This week’s podcast is Production and Consumption Ecosystems as digital business models. This thinking is mostly by Professor Mohan Subramaniam, who wrote the book The Future of Competitive Strategy: Unleashing the Power of Data and Digital Ecosystems.
My 9 digital business models are:
- Linear business models (i.e., pipelines)
- Production Ecosystems
- Consumption Ecosystems
- Company Ecosystems
- Pipeline plus Platform Business Model
- Protocol networks (i.e., blockchains) as stand-alone businesses
- Platform-protocol hybrids
- Protocol ecosystems (i.e., building blocks)
Here is a graphic of a Production Ecosystem:
Here is a graphic of a Consumption Ecosystem:
- 9 Digital Business Models: An Intro to Consumption Ecosystems (2 of 2) (Tech Strategy – Daily Article)
- The Big Strategy Concepts for Web 3 (1 of 3) (Tech Strategy – Daily Article)
- Why I Really Like Amazon’s Strategy, Despite the Crap Consumer Experience (US-Asia Tech Strategy – Daily Article)
- 3 Big Questions for GoTo (Gojek + Tokopedia) Going Forward (2 of 2)(Winning Tech Strategy – Daily Article)
From the Concept Library, concepts for this article are:
- Production and Consumption Ecosystems
- DOB4: Connectedness Interoperability and Collaboration Based Business Models
From the Company Library, companies for this article are:
Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy Podcast where we dissect the strategies of the best digital businesses in the US, China and Asia. And the topic for today, why incumbents should forget about building platforms and focus on building consumption ecosystems. So this is gonna be about various, let’s call them digital business models. And that conversation usually ends up being about pipelines versus platforms, traditional linear business models versus, you know, these very famous platforms that we always talk about and lots and lots of incumbents really want to become platform business models. And the truth is that’s not realistic for the vast majority of them. What they should be focused on is becoming either consumption or production ecosystems. And those are two different types of business models which I’ll talk about, which are very, very common. It’s a really good strategy. We see it all the time, very effective. I’m gonna detail that out today and that will be the topic. And for those of you who are subscribers, I sent you two pretty detailed emails about that in the last week, just sort of laying out these models. And this is not really my thinking. I’ll cite the people behind all this, but you see it all the time. So if you’ve gone through those, I thought they were more readable, because I’ve been sending you a lot of text, which I feel bad about. So in this case, I sent you a series of graphics, and I think if you just look at the JPEGs and the graphics, you’ll get the basic idea. So anyways, a lot of, I think, pretty useful thinking this week, but much more sort of readable than let’s say the prior week. For those of you who aren’t subscribers, feel free to go over to jeffthousen.com. You can sign up there, free 30-day trial, see what you think. housekeeping stuff. The final book in my Motes and Marathons series was published a couple days ago. That’s part six. So it’s a six book series. That’s number six. It’s all done. And it only took me, let’s see, 17 months worth of writing and seven years of research. So I felt pretty good about that. I know there is a problem. I think book six actually has some of the best thinking and some of the most directly useful thinking, which raises the question of why is it in book six and not in book one, which is a good point. In a way, I’m gonna rewrite and do some stuff going forward, but all the thinking’s there. Basically, it’s pretty much a textbook at this point. Only other housekeeping bit here today, the Asia Tech Tour, which I’ve been talking about the last couple weeks, some of you have emailed me about that, I’m gonna be sending you some more information, but that’s gonna be basically a five day intensive trip to Asia, Indonesia, Singapore, probably Thailand, visiting some companies, having a lot of fun, but also it’s gonna be a pretty intensive sort of digital training thing. So if you’re interested in that, feel free to send me a note. You can email me at info at 1000group.com. Go on the website, you’ll see the information on this. But yeah, if you’re interested, send me a note and I’ll follow up with you. That the information’s on the way right now. Okay, last bit, standard disclaimer, nothing in this podcast or in my writing on the website is investment advice. The numbers and information from me and any guests may be incorrect. The version of Opinion Express may no longer be relevant or accurate. Overall investing is risky. This is not investment legal or tax advice. Do your own research. And with that, let’s get into the topic. Now, as always, we start with a little theory and the key concepts for today. Really, it’s gonna be kind of three big ones. I mean, this is actually in terms of concept. I mean, if you go to the concept library on my webpage, I don’t know how many concepts I have there, probably 50 now. Within that, some of them are important, and some of them are not. This is on the short list of the important stuff. And I think this is stuff I don’t… really see people talking about very much. Usually people talk about network effects, they talk about platforms, fine, fine, fine. The three I’m gonna give you today all sort of go under the same idea of coordination-based business models, collaboration. And it’s this idea that, look, once you go from a traditional business, stores, warehouses, people, consultants, bankers, all of this, once you digitize and it starts becoming more software, more digital economics, the economics start to change, which I’ve talked about. But really one of the most important things that happens is you start creating value by creating interactions. Instead of creating value like we’re gonna take some steel and we’re gonna fold it into a refrigerator and then so that’s a process of value creation. Once you start to digitize, you can start to connect things very easily. And those connections and interactions are a source of value creation, which is basically how companies like Amazon, Facebook, I mean, they are all in the interactions business. They digitized something, people, social networks, and then they facilitate interactions. Well, that happens across the board. You can do that with traditional businesses. You can do that with shopping malls. You can do that with banks. You can do that with everything. Once you digitize. you can connect and interact, and then there’s certain types of value that can be created. You can do transactions by cell. But one of the most powerful types of interaction you can do is collaboration and coordination. And under that general idea, there’s really three concepts you wanna think about. Now, one of them I’ve talked about under the digital operating basics. And if you look at my digital operating basics, which is level two in the six levels, I talk about DOB four, which is unfortunately it’s a very wordy one. I’ve got to rewrite it. But DOB four, digital operating basics four is connectedness, interoperability, and coordination based operating models. Okay. That means when we start to digitize stuff, we can start to collaborate and connect with other partners. They could be external to our company, they could be internal. Now within that, you could also talk about platforms and ecosystems. Those are basically connected, interoperable and coordination based operating models. And I’ll talk about two of those today. But we actually, this is an incredibly important idea and I’ll talk about some examples of that today. Tesla’s an example, hire is an example, Snowflake is an example, Ford is an example. And it doesn’t have to just be your digitizing the company and its assets. You can just digitize the product. Once you take a regular washing machine and you make it a smart washing machine, the first thing you can do is start to connect it with other things. You can add digital compliments, you can add media, you can add messaging. Well, that’s all a form of interoperability and connectedness. Okay, so we put that in DOB4 because that is a type of the digital operating basics. It impacts how you operate. Now we can take that up to the next level and say, and this is, so the first concept for today is DOB4. The second concept for today is the idea of a digital platform, marketplace payment platforms, things like that. One of the five types I’ve been talking about is a coordination, collaboration, and standardization platform. I’ve called these the CCS platforms. That’s what Zoom is. That’s what Microsoft Teams is. That’s what Slack is. These are platform business models. So we’re not just talking about operating activities like DOB, we’re talking about building a real platform business model based on interactions that are all about collaboration. It’s the same idea. It’s just at the next level. So two ideas for today, two concepts that are really important, DOB4 and then CCS platforms. So that’s one of the five types of platform business models. That’s one of the seven types of digital operating basics. The third idea for today is new, which is production and consumption ecosystems. Now this is a type of business model, which is all about enabling interoperability, collaboration and coordination. Same idea, but showing up in a third location. But it’s all under the same idea of connectedness and collaboration. So those are the three ideas for today. All of them very, very important. They all go under the same general topic. and I’ll go through this production and consumption ecosystems business model for today. But those are listed in the show notes and I put the links. All of those are important. I think you see it all over the place. Okay, with that, let’s sort of get into the content. And the first idea I wanna talk about is, you know, this pipelines versus platforms thing. This has been talked about for years. I’ve been talking about it for years. And you know, it’s… It’s this idea, and it was a very famous book by Sanjit Jodhari. I always say his name wrong. Sorry about that. Platform Revolution, Marshall Van Alstine at MIT. You’ve been hearing about this for years and years, which is like traditional business models are mostly about linear processes. The idea that there’s a factory, the inputs come in one side of the factory, steel, energy, labor, expertise, technology. We move through a step. of linear processes. This is often called the value chain, Michael Porter. You know, one, two, three, four, five activities in a row, a linear process. And that is how we add value. We might shape the metal, we might brand it, we might do marketing, we might do after sales, traditional, you know, business school 101. And at the end of this value chain, this linear process comes a product. could be a car, could be a TV show, could be a lot of things. We sell that to the one user group, which we call the customer. But most businesses historically have been linear value chains, also called pipelines. And it can be services, products, content, whatever. The alternative way of creating value is the platform. We are in the business of enabling interactions. In a physical platform, it can be a shopping mall. consumers to interact with businesses. Fine. In an investment banking business, a people-based platform where we enable people who are looking for money, companies who are looking for money with people who are looking to invest money. Interactions, right? We can do all of this. Digital platforms tend to be very powerful. We’ve talked about this forever and ever. Okay, those are the sort of two traditional types of business models. Now I think there’s actually nine types of business models when you start talking digital that matter. So those would be two. We could also point to some sort of web three business models. And I’ve written about this for those of you who are subscribers and I basically laid out three of them. I’m not gonna go through these, but protocol networks, platform protocol hybrids and protocol ecosystems. That’s a whole world of thinking. I’m not gonna go into it, but I’ll put the list of the nine. So that’s one, two, three, four, five, six. Basically that’s five types. Okay. There’s a couple other types I haven’t talked about. Company ecosystems, pipelines plus platforms. But really the one I wanna talk about today, the two I wanna talk about today are production ecosystems and consumption ecosystems. So there’s nine in total, I’ll put the list, I can’t go through them all today. But basically if you look at my, six levels graphic, the one I’m always showing where it’s, you know, it’s the six different types of competitive strength. If you look at from left, so it’s going sort of bottom to top six levels, but if you look at going from left to right, you’ll notice that on the lower left of that graphic, and I’ll put it in the show notes, I say linear business models. And on the far right, I talk about platforms and ecosystems, and then there’s an arrow between them. A business can be a pure linear business model where you create value with these traditional linear processes pipeline. A business can be on the far right, which is a pure interactions based business, a platform, an ecosystem, and that’s how we create value. But between those two extremes, there is actually a spectrum of different business models that can create value both through linear processes and through doing interactions. and most businesses sit within that spectrum. So I’m gonna put a graphic in the show notes that basically shows nine types of business models spread out from left to right as they sort of create value in these two different ways. And within that, production ecosystems and consumption ecosystems are two business models, very, very important that sit on this spectrum. So that’s kind of the first point today that firms are increasingly creating value both through linear processes and by enabling interactions. So they have characteristics of both. Okay. Look at the graphic in the show notes. Hopefully that’s clear, but there’s nine different types and you can find them in the concept library if you’re curious. Okay. Now, let me first talk about production ecosystems and hire the Chinese multinational that makes washing machines and refrigerators. Very good example of this, but we see this business model with lots and lots of manufacturing companies, branded products, you know, everything. There’s a huge number of examples. So production ecosystems. Now, these are not my terms. I believe they were coined by Professor Mohan Sabra Man. Yum. And I’m sure I’m saying his name wrong. I’ll put it in the show notes. But he wrote a book called The Future of Competitive Strategy, Unleashing the Power of Data and Digital Ecosystems. I’ll put the link in the notes. But basically his idea is, you know, you can take most traditional businesses, manufacturing, consumer products, branded goods, things like this, and as you digitize them, What companies tend to do is they digitize their assets, factories, equipment, their logistics, their stores, and you digitize your products and services, a smart washing machine, and then you can start to connect these things and interact. And mostly what he talks about is once you do this, you can start to share data. So what he really talks about is data sharing ecosystems. And that when you start to share things, there’s a lot of value in that things get smarter. And that’s what a lot of companies are doing. And when you start talking about manufacturing, you immediately start talking about IOT sensors and then getting data, interactive data flowing between various parts of your company and between your company and external parties, you can start doing data analytics, AI, you get real transparency. Now, You’ve heard me talk about this for a long time. I put all of that under the digital operating basics. DOB3, the first thing you do is you build the digital core for management and operations. You start getting my standard phrases, smarter, faster, better. And you can see that in my sort of six levels. I’m always saying like digitize the core, you know, your management and operations start getting smarter, faster, better. Okay, so that’s kind of what he’s talking about. And that tees up the idea of then we’re gonna start to improve our customer service, we’re gonna start to improve the customer experience, and that tees up all the digital operating basics. So this idea that he talks about production and consumption ecosystem, it’s another way of talking about my digital operating basics. And it’s a very good first step for most traditional linear businesses that start to digitize and connect their assets, their products. their services, but then what he does is he breaks this into two buckets, two different types of business models. The first would we call production ecosystems and the second we’d call consumption ecosystems. Production ecosystems are when you digitize and connect your internal assets and your own supply chain. So the production side of your operations. So that could be things like, If you look at a traditional value chain for, let’s say, a washing machine manufacturer, you can look at Michael Porter 101, your traditional value chain, what are you going to see? The value chain is going to show inbound logistics, production, manufacturing, outbound logistics, which is going from your manufacturing to distributors, retailers. You’re going to see marketing and sales. You’re going to see after services. And all of that is going to be supported by R&D. human resources, procurement, your traditional picture of a business. And that value chain is gonna lead to the customers. But it’s gonna sit within a larger value chain for your industry. Your firm is gonna connect with your suppliers. Those suppliers are gonna connect with supplier suppliers. And then going downstream, you’re gonna connect with the distributors, retailers, and ultimately with customers. So a production ecosystem is about connecting your internal assets, putting sensors in your factory, putting cameras in your warehouses, putting IoT devices on all your pallets that are moving around, starting to connect with your customers, starting to make your products smart and connected. So now your washing machine being used by a customer is connected with the customer for the first time. the customer’s usage is being tracked, the data is going back to the company, going back to the R&D centers, going back to defects, I mean, all of that starts to be connected in terms of data sharing. And all of that he sort of describes as a production ecosystem. And it’s mostly about data flows and you call that an ecosystem. So that’s all very smart. And you can start to capture things. Immediately you can start to capture more operational efficiencies. Suddenly you’re looking at your factory and you’re reeling where the inefficiencies are. You’re doing things faster, smarter. Your quality control goes up because you’ve got cameras looking at every washing machine that comes off the conveyor belt and will immediately identify defects. So your factory is better, it’s more efficient. You can then start to… offer additional services because you can go to your customers and offer them things like predictive maintenance. Let’s say you’re John Deere. You know you’re a massive manufacturer that makes tractors. Traditionally these tractors have been sort of dumb. They’re not smart, they’re not connected. You have a lot of factories. You then sell the tractors. Well a couple things happen. Now one, Your factories are smarter and connected and you’re getting real visibility and transparency. You’re starting to do digital twin, AI, big data analytics, all of that production ecosystem. But your factors, I’m sorry, your tractors themselves are starting to be smart and connected. And when your customers, which is a lot of big farmers, fields, agricultural companies, those tractors are now gathering data. about their performance, about their wear and tear, about how they’re being used. And so you have that data coming in as well. Based on that production ecosystem, you can now offer additional services to your customers like would you like to pay every month for predictive analytics that will tell you when you need to start maintaining your tractors? Because all that data is coming in. So you really get two benefits as a company. Number one, you get operational efficiencies in your production and supply chain. You start to get just-in-time connections with the people that sell you tires. All of that’s connected data sharing. You also start to offer new digital services which you can charge for, like maintenance services. For everyone who’s ever bought one of your tractors, they can save money if they sign up for your maintenance service. So one, that can be a source of revenue, which companies like, or two, it can be a new way of getting more engagement and data from your customers. So you can win in both of those. It can be a revenue source, it can be a way of increasing your engagement with your customers, doing better customer relationship management, and companies like Caterpillar, John Deere, all of them, they do this. So when you start to look at… production ecosystems, we get data sharing, we get smart products and customers, and we get additional data services we can offer. Now you can take that one step further. Instead of doing sort of basic operational efficiencies, we can do advanced operational efficiencies like all that data that’s coming in from our tractors and washing machines can now be fed into R&D. and R&D is going to get smarter. And we’re going to start to offer more personalized products and develop new types of products because we’re getting a lot of real-time data sharing. So we can get two or three wins as a traditional company once we build this out. That’s basically the idea of a production ecosystem, a lot of connectivity, a lot of collaboration, a lot of data sharing, but it’s mostly being done with our own internal assets and our customers direct. Now, last year I talked a lot about a company called Snowflake, which is basically, it’s like Google Cloud, it’s like Azure, it’s like AWS, but very focused on data intelligence ecosystems. And that’s how they would describe themselves. They would say that we are a data intelligence ecosystem. They would say we are a data warehouse as a service company, also called a data cloud. Now, all of that, and you can sign up for this as a service the same way you can sign up for AWS. And at the time I said, this is an amazing idea because it lets basically every company on the planet sign up for the service and put in place a production ecosystem in like one day. You can sign up to the service, start funneling whatever data you have and you will start getting big data services immediately. I mean it was a Google like massive opportunity. Now they’re building a lot there as well, but it was a really cool idea. Another company I’ve talked about in the past is called Tuya, which is basically a service company in China and is Hanjo based. And they call themselves an IoT platform as a service company. I don’t really know what that means, but basically if you have a If you’re an equipment manufacturer or a brand, let’s say you’re Philips and you make razors that you plug in, you know, electric razors. You make, you have a brand, you’re a manufacturer, you’re a designer, you put all your Philips razors in retailers all over the world, but your problem is those products are pretty dumb. So you partner with a company like Tuya and they will start to put chips and sensors in those razors and you will start to get data coming back to you. So they basically help you. I mean if Snowflake is about digitizing your internal assets, Tuya is about digitizing your product, but in both cases you’re going to build a production ecosystem because you’re going to start getting data flows from those. So both of those companies, same idea. But a good company to think when I think about production ecosystems, the company I think about is Hire. Now, Hire is a pretty awesome company. They are studied by companies like McKinsey when they look at smart manufacturing. Whenever people write about the industrial internet and smart manufacturing, usually people start talking about Hire. They’re a massive multinational that makes washing machines, refrigerators, air conditioners, you know. home appliances, and then to a lesser degree, they do consumer electronics, some laptops and phones, but mostly they’re a massive manufacturer and they sell everywhere in the world. You go to Africa, you’re gonna see tons of higher washing machines, Latin America, Southeast Asia, definitely China, and then to a large degree, the US as well. Okay, there are a classic story of digitization. 10 plus years ago, They started on this sort of digitization journey. I think they pretty much followed my digital operating basics, which is not really my thinking. I’m just summarizing what people have been doing for 10 years. So I call it my DOB, but it’s pretty standard playbook by lots and lots of digital people. So it’s not really mine. What did they do? They spent four to five years digitizing their internal operations. That means taking all their factories, putting in IoT, putting in sensors, putting in cameras, getting all the data flows from every piece of machinery, and then having sort of really awesome transparency and insight into what they’re actually doing. And people start talking about we’re doing digital twins at that point. And they didn’t just do their factories, they started to do their supply chain that feeds into their factories. So if you’re a supplier to hire, you’re making plastic, metal, whatever, you have to connect to their system and start sharing data as well. Suddenly you get great visibility, you start to capture operational efficiencies, you start to get better quality control, and that’s really where they started. And it took them four to five years to build this. And that would be in the digital operating basics, that would be DOB3, digital core. for your management and operations. But then what they did, which was really cool, is they started to talk about what they call interconnected factories. They started to focus on, we’ve digitized our factories, let’s connect them now. And let’s connect them with our supply chain. And we will be in the interconnected factories business. And here’s a quote from the chairman and CEO, Jiang Rimin. He says, quote, no longer do successful companies compete through their brands. Instead, they compete through platforms, or another way, through linkages among independent enterprises aligned via interoperable technologies. So he’s basically talking about, you have to connect your enterprise with all your assets and become sort of an interoperable platform. Platform is not really a right word. I would call it an interoperable production ecosystem. I think that’s what they’ve been building. So they start talking about themselves as, you know, we have interoperable factories. We are the largest mass customization solutions platform. But they basically connected all of this with their smart products, which are now washing machines. And that’s what they built. And I would call that as an example of production ecosystems from top to bottom. And that’s a pretty good example of that. Anyways, I put some slides in the show notes that sort of graphics that show how to sort of visualize this, but all of that hire snowflake Tuya, all of that goes under production ecosystems as a business model and that’s sort of the, you know, the first big idea for today. So that’s concept number one, production ecosystems. Okay, the other business model for today is consumption ecosystems. And this is, you know, from the same basic idea, it’s just sort of a different aspect of it. Again, this is not my thinking. This is Professor Mohan. Um, and it was linked to his book is in the show notes, but it’s the same idea that you connect the assets. You connect the various aspects of the internal operation. You connect that with an increasingly smart product or service. and you start to do data sharing. That’s a production ecosystem. This is sort of the other side of that. Well, what if we’re not connecting internally, which is largely under our control, what if we begin to connect with external parties such that those parties can then well we can do data sharing but also it makes it better for the customer. And that can actually be pretty powerful and The example Professor Mohan talks about is when you start to connect and collaborate and interoperate with the complementors to your product or service. For example, well, let me give you a little more theory and then I’ll give you examples. So a consumption ecosystem, this is like when we have a pipeline business that digitizes and connects its products and services and assets, not just internally. but with external parties and their products and services. So, you know, an example from, this is from his book. He talks about like, what happens when we start to make a toothbrush smart? Okay, Phillips does this. If you look at Phillips has these smart connected toothbrushes that have little cameras in the bristles. Now first of all you put a sensor in it, you put some chips in it, and suddenly data starts flowing between your company Philips and the toothbrush about how often it’s being used. Does it break down? How long do the batteries last? You’re starting to get data sharing between the product and the company. You’re also getting data sharing probably between the toothbrush and the person and the company. If you can get the person to download the customer to download your app, Well, suddenly you’re getting data from them as well. You can communicate with them. You can send them marketing, things like that. Now people probably don’t wanna download that. But most smart products try and get you to download their apps. So what that gives you is data sharing between the customer, the product, and the company. That’s when you make a product smart. However, we can also extend that and we can start to collaborate and interoperate with… Companies that make compliments to our product. Now a compliment is something that increases the value of your product. Mustard is a compliment to a hot dog. It makes the hot dog better, even though the hot dog people don’t make the mustard. The standard example is electricity as a service being provided by power companies was useful, but it was not that useful when the only thing you could do was light light bulbs in your house in 1905. But once people started to make appliances that you could plug in, that made the value of electricity dramatically better, higher, so it’s a compliment. Okay. Well, what happens when we start to digitize the complements and the core service? So smart toothbrush. Okay, what would be a compliment to a smart toothbrush? Well, a compliment to a toothbrush might be a dentist. A dentist is a person who tell you, people who go to the dentist always tell you brush your teeth more. So, well, now we have data coming out of the toothbrush. We can connect that data with a local dentist. and the dentist can see, I don’t know why that might be useful, but could see how you’re brushing your teeth. You could see, are you doing it well? Are you doing it infrequently? The camera can start to stream video to the dentist. The dentist can see is there a cavity there? And it doesn’t just have to be the dentist, the AI, which would be a digital service built on top of this can start to flag teeth. You might have a cavity in your lower, you know, left tooth or whatever. Right, so once you connect you can start to connect with groups like people who make Dental floss people who make Tea you know teeth whitening You know, whatever those strips are people put on their teeth You can start to connect with I don’t know the local drugstore because that’s where these toothbrushes are sold. Suddenly everything that sits around this product, which can be a strong compliment, sometimes a weak compliment, you can start to connect all that stuff and create better solutions for the customer. So that’s kind of interesting. Now, you can see how that would start to be interesting. The challenge with a consumption ecosystem is none of those parties are under your control. You know, when it’s a production ecosystem, all those assets are internal, your factory, your distribution, your shipping. Okay, you can see the data and start to capture operational efficiencies or start to offer new digital services on top of that. When you move to a consumption ecosystem, most of that stuff’s not under your control. You’re gonna have to work with these parties. And how do people work together? Well, generally it’s APIs. They start to share data, they start to offer new services and things like that together. Another example that Professor Mohan gives is smart tennis rackets. That, you know, they start to put chips and sensors into tennis rackets and they start to gather data. And so that can share back to the company that makes the tennis rackets, that’s the core product. But you can also share that data with complementers. companies that study this data to help you hit the ball better because they can start to give you visual graphics of which you know how is your backhand doing versus your forehand how often are you hitting the ball in the center of the racket versus on the side how often do you need to change your strings how is your grip doing because of your sensors things like that well the tennis racket company is probably not going to offer those services Professional leagues that study how people hit are gonna study that stuff. So you start to, and Professor Mohan calls this your complementor network. You start to build a broader network of people who are all creating services and you all start to connect with each other. So that’s pretty cool, kinda interesting. I don’t think those sort of knocked me over as examples, but you can see how most traditional. linear business models that make simple products. I don’t know, electric razors, tennis rackets, toothbrushes, washing machines, that they would naturally start to build a production ecosystem and then try as much as they can to become a consumption ecosystem. So data-driven services that you can add to your products and services, more connections with the complementors to whatever your product and service. And the more complementors you can add, the better off you are, the more power they add. So this starts to become sort of interesting. Now, the example that I think is actually the most interesting is a company like Tesla. What are the, so you start to ask, what are the compliments to an automobile? Well, it turns out for this product, there are some pretty powerful compliments. The toothbrush doesn’t have tremendous compliments, they’re okay, but automobiles, that’s more like the electricity example. The compliments here are very powerful. I buy a car. What are the compliments to that car that add value? Well, gas stations are real important. Roads are really important. Streetlights, those are important complements. Maintenance, insurance, repair shops, emergency services, the media that plays on the radio when I’m driving the car, all of those complements are very, very powerful. Well, Tesla is sort of single-handedly, in many cases, digitizing and connecting those complements to create a better customer experience. So Tesla’s building charging stations everywhere. Those are complements, they’re digitized and you’re connected. If you’re driving a Tesla, it tells you where the charging stations are. It tells you how many spaces are empty within a particular charging station is near you. So you pull right in and go into an assigned space. predictive maintenance when your battery is going to need repair. And this is getting really interesting because people are starting to digitize things like parking lots. So as you pull up to a parking lot, your Tesla will tell you where the empty spaces in the parking lot are if it has any. So. Once you can, and street lights would be the same thing, you can start to connect with the street lights. You can start to connect with sensors in the road. You can connect with your home smart hub. You can connect with your smartphone, which is why he’s building Tesla phones, right? Automobiles look like a very powerful connected consumption ecosystem. And once these things are connected, there should be all types of services that you can build on top of this. Is Twitter going to end up being a connected complement to a smart car? Probably. Is it going to start being the operating system for your smart car? Because when you look at the operating system for a smart car, there’s the system that controls the car, but then there’s the mapping, and then there’s the entertainment system and the operating system. You can see how that might plug right in there. So when you start looking at a company like Tesla, That’s really interesting. So if you look at a company like Ford, both automobile examples, Ford is going, you know, seriously into a production ecosystem. They’re digitizing all of their factories as much as they can and their supply chain because that’s always where they’ve lived. Tesla is not really doing that because Tesla is not digitizing an existing supply chain. They’re building an entirely new type of production system. So they’re kind of digital from the get-go. What Tesla’s more focused on is building a consumption ecosystem. And they’re having to build a lot of it in-house because they’re kind of far ahead of everybody. But you can see as other companies catch up, the people that make gas stations, charging stations, the roads, the streetlights, the smart, they’re all gonna start to be complements. to probably a Tesla consumption ecosystem. Anyways, I think I’ve kind of made the point there. But it’s all really cool to think about. And when you start to look at the world this way, you can see these two business models everywhere. Some companies are absolutely rocking and rolling. Others are sort of too weak within the hierarchy to build out a consumption ecosystem that others wanna play in. So they’re gonna have to connect into others. And if you look at last point, then I’ll finish up. If you look at my smile marathon, the five types of digital marathons, number five is the idea that you can be an ecosystem orchestrator, the E, you can be an ecosystem orchestrator or participant, but you’re gonna have to be one of those. So a lot of these companies that are going digital are gonna be participants in other companies’ consumption ecosystems, just like… a lot of merchants on Amazon are participants in their digital platform. Same idea, but you’re going to be a participant in a production, I’m sorry, consumption ecosystem of a company like Tesla, which may or may not be a platform as well. Anyways, I think that is enough theory for today. Hopefully that is useful. I think that’s directly usable for a lot of managers and investors when you look at these companies. I find this very, very helpful. And within that, the three concepts to sort of maybe dig into more digital operating basics, number four, which is about collaboration in interoperable business models as part of your operating system, operating activities, the CCS platforms, the coordination platforms, which is a type of business model based on enabling collaboration. and then production and consumption ecosystems as two business models that are really common, becoming more common all the time. Those are sort of the three concepts for today. And I think that is enough concepts and theory for today. As for me, it’s just been another pleasant week in Bangkok, rocking and rolling here sort of content wise and thinking wise, which always puts me in a good mood. I’ve got my mother flying into Bangkok right now from the US. She’s… Landing in about two hours. I got the flight stats sort of graphic up on my screen as I’ve been talking here Making sure she does I don’t sort of misjudge that That would really be bad form to sort of miss my elderly mother as she arrives at the airport in Bangkok. So anyways, I’m a little worried about that, but I should be fine. I’ve just got to keep an eye on Bangkok traffic, which is always a bit unpredictable. So anyways, that’s going to be my day. And yeah, she’ll be visiting for about two weeks and we’ll probably travel around Thailand a little bit. I’ve been sort of wondering where to take her because I, you know. A lot of the stuff is great, but it’s not like she’s going to be going to the full moon party on Copenhagen or anything, so I don’t know if it’s real valuable to take her to the craziness. I was sort of thinking I’d take her down to Raleigh just because it’s a super pretty place and everyone always seems to like that a lot. I’m not totally sure where else. Maybe a cooking class in Bangkok was sort of an idea. If anyone can recommend any good sort of cooking classes for foreigners, tourists in Bangkok, there’s a well-known one called Cooking with Poo, which is obviously the person’s name, but it’s funny. Mark Ween and some of these famous YouTube influencers who talk about Thailand all the time recommends that one. So I was thinking about that. Maybe the flower market. I’ve heard that’s good, but I’ve never been to that. Anyway, if you have any suggestions for where to take a… my mother over the next week here in Bangkok or Maybe outside of town, but not too far outside of town. I’d appreciate it. Send me a little note That’d be helpful. I’ve got sort of a running list. I’m thinking about Anyways, that’s it. Okay. I better start heading towards the airport here in a couple minutes, but hopefully today’s podcast was helpful If you have any feedback or if you’re interested in the Asia Tech Tour, send me a note. Otherwise, that’s it for me and I will talk to you next week. Bye bye.
I write, speak and consult about how to win (and not lose) in digital strategy and transformation.
I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.
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