users
• Participation
• Data
Additional User
Groups• App Developers
• Content
Creators
• Advertisers
Network Effects:• Primary
Interactions
• Additional
interactions
• Share of consumer mind
• Switching costs
• Limited options
• Subsidized pricing. Free?
Chicken-and-egg? Data?
• Search costs
• Switching costs
• Limited options
• Subsidized pricing. Free?
Chicken-and-egg? Data?
• Search costs
• Switching costs
• Limited options
• Subsidized pricing. Free?
Chicken-and-egg? Data?
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Online Retailer
or Marketplace
97www.jeffreytowson.com
Consumers
Merchants / Brands /
Online Retailers
• Users
• Participation
• Data
Demand-Side
Scale
Phase 3a: Build Supply-Side Scale
Supply-Side
Scale (initial)
• Marketing
• R&D
IT / Web
Services
Logistics and
Delivery(?)• Economies of scale
• Production cost advantages
(IP/Tech, location/transport)
• Government advantages
(patents, licenses, other)
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Open to MarketOpen to Market
Online Retailer
or Marketplace
98www.jeffreytowson.com
Consumers
Merchants / Brands
/ Online Retailers
• Users
• Participation
• Data
Demand-Side
Scale
Phase 3b: Keep Building Supply-Side Scale.
Digitize Capabilities and Invert.
Supply-Side
Scale (later)
• Marketing
• R&D
IT / Web
Services
Logistics and
Delivery(?)• Economies of scale
• Production cost advantages
(IP/Tech, location/transport)
• Government advantages
(patents, licenses, other)
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Open to MarketOpen to Market
Online Retailer
or Marketplace
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Consumers
Merchants / Brands /
Online Retailers
• Users
• Participation
• Data
Demand-Side
Scale
Supply-Side
Scale (later)
• Marketing
• R&D
IT / Web
Services
Logistics and
Delivery(?)
Phase 4a: Exploit and Innovate Rapidly (Musk Strategy).
Additional
User Groups• App
Developers
• Content
Creators
• Advertisers• Identify and exploit new
services, products and use
cases.
• Horizontal attacks
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Open to MarketOpen to Market
Online Retailer
or Marketplace
100www.jeffreytowson.com
Consumers
Merchants / Brands /
Online Retailers
• Users
• Participation
• Data
Demand-Side
Scale
Supply-Side
Scale (later)
• Marketing
• R&D
IT / Web
Services
Logistics and
Delivery(?)
• Identify and exploit new
services, products and use
cases.
• Horizontal attacks
• New platforms
• Linked businesses
Additional
User Groups• App
Developers
• Content
Creators
• Advertisers
Complementary
Platforms
Phase 4b: Add Platforms and Linked Biz
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Open to MarketOpen to Market
101www.jeffreytowson.com
Consumers
Merchants / Brands /
Online Retailers
• Users
• Participation
• Data
Demand-Side
Scale
Supply-Side
Scale (later)
• Marketing
• R&D
IT / Web
Services
Logistics and
Delivery
• Identify and exploit new
products, services, business
models and use cases.
• Horizontal attacks
Additional
User Groups• App
Developers
• Content
Creators
• Advertisers
Phase 5: New Retail
Physical
Retailers
Online Retailer
or Marketplace
Physical Retail
• Search costs
• Switching costs
• Limited options
• Subsidized pricing. Free?
Chicken-and-egg? Data?
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When In Doubt, Check Who Has the
Most Users, Participation and Data on
the Demand-Side?
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Marketplace –
Taxi Hailing &
Ride-Sharing
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Chinese Consumers
/ Riders
Drivers and Taxis
Users
Participation
Data
Demand Side
Scale
Example Didi: Phase 1
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Marketplace –
Taxi Hailing &
Ride-Sharing
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Chinese Consumers
/ Riders
Drivers and Taxis
Users
Participation
Data
Demand Side
Scale
Supply Side
Scale
• Marketing
• Tech / Big
Data / AI
Didi Alliance
Open Services
to Market?
Example Didi: Phase 2-3
Driver Services
(Xiaoju)
Open Services
to Market
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Marketplace –
Taxi Hailing &
Ride-Sharing
106www.jeffreytowson.com
Chinese Consumers
Drivers and Taxis
Users
Participation
Data
Data NE?
Demand Side
Scale
• Identify and exploit
new services
• Horizontal attacks
Supply Side
Scale
Complementary
Platforms
Example Didi: Phase 4?
• Driver services /
Xiaoju
• Bike-sharing?
• Marketing
• Tech / Big
Data / AI
Didi Alliance
Open Services
to Market
• Autonomous vehicles?
• Integration with smart
cities?
• Additional local services?
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• Services underway
• Online bookings and payments
• Information and communication
• OTC products and delivery
• Services emerging
• Online consultation for basic care.
• Online pharmacy and delivery?
• Game changer services
• Insurance / PBMs?
• More complicated care online.
• Government portal?
Ping An Good Doctor
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108www.jeffreytowson.com
Consumers
Merchants / Brands
Users
Participation
Data
Data NE
Demand Side
Scale
• Content
Creators
• Advertisers
PingAn Good Doctor: Phase 1
• Hospitals /
Clinics
Marketplace,
Consultations,
Coordination,
Innovation
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Marketplace,
Consultations,
Coordination,
Innovation
109www.jeffreytowson.com
Consumers
Merchants / Brands
Users
Participation
Data
Data NE
Demand Side
Scale
Supply Side
Scale
• Marketing
• R&D
AI + Team
Online
Consultations
• Content
Creators
• Advertisers
PingAn Good Doctor: Phase 2
• Hospitals /
Clinics
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• Launched in 2013 as money market fund. Easy to transfer, good
online services, no minimal amounts.
• Over 80M people signed up in about a year.
• Today, over $165B in assets.
• Expanding into financial services, global payment network,
insurance products, private banking, etc. Very unclear what this is
going to be.
• Tencent Wallet has taken about 40% of the payment business,
mostly from Alipay.
• In 2018, closed a private fund round at $150B
Alibaba Yu’E Bao
110
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111www.jeffreytowson.com
• Three Simple Digital Rules (Part 1)
• Case: Mobike vs. Ofo vs. Giant
• Three Digital Rules (Part 2)
• There Is No New Chinese Sharing Economy: 5 Questions
• Digital Transformation Frameworks Are Everywhere
• Break
• How Platforms Evolve (Sometimes)
• Case: Didi vs. Uber vs. Geely
• Review
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Case: Didi vs. Uber vs. Geely
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113
• Didi Dache, founded 2012 by Cheng Wei (previously 8 years at Alibaba). Cabs
were difficult to catch, particularly during rush hour. Began initially with taxi-
hailing.
• Backed by Tencent in 2012. Competitor Kuadi Dache backed by Alibaba.
• In 2014, Jean Liu (Liu Qing), a former Goldman Sachs Asia managing director
and daughter of Lenovo founder, joined the company as its COO. She became
president of the company the following year.
• A price war (subsidies for drivers) with Kuaidi led to a merger in 2015. Didi had
55% of market and Kuadi had 45% of market.
• By September 2015, the company had a market share in private cars of 80%
and in taxis of 99%.
• In 2015, Didi Kuaidi invested in Grabtaxi, a taxi-hailing app in Southeast Asia.
Group 1: Didi Chuxing
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114
• Today, Didi is the world's leading and most valuable(?) ride-sharing service. 550
million users in 400 cities.
• Employees 10,000(?)
• Didi Taxi: about 2 million drivers operating in +400 cities in China and Brazil;
partnered with 500 taxi companies to upgrade services.
• Didi Express: operating in +400 cities with an ExpressPool option. Didi
ExpressPool carries over 2.4 million daily rides.
• Didi Premier: upgraded brand in 2018, accompanied by a new logo and a full
suite of product and service upgrades.
• Didi Hitch: A ride-sharing service. During 2018 Chinese New Year holiday,
DiDi's Inter-City Hitch provided nearly 30.67 million passenger trips.
• Enterprise Solution: about 170,000 corporate clients.
Group 1: Didi Chuxing (continued)
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115
• Didi Bus: Launched initially in Beijing and Shenzhen as a WeChat-based trial in
2015. In Beijing, Didi took over Kaola Bus (考拉班车) fleet and operation in
September 2015. By the time of Didi Bus's official launch in October 2015, Didi
Bus was providing 1,500 daily rides and transporting approximately 500,000
daily commuters.
• Didi Minibus: DiDi started to offer minibus rides in December 2016, aiming to
provide “last three-kilometer” connection to and between public transport hubs.
• Didi Select: over 1 million rides a day.
• Bike-sharing: DiDi has added bike-sharing service from ofo to its app since
April 2017. On 17 January 2018, DiDi launched its own bike-sharing platform,
which integrates Ofo, Bluegogo, and Didi-branded bikes.
Group 1: Didi Chuxing (continued)
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116
• Entered China in late 2014. Led to two years of fierce competition with lots of
subsidies. Uber invested approx. $2B.
• Early 2015:
• Didi and Kuadi merged. After a long price war.
• People’s Uber launched. Ride-sharing (technically illegal) and not taxi-
hailing. Helped Uber grab a chunk of market share from Didi.
• Co-Founder Travis Kalanick frequently traveled to China.
• Uber China staff of approximately 500 (Didi approx. 4,000). Run by Travis
from San Francisco without China head. Although Jean Liu cousin, Zhen Liu,
was a vice president and spokeswoman for Uber China.
• Summer 2016, Uber sells to Didi. Receives 20% and $1B equity investment.
Group 2: Uber China
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117
• Founded in1986 as a refrigerator maker with money borrowed from family.
• Manufactured motorcycles in the mid-1990s. Small van production began in 1998,
and a year later, it received state approval to manufacture automobiles. Car
production began in 2002. IPO in Hong Kong in 2004.
• Bought Swedish Volvo in 2010 from Ford. Acquired British taxi maker The London
Electric Vehicle Company in 2013. Acquired a majority stake in British sports
carmaker Lotus Cars in 2017.
• Purchased a 9.7% stake in Daimler-Benz, parent of Mercedes-Benz.
• In 2010, sold 415,286 units from its 680,000 units/year production capacity. Giving
Geely a 3% market share.
• In 2014, it had a reported 900 retail outlets.
• Sells passenger cars under five marques currently: Geely, Lynk & Co, Volvo, through
its Swedish subsidiary, Volvo Cars, Lotus and Proton.
Group 3: Geely
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118
• Rule 1: Give consumers what they want.
• Revenue and pricing plan? Can you purify demand?
• Rule 2: Digitize and reimagine operations.
• How digitize customers?
• What operations would focus on first?
• What are your competitive strengths / differentiation?
• Do you have any digital superpowers? Does your competitor?
Question: What Do You Do?
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119www.jeffreytowson.com
• One week after merging with Uber China, Didi and Softbank invest more in
Grab Taxi in SE Asia. At that time, SE Asia was mixed market with Grab,
Uber and Go-Jek.
• Didi does large fund raises. Amasses +$10B in cash.
• Builds the anti-Uber alliances with Ola in India, 99 in Brazil, Lyft in USA,
Grab in SE Asia and Taxify in Eastern Europe.
• Uber has internal management problems. Focused on IPO. Retreats
internationally.
Dominant in China, Didi Goes Global
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120www.jeffreytowson.com
• Significant money into big data and AI.
• Assembles 31? Automakers in Didi Alliance. Focused on building
ride-sharing vehicles. Discussion of EV and autonomous vehicles.
• Launches Didi driver solutions. Offering suite of financing,
maintenance and other services to +30M drivers.
• Begins to integrate with local cities. Data sharing. Smart city
initiatives like street lights, lane changing, driver notifications.
• Begins assembling super mobility app that covers ride-sharing,
taxi-hailing, metro, car pooling, bicycles, etc.
Didi Deepens Mobility Services
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121
• Didi Chuxing with Chinese traffic management authorities has launched “Didi
Smart Transportation Brain.”
• Integrating Didi’s traffic data and data resources from local government and
business partners.
• Real-time data leveraging cloud computing and AI-based technologies
provide cities with transportation infrastructure improvements, including traffic
flow measurements, “Smart Traffic Signals,” reversible lanes, and traffic
management programs for maintenance scheduling and system
assessments.
• Adopted by +20 Chinese cities and guided by Discover, Decide and Deploy.
• In Jinan, Smart Traffic Signals have been installed at 344 road intersections.
Average traffic delays have been shortened by 10% to 20%.
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Didi’s Smart Transportation Brain
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122www.jeffreytowson.com
• Three Simple Digital Rules (Part 1)
• Case: Mobike vs. Ofo vs. Giant
• Three Digital Rules (Part 2)
• There Is No New Chinese Sharing Economy: 5 Questions
• Digital Transformation Frameworks Are Everywhere
• Break
• How Platforms Evolve (Sometimes)
• Case: Didi vs. Uber vs. Geely
• Review
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• Platforms vs. Pipelines
• Network Effects
• Economics of Digital
• Competitive Advantage: Digital vs. Traditional
• 6 Digital Superpowers
and / or
• Regular Digital Business and Dynamic Competition
Main Ideas
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My Opinion
124
• Absent a competitive advantage, business is usually an endless
marathon in operational scale, effectiveness and efficiency.
• Digital is destroying some traditional competitive advantages and
creating some new ones.
• This operational marathon is being combined and sometimes replaced
with marathons in:
• Rate of learning
• Innovation (tied to rate of learning)
• Ecosystem shaping and management
• The best players are fast in their marathons but also have strong
competitive advantages that give them structural advantages in these
races.
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• Level 1: Digital is overwhelmingly granular.
• There are lots of new digital and data technologies being developed
and these can be used in lots of ways within businesses.
• The best approach to digital strategy is to just look at the use cases.
McKinsey has good reports that take this bottoms-up approach.
• Normal dynamic competition.
• Level 2: Bubbling up out of all these use cases are at least 6 digital
superpowers that can happen that really change a company.
• Level 3: At an even higher level, we can see platforms evolve in certain
patterns. Becoming conglomerates and other powerful structures.
• So you want to look at all of this at at least 3 levels.
Digital Transformation Happens At At 3
Least Levels
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MSPs vs. Pipelines (Platform Revolution)
126
1. One main customer group
2. Asset value increases as it moves down the
pipeline.
3. Through tightly controlled process and
assets (by contracts).
4. Management focuses on increasing the
efficiency and returns on internal assets.
5. Scales by internal actions such as acquiring
more assets or customers. Lot of attention
to supply-side economies of scale. Driven
by management.
6. Owned or contracted assets and products /
services. Centralized ownership, profit and
control.
7. Challenges: Well-known. See any 10k Risk
section.
1. Multiple user groups
2. Value is created by interactions of the user groups on the
platform
3. Provides open architecture and governance (rules for
users, incentives for participation).
4. Management orchestrates the ecosystem and its assets.
You focus on ecosystem assets (not internal assets). You
manage external actions / processes / interactions. If you
don’t own assets then need data to manage this.
5. Scales without effort. Driven by external participants and
their activity.
6. Decentralized assets, products and risks but centralized
ownership, profit and control
7. Challenges:
1. Need to decide the controls point(s) and what to
monetize (Apple lets developers take ecosystem
profits).
2. You want everyone to keep investing in the platform.
3. They can bait and switch by changing rules after
built biz on platform.
4. Backlash to centralized governance growing. May
need distributed governance (blockchain)
5. Some platforms enable you to build (apple,
Microsoft) others are channels and gatekeepers to
customers (Facebook)
Pipelines (VI) Platforms (MSP)
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127www.jeffreytowson.com
1. Marketplaces and Transaction Platforms
2. Coordination and Standardization Platforms
3. Payment Platforms
4. Innovation (and Audience-Builder) Platforms
5. Learning Platforms
• These re not mutually exclusive. Each platform can be a combination of users,
interactions and feedback loops. And you can combine them.
• Payment platforms are probably a type of coordination but pulled it out as
separate.
5 Common Types of Platforms
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128
Attractive But Dangerous Economics of
Information / Digital
• Zero marginal production costs
• Non-rival goods
• Low distribution costs
• Bundling and versioning
• Complements and consumer surplus
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Traditional Competitive Advantages (1 of 2)
129
1. Consumer – captive customers / control over pricing• Share of consumer mind or buying habits
• Switching costs (i.e. training costs)
• Searching costs (i.e. brand names)
2. Producer – proprietary production capability / manufacturing cost advantages• Labor costs
• Proprietary technology
• Lower cost of inputs
• Special resource
• Location or transportation
3. Scale economies – lower average costs at higher volumes• Manufacturing
• R&D
• Marketing
• Distribution / logistics
4. Government• License
• Regulation (antitrust, zoning, environment)
• Patents
• Tariffs and quotaswww.jeffreytowson.com
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Traditional Competitive Advantages (2 of 2)
130
5. Network economics– Demand side economies of scale.• One sided networks – Facebook, WeChat, telephone
• Two sided networks – UnionPay, American Express, Apple App Store
• Combos – Tencent multiplayer gaming is one sided and two sided.
• Data network advantages – insurance pricing, personalization / curation
6. Efficiency of Scale– One dominant company in small market – with high
capital costs and history of attacking new entrants.• Not a strict CA. But strong disincentive to new entrants.
• The only hospital or powerplant in a small town. High capital costs, limited
market and one dominant, entrenched player.
• Usually not (but not always) a competitive advantage:
• Most brands. You can buy a brand with cash. It’s an asset.
• Smarter. This can be copied.
• Expertise. Can be copied over time.
• Lower cost of capital – nope.
• Lower cost of labor – nope. Transitory.
• Most government regulations and tariffs
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Digital Competitive Advantages
131
1. Revenue Advantages
• Share of consumer mind – software excels at hacking behavior. Gamification.
Habit-creating. Dopamine hits. Personalization and curation.
• Switching costs – Rare for consumers. Stronger for platforms, merchants,
content creators, B2B, app developers, etc. Integration of workflow can be
powerful.
2. Production Cost Advantages
• IP / tech cost advantage. Code written over time. Growing with AI and
algorithms.
• Special resource: Data. Partnerships.
3. Economies of Scale – Cost Advantages
• Marketing
• R&D
• Web services / tech – particularly if open to market
• Logistics / delivery – particularly if open to market
• Medical teams? Driver services? Auto alliance?
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Digital Competitive Advantages (cont.)
132
3. Government. Licenses. Access to data / smart cities.
4. Network Effects
• Network effects in main platform.
• Data network effect
• Emerging: AI? Autonomous vehicles?
5. Efficiency of Scale
Other
• MSP soft advantages. Subsidized or free pricing. Chicken-and-egg
• Data soft advantages
• Complementary platforms
• Linked business models: Customers, data, capital
• Combined services and digital conglomerates
• Platform vs. product / pipeline
• Platform vs. platform
• Platform vs. digital conglomerate
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6 Digital Superpowers
133
1. Dramatically improved user experience and journey. You need sufficient delta of
improvement (vs. pain of adoption)
2. Creates a platform (and gets complements or soft MSP advantages). Including without
NE.
3. Captures network effects, including data network effect. Including 1-sided without MSP.
4. Captures other competitive advantages - including switching costs and digitally-
enhanced share of consumer mind (habits, behavior, etc.).
5. Viral or other powerful customer acquisition and/or retention mechanism.
6. Scalable. Especially if gets massive demand-side scale. Global scale is best.
• Also awesome is recurring revenue, freemium and pre-pay if you can get it. Slack has this and all of above.
• B2B criticality is also great (Microsoft has)
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Rule 1: Give Customers EXACTLY What They Want – Or
Someone Else Will
Rule 2: Digitize and Re-Imagine Operations ASAP
Rule 3: Get Ready for Super-Platforms – and for Industry
Boundaries to Move and Fall
3 Simple Rules for Chinese Digital
Transformation
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Online Retailer
or Marketplace
135www.jeffreytowson.com
Consumers
Demand-Side
Scale (early)
Phase 1: Build Basic Demand-Side Scale
Around 1-2 Interactions.
Merchants / Brands
• Users
• Participation
• Data
Network Effects:• Primary Interaction
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Online Retailer
or Marketplace
136www.jeffreytowson.com
Consumers
Data NE
Demand-Side
Scale (Middle)
Phase 2a: Keep Adding Demand-Side
Scale. Add Other Advantages.
Merchants / Brands /
Retailers
• Users
• Participation
• DataOther Revenue-Side Adv
• Share of consumer mind
• Switching costs
MSP Adv
• Subsidized pricing. Free?
Other Revenue-Side Adv
• Search costs
• Switching costs
• Limited options
Network Effects:• Primary Interaction
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Online Retailer
or Marketplace
137www.jeffreytowson.com
Consumers
Data NE
Demand-Side
Scale (Later)
Phase 2b: Keep Building Demand-Side
Scale. Add New Users and Use Cases.
Merchants / Brands /
Retailers
• Users
• Participation
• DataOther Revenue-Side Adv
• Share of consumer mind
• Switching costs
MSP Adv
• Subsidized pricing. Free?
Other Revenue-Side Adv
• Search costs
• Switching costs
• Limited options
Additional User
Groups• App Developers
• Content
Creators
• Advertisers
Network Effects:• Primary
Interaction
• Additional
interactions
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Online Retailer
or Marketplace
138www.jeffreytowson.com
Consumers
Merchants / Brands /
Retailers
• Users
• Participation
• Data
Demand-Side
Scale (initial)
Phase 3a: Build Supply-Side Scale
Supply-Side
Scale (initial)
• Marketing
• R&D
IT / Web
Services
Logistics and
Delivery
• Physical vs. intangible
capabilities?
• In-house vs. partnership?
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Open Services
to Market
Open Services
to Market
Online Retailer
or Marketplace
139www.jeffreytowson.com
Consumers
Merchants / Brands /
Merchants / Brands
• Users
• Participation
• Data
Demand-Side
Scale (later)
Phase 3b: Keep Building Supply-Side
Scale. Digitize Capabilities and Invert.
Supply-Side
Scale (later)
• Marketing
• R&D
IT / Web
Services
Logistics and
Delivery
• Physical vs. intangible capabilities?
• In-house vs. partnership?
• Other cost adv: Economy of scope,
production cost, location & transport,
IP/Tech,
• Other adv: Patents, government regs
and limits
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Online Retailer
or Marketplace
140www.jeffreytowson.com
Consumers
Merchants / Brands
Users
Participation
Data
Data NE
Demand Side
Scale
• Identify and exploit
new services
• Horizontal attacks
Supply Side
Scale
• Marketing
• R&D
Tech / Web
Services
• App
Developers
• Content
Creators
• Advertisers
Logistics and
Delivery
Open Services
to Market
Open Services
to Market
Phase 4a: Exploit and Innovate Rapidly
(Elon Musk Strategy).
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Online Retailer
or Marketplace
141www.jeffreytowson.com
Consumers
Merchants / Brands
Users
Participation
Data
Data NE
Demand Side
Scale
• Identify and exploit
new services
• Horizontal attacks
Supply Side
Scale
• Marketing
• R&D
Tech / Web
Services
• App
Developers
• Content
Creators
• Advertisers
Complementary
Platforms
Logistics and
Delivery
Open Services
to Market
Open Services
to Market
Phase 4b: Add Platforms and Linked Biz
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Online Retailer
or Marketplace
142www.jeffreytowson.com
Consumers
Merchants / Brands
Users
Participation
Data
Data NE
Demand Side
Scale
• Identify and exploit
new services
• Horizontal attacks
Supply Side
Scale
• Marketing
• R&D
Tech / Web
Services
• App
Developers
• Content
Creators
• Advertisers
• Creating new use cases
and business models
• Bringing physical
retailers (and data) onto
platform
• Adding physical assets
to supply side
Complementary
Platforms
Logistics and
Delivery
Open Services
to Market
Open Services
to Market
Phase 5: New Retail
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LinkedIn: Jeffrey Towson
WeChat – a555666777aa
143
My Contact Information
www.jeffreytowson.com
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144
• Mario Gabelli and GAMCO
• Private Market Value and Catalysts
• Break – 15 min
• Pop Quiz
• Seth Klarman and Baupost Group
• Complicated Sits and FEMs (Forced / Emotional /
Mindless Sellers)
• More Baopost Rules and Cases (Optional)
• The Secret to Happiness
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• Sending out resumes
• Calling up friends of friends and asking for work
• Networking around randomly
145
Career Stuff That Doesn’t Work
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• By William Duggan, Author and CBS professor.
• Focus on an idea. Something you care about. Something that
is valuable. Become a serious thinker on this subject. Such as:
• Chinese real estate
• Technology
• Healthcare policy
• Whatever
• Finding good stocks
• Private equity deals
146
I = IDEAS
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• Working on ideas will lead to meeting people who also
care about that subject.
• You will meet people all the time. Conferences. Friends.
Emailing people randomly if you read about them. You can
cold call people about the topic.
• They will want to talk with you. And you can build a
relationship with them.
147
P = PEOPLE
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• Out of this big network of people and ongoing
discussions of the idea, opportunities will follow.
• As you talk and develop ideas, jobs, contracts, and
investments will just fall out all the time.
148
O = OPPORTUNITIES
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149
“It takes very little to provide for
what you need in life. So you have
no excuse for not doing something
you really love.”
- Warren Buffett (approximately)
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150
But what if you don’t really love
anything?
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151
My default strategy: Follow the
best and brightest
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152
“Don’t wait too long to start
enjoying your life”
- CBS Professor
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