Companies Can Have Digital Superpowers: Lazada vs. Grab. Luckin vs. Hellobike. (Tech Strategy – Podcast 37)

In this class, we go through 6 digital superpowers, which is a simple high-level checklist for when digital tools can significantly change the competitive dynamics of a business.

You can listen here or at iTunes, Google Podcasts and Himalaya.

Which of the 6 Digital Superpowers does the company have? If any.

  1. Dramatically transform the user experience
  2. Enable a platform business model
  3. Network effects
  4. Other competitive advantage
  5. Virality
  6. Scalable

Related podcasts and articles:

This is part of Learning Goals: Level 4-5, with a focus on:
  • #25: 6 Digital Superpowers

Concepts for this class:

  • 6 Digital Superpowers
  • SMILE Operational Marathon
  • Competitive Advantages: Traditional vs. Digital

Companies for this class:

  • Lazada
  • Grab
  • Luckin Coffee
  • Hellobike

Some stuff from Koh Phagnan


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.

My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.

Note: This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.

——transcription below

Welcome, welcome everybody. My name is Jeff Towson and this is Tech Strategy. And today we’re going to talk about six digital superpowers. And this is my quick back of the envelope cheat sheet for deciding how big an impact a digital tool is going to have. And we’re going to look at Luckin versus Hello Bike and Grab versus Lazada under this sort of simple digital superpowers framework. Now first let me apologize a little bit. The audio is not going to be awesome. I’m sitting down in Koh Phan Yang. I always say that wrong. Koh Phan Yang in the Gulf of Thailand in a bungalow on the beach which is fantastic. But I’ve got my little travel microphone here so I’m afraid the audio is not going to be awesome. It’ll be better next week I promise. I’ll be back in my home there. have the big blue yeti. So anyway, sorry about that, but it is pretty awesome here. I’m in a 10 times better mood after months of being in lockdown. Now the subject for today, digital superpowers. This is just a quick little framework. I find it really helpful just to assess the impact of, you know, there’s just a constant stream of digital tools coming things software can do, sensors, GPS, types of hardware, devices, new types of data, all of these sort of things we put under the banner of digital, which is hardware, software, data, new AI tools come out all the time that can do things that we couldn’t do before. So those things just sort of run through business after business, it’s hard to get a sense of whether this is important or not. The easiest analysis, the most granular analysis would be, okay, let’s just look at use cases. We work at a retail bank, there’s this new type of machine learning that can estimate customer intention based on their facial expressions. Are there any use cases in the bank where this is going to make sense? And there’s a lot of crazy stuff being tried. So you could look at use cases. One level up from that is maybe you come up with a new type of product or service. We’ll talk about a couple of those today. One more level up is we could talk about an entirely new business model that these digital tools enable. That would be like DD emerging against taxis, things like that. And then maybe one level up from that is sometimes it, sometimes it really changes the entire industry. I think you can look at. sort of online merge offline is just a sea change in retail. We can look at autonomous vehicles, electric vehicles, shared vehicles, connected vehicles, all of that is really a major change in how we think about mobility from what we’ve thought about for a long time. So it can kind of play out at a very granular level, at the product service level, at the business model level, or at the industry level. Now, against all that, chaos because it’s always ongoing. I have a list of six digital superpowers I check, and if it hits one of those like, hey, this new product has three of the superpowers, this could be a big deal. It helps me bubble things to the surface and decide what’s important and what’s worth looking at. So that’s going to be the topic for today, and we’ll talk about four companies, Luckin, Hello Bike, Grav, and Lazada. which are all sort of basically singular product companies. So they’re a little easier to think about in this context than say something like Alibaba, which is like 10 different businesses now. Okay, so that’ll be the topic for today. For those of you who are subscribers and we keep getting new subscribers every day, it’s great. I appreciate it. Welcome to everybody who just signed up and your homework assignment as always, take one of these now. 25 learning goals that are unavailable on my website. Apply one of those 25 learning goals to some company that’s of interest to you. Write it down. Do I think this company has switching costs? Do I think this company is a platform business model? Any of those 25 learning goals, apply one of those to a company, write it down. Three to four paragraphs. This is what you would tell the CEO if they asked you. Think about it like a pitch. I find that’s a very helpful way to think about it. So that’s your standard homework assignment. For those of you who aren’t subscribers, please go over to You can sign up there. There’s a 30 day free trial. I’m sort of recommending that people don’t use the Alipay option. I’m probably gonna disable that. It’s causing continual problems because it comes out of China. The other option, which is Stripe and PayPal works fine. But yeah, so that’s probably a better option for right now. Okay, and with that, let’s get into the case. Now this is the 37th podcast, which is really… I think I’ve sort of completed the foundation for most of the thinking. I’ve gone through most of the ideas I wanted to cover. The basics of the toolkit are now there. Within the 37 episodes, counting this one, I had 25 learning goals. that were laid out over five levels. So depending where you started, some people started early on, some people moved up to level two, level three, four very quickly, depending on where they were in their own sort of understanding. But I think those 25 learning goals in this 37 episodes, I think that’s the foundation. I don’t really have any other major big subjects I wanna go into. Now, this is… I think that gives us an ability to start talking more and more about specific companies and what they’re doing, which I’m going to do a lot more of. And then we can kind of refer to this. This will be sort of the common language for talking about why Grab is doing well against Gojek in Thailand. And we can refer to all this terminology, this vocabulary, these ideas. It gives you a basis for discussion. So it kind of took me quite a few months to lay that out. However, I am giving you sort of the first pass version of all these ideas, whether it’s network effects, platforms, marketplace platforms, virality, scalability, all of this stuff. I’m giving you sort of the basic thinking on this, but the truth is, as we go forward, we’re gonna dig into each of those, and there’s a lot more in each of them. And I’m really giving you the basics thus far. So let’s say marketplace platforms. which we’ve talked about with Alibaba. It’s one of the five platform types I talk about. Now we could do five to 10 episodes just on different subtleties and complexities of marketplace platforms and how they’re evolving very quickly. The marketplace platforms we’re looking at now are very different than five, seven years ago. So we could dig into each one of these ideas a lot more and that’s what we’re gonna do over time. So, you know, these 25 learning goals, that’s kind of the foundation of the ideas, but they all go a lot, well most of them, go a lot deeper and get more complex. And ultimately you have to look at all this stuff company by company. Each company is in fact different. Even if we weren’t talking digital, Coca-Cola is different than SunKissed, it’s different than 7-Eleven, even though they’re all sodas, we could look at each of those companies for a long time and see that they’re very different. So even within all these categories, lots and lots of differences play out. So, but I think, I think we’re at a good sort of pausing moment, you know, after these 25 learning goals for the foundation of most of the thinking. Now I got, I got a very nice email from a young gentleman in India, you know who you are, and I won’t say your name, and he sent me a very set of pleasant email saying, you know, I’ve just sort of discovered your class and I listened to 15 episodes, right, so he’s working his way through the podcast from 1 through 15, which is great, and he was sort of asking about the subscription and all that stuff, and that’s great, but there’s a little bit of a problem with trying to do any of this stuff in a binge fashion. My experience is I don’t learn by listening to them for the first time. I have to listen to it once or read a book once and I take some notes and then I put it aside. And I need time, I need a repetition and I need time for it to kind of gel. Like if I try and get right back into it the next day and the next day, it doesn’t stick with me. So when it comes to major ideas, I like to hit them three, four, five different times and I like to… sort of delay. So I might listen to it, read a book that I care about, and I’ll take a lot of notes, and then I’ll put it aside, and about a month later I will come back and I’ll read my notes. And one, I remember it because I’ve probably forgotten a lot of it, so it’s repetition that helps. I’ll try and apply it to something, like a company I’m looking at. I’ll maybe make some additional notes, I’ll edit my notes, and then I’ll put it… put it aside again and I’ll probably come back maybe a month later and I’ll do the same thing and usually it takes about four times for me to really get something like that. I need the repetition and I need the delay to sort of let it gel in my mind and then I do a lot of writing and then I will apply it to companies and I will slowly put it into my frameworks for how I take apart companies. So binge watching 15 is that’s cool and that’s great. But I find a lot of that are binge listening in this case. I find it tends to go in one ear and out the other. You know, the complicated ideas take time and they take repetition and they take practice. You really need all three of those things. You gotta try and use it. You gotta repeat it. So that’s cool, but you’ll notice in a lot of these podcasts, I will repeat myself a lot. I will keep coming back to things over and over and over and each time add some subtleties and complexities. that’s and I’ll you know keep pushing you to write write write that’s what I’m trying to do here is repeat give some time delays in there and then get you to you know try it yourself that’s kind of my mantra that’s how I find I learn so anyways I thought the binge watching listening thing was cool I’m glad you’re doing it but I think you need to repeat and you need some delays I find that is better okay now looking back over all these these There are sort of some big buckets, like there are some big ideas here. And definitely one of them is, um, the economics of digital. You know, we talked a lot about that. It tends to play out in a lot of things. Another one is platform theory, which is a type of business model. That’s its own phenomenon, which is different. Now it’s based on digital economics, but it’s its own sort of power in its own. Right. Another big bucket I keep going back to is competitive advantage, which is sort of my, that’s where I live more or less, and traditional competitive advantages versus digital competitive advantages, which in some cases destroying the old ones, in some cases it’s creating other new ones. And then the one I did a couple podcasts ago, which was podcast 34, was the Smile Marathon, which is SMILE. which is an acronym for the five different types of operational ongoing day-to-day marathons you have when you’re running one of these businesses, any business. And that’s sort of day-to-day decision-making. There’s five different dimensions of which SMILE is the acronym. And then maybe on top of that, you have a competitive advantage, maybe you don’t. But those are kind of, I think the biggest buckets I’ve been talking about. And it’s kind of hard to put all that together. I’ve got to have a competitive advantage or I’d like to have one. I need to sort of think about the economics of digital. There might be platform business models I’m competing with or managing or trying to deal with. And then I’ve got this marathon thing of day-to-day operational decision-making. That’s a lot of thinking if you’re a vice president of a shopping mall. So on top of all of this thinking, I’ve sort of bubbled out my little cheat sheet. which I call the six digital superpowers. Look, with all of those big ideas I just mentioned, look, there’s six superpowers that come out of digital. And if you get one, two, three or four of those, it’s gonna change a whole lot of things very, very quickly, which is why I call it a superpower. And if your competitor gets one, it’s a big deal. So this is kind of like a bubbling out of all of this thinking of like, check this little list of six things and see if you’re getting any of those. So it’s kind of a cheat sheet. So what are these superpowers? I’ve put them in the show notes and I’ve put them in the blog, the webpage associated with this class. I’ve mentioned a couple of them thus far. One was in podcast four, which was how did Alibaba beat everybody? And that was about platform business models. I think the audio on that one was not terribly good either. Sorry about that. That was kind of one of my first ones. But of the six, the first one, digital superpower number one, I call it like, does this dramatically improve the user experience? And the language there is very specific. Dramatically improved. When you talk to venture capital people, especially people who do product design, product development in Silicon Valley or in Shenzhen or Beijing, they’re usually trying to come up with a new product or service. a new type of way to book a hotel, a new way to get around town, whatever. One of the things you hear them talk about a lot is they’re looking for an opportunity where the service is dramatically better at like one-fifth the price. And you hear that a lot. They say this all the time. You know, we want something where not only is the service better, the user experience is better, but it’s also a lot cheaper. Like Uber. and you know DD like one it was well actually that’s not a great example like Airbnb. Airbnb was a much nicer way to book a hotel oh and by the way it was a lot cheaper than going to a hotel. That combination of factors you hear it all the time WhatsApp WeChat when it was just about messenger it’s easier to chat with your friends as opposed to say texting on your cell phone. And by the way, it was free and your mobile carrier charges you to text. You see that pattern a lot. I mean, that’s an idea of, look, it was a dramatic improvement in the user experience. And it’s really a judgment call. Is it a big deal? Is it just kind of OK? Are we going to see a big change in behavior because you’ve put this on the market? Now, but you’ll notice the phrasing, a dramatically improved user experience. Now I’ve sort of implied that we’re talking about consumers. If we’re talking about WhatsApp, we’re talking about consumers. When WhatsApp came out, you could text your friends for free as opposed to paying China Unicom, well, that’s in China, but let’s say T-Mobile or whatever. And it was actually a pretty nice app. It was very easy to use. It automatically uploaded your address book from your phone. So, dramatically improve consumer experience. But if we’re talking about a platform business model, that means we have more than one user group that we are serving, like eBay, Amazon, Alibaba, YouTube. These are all multi-sided platforms, which means they have multiple user groups. So when you ask that first question, sometimes the answer can be about the consumer. You know, YouTube is a dramatically better viewer experience. Like it’s free, you can watch everything, there’s gazillion videos, it’s great, you can watch it on your phone. That’s a dramatic improvement to cable TV in many ways. Not in all ways. But there’s another user group which would be the content creators. Sometimes the dramatic improvement can be on the other side of the platform, not for the consumers. And we’re going to do some of these cases today, Luckin, Hello Bike, Grab, and Lazada. And we’ll talk about sometimes the dramatic improvement can be to another user group. A lot of what Facebook and Google are doing is they’re providing dramatic improvements to merchants and advertisers who want to micro target consumers, which they’ve never been able to do before, but now they can because of AdSense and Facebook marketing. Think about that phrasing, a dramatic improvement in the user experience. And you also have to sort of think about, okay, the experience is not just like buying a pair of shoes. Sometimes it’s an ongoing relationship where, you know, like someone creating videos on YouTube, you sign up or TikTok, you start creating videos, it’s very easy, you get a lot of traction very quickly, you get a lot of viewers very quickly, that’s very satisfying. Content creators love that, but it also creates a long-term relationship with the platform. So you need to think about the whole span of the user relationship. So the user experience is not just a one-off transaction. It can often be a long-term relationship. So that’s digital superpower number one, dramatically improve the user experience. does it enable a platform business model to emerge or to be part of this industry? And the podcast, this is in the show notes as well, podcast number four, how did Alibaba beat everyone? That was kind of an introduction to platform business models. Okay, now I’ve sort of said like, when a digital tool emerges, sometimes it enables a platform business model to jump into an industry where it hadn’t been before. So when GPS started getting added to smartphones, that enabled companies like Uber, because basically it digitized location, location information became digital. It enabled a company like Uber and later Didi to jump into this business, ride hailing, taxi hailing, ride sharing, taxi hailing. and create a platform business model where there wasn’t one before, which was devastating for taxis, it’s been very difficult for rental car companies, and has had some impact from car ownership as well. So that would be something to look for. Does a platform business model emerge? Now within platform business models, you know, I’ve made the distinction of platform business models and network effects. Not every platform has a network effect. Not every network needs to be on a platform. I define my personal Jeff definition of a platform business model is you’re serving more than one user group at the same time. And your primary role is to help those two user groups do an interaction successfully, whether it’s viewing a video, buying something, finding someone to date, communicating with your friends, making a payment, whatever. And within there I’ve sort of listed five different platform types, which I’m not going to go through here. Some people think there’s two or three different types, other people think there’s seven different types. I think there’s five main ones right now, but there’s a lot of debate about that. Okay, if you have a platform business model, even if you don’t have a network effect, you’re still going to have certain advantages. And the biggest advantage is your ability to price subsidy, to price shift. that suddenly if you’re a media company, you don’t have to sell your magazine for a dollar or two dollars or five dollars because you can charge advertisers and give it away to the reader for free because you have two user groups, advertisers and readers, as opposed to one user group which is like, you know, people going to the movies, there’s one user group, the customer. If you have two user groups… you can shift your pricing from one side to the other. Now, maybe you don’t give it away for free, although giving something away for free is a really powerful move. Sometimes you just subsidize it. You make it a little bit cheaper. And the more user groups you have on a platform, the more ability you have to shift that around because you can shift from two to three users to four users to five users. And generally speaking, the more user groups you have on your platform, you tend to win. A two user group platform tends to beat a traditional product or service company, not all the time, but a lot of times. A three user group platform beats a two, a four beats a three. It’s a powerful move. So that’s sort of one soft advantage you can get by being a platform. Another is the chicken and the egg problem, that if you want to become a platform, it’s actually quite difficult because to get one user group, you have to get one group. And then to get that, I’m sorry, to get one user group, you already have to have the other one. And to get that one, you have to, so like, if you want drivers, you have to have riders. But if you want riders, you have to have drivers, right? And so that first step of breaking into the business, market entry, barrier to entry, there tends to be a natural barrier to entry on two or three sided platforms. Especially if there’s an incumbent in there who’s defending aggressively. That tends to be another soft advantage. There’s several advantages just being a platform business model, as opposed to a traditional, you know, vertically integrated or pipeline business. So that’s sort of number two, digital superpower number two. If a platform business model emerges, that’s a big, big deal, and you always have to be on the watch for that. Superpower, digital superpower number three is network effect. I’m going to talk a lot more about network effects. This is something we’re going to go into in subsequent podcasts because it’s actually quite complicated. You know, network effect is okay, the more usage you have of your service or product, the more activity you have, the number of users you have, the better the product or service becomes. So the standard example I always give. If you go to KFC and I go to KFC, your chicken doesn’t taste any better because I went to KFC. But if you’re on WeChat or WhatsApp, my WeChat and WhatsApp just got better because there’s more people I can call. If you became a merchant on Lazada and I’m a buyer on Lazada, it just got better for me because there’s more people I can buy from. So it’s a feedback loop, network effect, But basically, it’s the idea that the more activity users, it depends on what metric you’re looking at, the more going on, the more usage that happens, the better the service or product becomes. And that tends to mean that the market usually tends to collapse to one or two players quite quickly because the player that is a little bit bigger actually has a superior service, so more people go there. It tends to grow more quickly. The customer acquisition costs tend to fall more quickly as the network effect goes on. Couple things to keep in mind on this. Network effects don’t go on forever. There’s usually a phase at which as you’re adding more users or more activity, the product or service gets better. But then at a certain point you add more and more and it doesn’t get any better. A lot of them do flatline very quickly. Some of them go on for a long, long time, like marketplaces have that. Others don’t. Like, you know, the more people that add Facebook doesn’t really help me, because I don’t talk to 10,000 people. I only talk to a couple hundred people. So after a certain point, more people joining Facebook doesn’t help me. So it kind of flatlines. It’s a problem for ride sharing. It flatlines very quickly. So one, it doesn’t go on forever. A network effect is a very powerful phenomenon. It’s a feedback loop, it’s a positive feedback loop, but no positive effect phenomenon goes on forever. Trees are a very powerful sort of organism, but they don’t grow to the sky. They don’t grow to 10 miles high. You know, they grow very fast to 10 or 15 or 20 or 100 feet. they don’t grow to a mile into the sky. So even that powerful effect taps out after a while, and that’s true of literally everything. No powerful phenomenon goes on forever. So that’s something to think about. All network effects are not the same. Some are strong, some are weak, some go on for a long time, some go on for a short time, some are international, some are only regional, some are very very local. You know… If I’m on Grab and I’m looking for a ride to the airport, I don’t really need Grab to be in California. It doesn’t help me if they have a bunch of drivers in California. It helps me in Bangkok. I don’t really need them in Beijing because I can go use another service. That’s a very local network effect. But it’s a big thing. The other thing to keep in mind in network effects is they go in reverse as fast as they go forward. like positive feedback loops are powerful, network effect, negative feedback loops are also powerful. So if all the women start quitting a dating site because there’s a bunch of men behaving badly, which is a problem, once they start to leave, then all the men leave because the women are leaving, and then the men are leaving, so the women leave, it works in reverse. So if these platform business models start to have a problem, they have to jump on it very quickly if they’re based on a network effect because it can ramp down very, very fast. All right, so that’s number three. Three more. Number four, digital superpower number four, another competitive advantage. Now I think network effects are a competitive advantage. They’re a hard advantage. Demand side economies of scale is how they’re often referred to. I’ve laid out quite a few competitive advantages. I will do another talk. I have a whole list of these I go through, but I’ve mentioned switching costs. In the last talk, podcast 36, I talked about share of the consumer mind, switching costs, search costs, a temporary supply, demand and balance. Those are sort of revenue side competitive advantages. And then there’s some cost side competitive advantages. And then there’s some external ones, which are like government involvement and things like that. So, anything that has a competitive advantage that gets created is worth keeping an eye on. And you have to keep in mind that these can be on, if you’re talking about a platform business model, this can be to any of the user groups. So, a company like DD, Uber, actually doesn’t have too much of a hold on the riders. people switch between Uber and Lyft and DD and Grab quite quickly. They don’t have any switching costs, they don’t have a share of the mind, searching costs are zero. But if you look at the other user group on those platforms, which is drivers, they actually have a pretty good hold on the drivers in many cases. So these competitive advantages can be specific to each user group on the platform. So you got to think about each one, one by one by one. And I think this is like Dee Dee’s big thing, that what Dee Dee has been doing for the last year has been building out their switching costs on the driver side of their platform, which is a good move. So that’s number four, that’s a big bucket. Having another competitive advantage besides network effects. Number five is virality, which I did a podcast on as well. And virality, people get that confused with network effect all the time. Virality is just a sales mechanism. People call it a growth mechanism. It’s not necessarily a growth mechanism. It’s a sales mechanism. It’s group buying, where I’m going to buy some tissue paper on Pinduo Duo and the price is 10 kuai, but if I reach out to two of my friends and we all buy together, I get a price of 8 quai, we all get a price of 8 quai. I have effectively become a sales agent as a customer for their company. I’m finding other customers for them. So group buying is a type, it’s sort of a sales mechanism where you turn your users into sales agents for the company. Another common example of this is Zoom. I wanna do a Zoom video call with someone, I send them an invitation. to do the call with me, they have to sign up for Zoom. I’ve become a sales agent, I’ve recruited them, they are now a Zoom customer as well. Payment platforms have this, communication platforms have this, a lot of enterprise software is this way, group buying. People often associate this as a growth mechanism, a lot of Silicon Valley venture capital talk about, virality as a growth mechanism, like Dropbox and Zoom. That can be true. It doesn’t have to be true. You can be a very, if you’re a very stable business, I don’t know, like VIP shop or something, you’re always going to be losing customers. Always. No one has 100% retention. So you, it helps if you have a sales mechanism that helps you always find new customers and bring them onto your platform. So it can be a customer acquisition mechanism, a sales mechanism. without showing you net growth. Both of those things are important. And one of the reasons I put this on as one of the superpowers is because the cost of acquiring customers is getting higher and higher. There are so many videos to watch and so many products to buy, and there is a limited time and attention of each consumer in a 24 hour period. So, The demand is somewhat flat relative to the supply. It’s getting harder and harder to get customers and get people’s attention. And so if you have a sales mechanism like a viral mechanism, that’s a big deal. So that’s number five, digital superpower. And number six is the easiest one. Digital superpower number six is scalable, scalability. One of the nice things about digital economics. There’s zero marginal production cost. I make a book, I create an e-book, it takes me six months to write it and edit it and publish it. The first copy was a big pain, but once I create the first copy, the second copy is literally Ctrl C, Ctrl V on my laptop, and I have two copies. The second version has no cost. A lot of digital goods have this phenomenon. It’s very powerful. And if you apply that into a business model, you can become very, very scalable. So Facebook, you know, 2.5 billion users, Google is everywhere. WeChat is everywhere in China. Uh, Netflix is in like a hundred, I don’t know how many countries they’re in, 200 countries now, you know, these digital first companies are incredibly scalable. It doesn’t have to be internationally scalable, although that’s pretty nice. You know, even my class here, I have customers from everywhere. Now I want to say customers, subscribers. I mean, literally everywhere. The Middle East, Brazil, Russia, Germany, Thailand, the US, Canada. I mean, it’s everywhere. It’s a nicely scalable business model. So anytime you can leverage in the economics of digital and become easily scalable, that can be very, very powerful. And that’s number six. So the list of the sixes in the show notes. Number one, dramatically improve the user experience. Number two, enable a platform business model. Number three, network effect. Number four, some other competitive advantage. Number five, virality. Number six, scalability. Those are my six. That’s a, it’s kind of a cheat sheet. I find it very helpful. And… With that, let’s talk about some cases or some examples, and I’m going to ask you to make the decision on whether they have any of these six digital superpowers. Okay, so for the first two companies, let’s talk about Grab and Lazada. So this is for the people in Southeast Asia, especially Thailand. These are very big companies in Thailand, but they’re pretty big across Southeast Asia. And they’re really important to watch. The reason I’m sort of choosing those rather than say Amazon or Alibaba or Tencent, is they’re a little simpler. I mean, Lazada is really a simple, marketplace platform. There’s merchants who are one user group who are selling and then there are consumers who are buying. And they haven’t moved into entertainment and they haven’t moved into new retail and they haven’t moved into payment processing and all of the crazy things that Alibaba is doing. So it’s a little bit more of a pure breed and therefore I think it’s easier to talk about in terms of these six digital superpowers. And for the same reason we’ll talk about Grab, which is basically like pretty much like Uber. You know, it’s food delivery and it’s taxi hailing. And then in some countries it’s also ride-sharing, but not in Thailand. Okay, so let’s talk about Lazada first, which is, you know, it’s a marketplace platform. Let’s say we’re talking about Thailand, but we could be talking about any country in Southeast Asia. There is some cross-border stuff, obviously, but it’s mostly a domestic phenomenon. Alright, you have a lot of merchants, a lot of brands selling, and then you have a lot of consumers buying. Fine. First pass, simple analysis, does it have any of the six digital superpowers and just run the list? And I’ll talk through this one and then I’ll ask you to do a couple companies. So does it dramatically improve the user experience and the users can be the consumers or it can be the merchants and the brands? And I think for the brands and merchants, the question is, I think it’s absolutely yes, especially for SMEs, small and medium-sized enterprises, and most marketplace platforms build themselves off SMEs, not the big brands. Jack Ma has talked about this for literally 20 years, that he is in the business at Alibaba, although he’s gone now, you know. he is in the business of creating digital tools for SMEs that level the playing field, that let them do the things that only big businesses used to be able to do. So, you know, if I’m in Thailand, I can buy, I buy coffee through Lazada and it’s from a small farm, a small business in northern Thailand and, you know, they just grow the coffee themselves, because there’s coffee here. they ship it to me and I found them through Lazada. Now how could a company like that ever have reached me as a consumer without this platform? I mean they’d have to get into shopping malls, they’d have to get into Tesco, they’d have to… they’re too small. It’s a handful of people that are growing coffee and they bag it and they sell it and it’s great. So for SMEs, small merchants, niche brands this is a game changer for them. Not only can they sell in Thailand, but they can go cross border. They can sell across Southeast Asia. I can buy from Chinese merchants, SMEs here in Thailand. I have to wait a little longer because it comes through customs. But yeah, definitely for merchants, it dramatically improves their experience. For bigger brands, it’s a bit of a mix. A company like Zara is already pretty powerful. A company like Tesco is already big. Coca-Cola is pretty powerful. I’m not sure it changes their world dramatically. It’s mostly for SMEs. Okay, what about the other user group, which would be the consumers? Does it dramatically change the consumer experience in let’s say Thailand? Yeah, I think it’s a pretty big jump. I mean, you can go to the shopping mall, like you can go to the Tesco, you can go to the Walmart, whatever, and it’s pretty great. But the spectrum of goods you can buy online is pretty amazing. It’s open 24-7. You can read about reviews. I mean, it brings a lot to the table. So I think it’s good. I think it’s not as powerful as it is for the SME’s merchants. But I think it’s definitely good. OK, so I think it’s got number one. So what about digital superpower number two, which is, does it enable a? platform business model. Yes, I mean, clearly that’s what Lazada is by definition. It’s a marketplace platform business model that enables interactions, transactions between merchants and consumers. Now, they will probably move closer to entertainment over time and start to add content creators and other types of user groups. But for now, it’s you know, it’s a pretty Basic marketplace platform. So yes number two it has it was designed to be that way Number three does it have a network effect? Oh and within the platform business model, you know, they’re making most of their money off Merchants and brands not consumers. So they’re not charging huge transaction fees You’re not paying 20% more because you’re buying it through lazada They’re making most of their money off marketing and other services to merchants Okay, number three, network effect. Yeah, I mean, it has a network effect. It has a couple of them actually. You know, the more consumers that come to the platform, the more valuable the platform is to all the merchants and brands, the more merchants and brands that are on the platform, the more valuable it is to consumers. So it’s an indirect or a two-sided network effect. You can also say that there’s some one-sided network effects going on. The more… personalize the site becomes to you. So you go on Lazada, you shop, it starts to see what you like to buy. It also knows what other people are buying. So it gets smarter. It starts to personalize and only show you things you like, which sort of increases the value of the service. So sometimes people refer to that as a data network effect. Some people call it a learning platform. It’s a type of network effect. I don’t think it’s exactly the same thing. And you could also argue that reviews, user generated content, when people go there and they leave merchant reviews, every review that’s done is more valuable to other people. It makes the site better. So there’s some other phenomenon going on there. But the predominant network effect is obviously between the merchants and the consumers. And it’s pretty regional, or at least country specific, and maybe across Southeast Asia, but it’s mostly a country wide phenomenon. not local, you know, it’s not just Bangkok, it’s clearly all of Thailand and then to a lesser degree Southeast Asia and China. It’s pretty much a linear increase. The more merchants and brands that are on there, the value to the consumers does keep going up. It doesn’t flatline very quickly. So you have sort of a linear increase in the network effect and that’s pretty good. So it has number three. Number four does it have other competitive advantages? Yep. It’s got quite a few of these actually I’m not going to go into all these but on the merchant side You are really getting merchants to especially the SMEs to build their business on your platform You know a lot of SMEs. They’re not building a separate website. That’s ever going to do a lot of traffic You know, they’re building the business on the website. There are a lot of switching costs in that That would be one. Share of the consumer mind. It becomes part of the daily life or weekly habits, sorry, the daily habits or the weekly habits of consumers. It’s just one of the companies you always use. We’d call that share of the consumer mind. On the cost side, you have to build all these warehouses and have all these trucks and all that stuff. So there’s economies of scale in logistics. There’s also some economies of scale in IT. There’s a whole lot of competitive advantages being built there. So yep, it’s got those two. Number five, is it viral? No, it doesn’t have virality at this point. If they start to do group buying, it could. But, you know, for me virality, it has to be turning your users, which could be merchants or brands, into sort of agents, sales agents that drive and complete transactions. So word of mouth, talking about what you bought, sharing it, that’s all good, that’s a type of marketing, but I don’t consider them being sales agents. So I don’t really think it has virality at this point, although people can argue that. Number six, is it scalable? Yeah, I mean, it is pretty scalable. You can have one app that covers all of Thailand, all of Southeast Asia, you know, like there is one for China, which would be Alibaba and JD. So it is scalable. It’s not hugely scalable. It’s not like TikTok. It’s not like Facebook. It’s not like Google, because those are pure digital creatures. There’s no physical aspect to those companies. If you want to grow Lazada or Alibaba or JD, you have to build a lot of warehouses. You have to hire a ton of people. You have to have robots. You have to have trucks. So it has a big physical component that doesn’t scale as well as a purely digital creature. So my quick back of the envelope assessment in terms of this company would be, it’s got digital power, one, digital superpower, number one, two, three, and four in a major way. It doesn’t have five, and it’s got some six, some scalability. That would be my short assessment, which I think is pretty, I think that’s pretty much on the mark. Another example, we’ll do this one a little quicker because we’re getting out, running out of time. Grab is basically like Uber. They have three core businesses, which are transportation services, food delivery, and payment. That’s what they’re going for. And with different degrees of success in those three, which is pretty much like Uber, Uber Eats. Although Uber Eats has, although they have Uber Freight, and then they’re trying to do Uber Pay, which I think they gave up on that. Let’s say we run the list for Uber Eats, which is the more interesting business, I think. Does it dramatically improve the user experience? Obviously on-demand food delivery consumers love this. Not just from the major chains that can afford to have delivery people, but from any little restaurant consumers love being able to have every little restaurant in their neighborhood delivered to them. It’s awesome. The restaurants who are the other user group. to keep in mind on this platform for food delivery. It’s pretty powerful for them too. You know, your typical small restaurant has a high fixed cost structure. You have to have a certain number of chefs and waiters and such on staff, even if you only have a couple customers in the restaurant. So you have a lot of slack capacity which you can now sell online and sort of make more money. Otherwise, it’s just free money. and you get a delivery capability you would have never gotten. You get an online presence you would have never gotten. You can reach consumers in your neighborhood, not being dependent on them walking by like you normally have been. It’s a pretty dramatically improved experience for restaurants, especially small ones. So it has number one on both sides, both user groups. Number two, is it a platform business model? Yes, it’s designed to be a platform business model from the get-go. Does it have a network effect? Yes, the more consumers in a neighborhood that buy from Grab food the better it is for every little local restaurant the more restaurants you offer You know, you can look at tons and tons of restaurants indirect network effect That’s great Pretty similar to Lazada. Does it have other competitive advantages? Yep. You have share of the consumer mind on the consumer side companies like mate one are really good at building in operational integration with restaurants. They’re basically trying to become the operating system for local restaurants. So they’re giving them like, you know, free software to run their entire business. They’re basically building and switching costs with little restaurants. There’s a lot of interesting competitive advantages. Is it viral? Nope. Is it scalable? Yeah. Yeah, probably more so than Lazada. So, I mean, this picture, it’s basically the same type of business. If Lazada is a marketplace platform for products, Grab is, Grab food aspect, is a marketplace platform for services. So they’re different, but a lot of the simple top six digital superpowers pretty much look the same, even though they are very different businesses. So I’d say the same thing. It’s got one, two, three, and four. doesn’t have five, probably a little bit more scalable than Lazada because you don’t have all those warehouses. Although you do have all the drivers. So okay, those are sort of two examples. Both are basically similar business models at the highest level. So you get a similar answer to the six digital superpowers. All right, that’s enough of me talking. Let’s, let’s have you give it a shot now. I’ve given me to give you two companies. Choose one. It can be Luckin Coffee, which is we’ve talked about before. It’s a digital first company. They went public as a, we’re a digital tech company that does retail coffee. That was their pitch. Um, you know, run the six digital superpowers for Luckin Coffee. Or if you don’t want to do Luckin Coffee, another one you can do is MoBike or HelloBike, which is these bike sharing companies of China. Again, both of those are pretty simple businesses. One is just selling rides on bicycles. One is just selling cups of coffee. So there’s not a lot of complexity in what they’re selling as a product or service. But they both position themselves as sort of digital first, digitally transformed, digitally innovative companies. So choose one of those or both and run the list of six. And the list of six is in the show notes. So you should be able to look at it. and they are, you know, I’ve mentioned them many times. So pause the recording, do one, do both, and just run the list and decide do they have them and which one. Okay, so do that now and then please come back. And welcome back. Did you do it or you just listened to the podcast and didn’t do it? If you didn’t do it, press pause now. It’s really 10 times more valuable if you take a stab at this stuff. So if you didn’t do it, pause now. Otherwise, let’s talk about that briefly and then we’ll finish up for today. Okay, I think luck in coffee is the simplest one. The idea was we are basically going to sell coffee through a mobile app. And by selling through a mobile app, you know, you buy it through the app and then you either have it delivered or you walk down to a local outlet and pick it up when it’s ready. Or maybe you sit in the store and you drink it. But 90% of their outlets were designed to be just walk down, pick it up and leave. So because they did it that way, they didn’t need all that real estate Starbucks has. They didn’t need all these sit down stores, all these sofas, all these tables. Most of their outlets, which they opened very rapidly, were just like counters. I mean, it was just like the lobby of an office building would have a small counter. with one or two people and when the app said it was ready, you just walk down, the coffee would be on the table, you’d pick it up and you’d go back to your office or you’d go back to your home. So that was their level of innovation. We said they took retail coffee, everyone knows what a coffee shop looks like. They got rid of the real estate and the staff and you would order on your phone, walk down the street, pick it up and walk away. It was an order and pick up model, which was clever. That’s a very innovative idea. OK, so let’s run the list. Does this dramatically improve the user experience? Now, in this case, there’s only one user, which is the consumer. My take is no not really I Can walk into 7-eleven and buy a cup of coffee? I can walk down the Starbucks walk in buy a cup of coffee I can order on my phone walk down to the Luckin pick up my cup of coffee. It might be a little more convenient In terms of just getting the cup of coffee, but it wasn’t a game changer and Also, you know, this was just for ordering a cup of coffee A lot of what Starbucks is selling is the experience of sitting down and having a chat with your friend. If I’m just ordering a cup of coffee, I can get that at Tesco, I can get that at 7-Eleven, I can… So, you could argue it was a little bit more efficient. I don’t think it dramatically improved it. That was my phrase. Dramatically improved the user experience. I think no. I think it’s mildly more convenient, maybe. So I say no. Number two, is it a platform business model? Nope, there’s only one user group. Is there a network effect? Well, if more people order from Luckin, does that make my coffee better? Nope, no network effect. Does it have any competitive advantage? And my answer to that was no. And this is actually, I was on, it was Bloomberg TV. And this was about the time Luckin was going public. And. You know, they kind of said, Oh, it’s a tech company, Jeff, what do you think about LuckinTV, you know, Luckin Coffee? And my main thing was, look, it’s not clear that Chinese consumers like coffee, which is a problem, but even if they do like it, what’s to stop 10 other companies from doing the same thing tomorrow? Like why can’t 7-Eleven just create an app and do exactly what you do? Why can’t 10 other companies get launched in Beijing next week and offer an app? with 10 pickup counters. Like why it doesn’t seem to, that was my main point. I don’t see a competitive advantage. So even if you get a lot of usage by consumers, how do you protect it? Because a lot of people will come after you. So I don’t think they had a competitive advantage. Is it viral? Nope. So one through five, no, no, no, no, no. Is it scalable? Number six. I actually do think it’s scalable. I think this is the one thing that was very powerful, moderately powerful in their business model by getting rid of all that real estate and just being little counters in an app. They were able to open 2000 outlets in their first year, 2000 in their second year. And Starbucks had 3500 or so outlets after 20 years. So it was a very scalable model. So I thought they had number six. So out of one through six, I saw number six. That was my take on Luckin. Hello Bike or Mobike. A little more, I thought a little bit more compelling. Does it dramatically improve the user experience? Now in this case, there’s only one user group, which is consumers. It’s not a platform. It’s not bike sharing. There’s no sharing going on. It’s like a vending machine business. You put the bikes on the street, people walk by, they buy it, if they feel like it, it costs a dollar. does it dramatically improve the experience of using, owning or renting a bicycle? And I think the answer is yeah. I think people really love those bicycles in China. I ride them all the time, almost every day. They’re everywhere. You hop on them, you ride three blocks, you kick off, you forget about it. It was super convenient way to ride a bicycle from the subway to your office, to your home. So I think they actually did. DD bikes and even OFO before they sort of cratered. I thought they had a very powerful and impressive consumer experience. I thought it was really great. People do love the bikes. It doesn’t mean it’s profitable. It doesn’t mean it’s going to make you a tech god. But I thought, you know, I thought we saw that in their usage. That people really like riding those bicycles. So I think number one they did dramatically improve the user experience. And if you were a bicycle rental business, like a traditional one, they basically put you out of business. If you were like, please come into our shop, sign a contract, leave us your driver’s license and rent it for eight hours to ride in the park. I mean, they put those businesses out of business. So I thought it had number one, two, does it have a platform business model? No, there’s no other user group. Does it have a network effect? Eh, you could argue their data is valuable. Um, I think no. You could argue the more bikes you have in a city, the more convenient it is because you can always count on a bike. I think that’s just scale. I don’t think that’s a network effect. Does it have another competitive advantage? Uh, I think it has a share of the consumer mind. I think people who ride these bicycles ride them every day. A lot of people ride them every day, every two days to work and back. So I think they do have a presence in people’s mind. Outside of that, they’ve got some mild stuff, nothing terribly impressive. I actually met the founder of Mobike in the first year they opened. I went down to their headquarters in Beijing and sat with Hu Weiwei, who was one of the founders. And my question for her was, are you going to do subscriptions or memberships? And she basically said no. You hop on the bike, you pay for the bike ride, which is like 10 quai or five quai or one quai back then. It’s pay as you use it. And she said no. But my question was really about switching costs. Are you gonna sign people up for subscriptions? Because that will lock people in to some degree. And I was trying to figure out if she was going for another network effect or another competitive advantage and the answer was no. Is it viral? I don’t think it’s viral. I think they have a very powerful word of mouth, because when you ride the bicycle, everyone sees you riding the bicycle. They have sort of natural marketing. I don’t consider that virality, but I think it’s a powerful marketing mechanism, not a powerful sales mechanism. If I ride the bike, that doesn’t make anyone else rent a bicycle. But if I ride the bicycle, I am doing marketing for them. So they’re turning their users into marketing agents. but not sales agents. So no. Number six, is it scalable? Yeah, I think it’s pretty scalable. Once you get the tech built, you can pretty much dump these bicycles on the street one after the next. And they deployed five, 10, 15 million of these bikes in China in a year or so. So when I look at Hello Bike, Mobike, I think they had digital superpower number one. I think that was their biggest lever. was it was a great consumer experience upgrade. That was their biggest thing. They had some mild competitive advantages, number four. They didn’t have two, they didn’t have three, they didn’t have five. And I thought they were scalable, number six. So I think they were kind of one in six and a bit of four. And I liked them sort of better than Luckin. But that’s basically my take. Do you agree with my assessment? I mean, send me a note if you think I’m wrong, or put it in the comments or send me an email or something like that. I’d like to hear your thinking. I mean, this is just a simple first pass, back of the envelope sort of analysis that sort of guides me. It helps me sort of know where I should dig deeper. Cause you can look, when you look at a company like this, any of these companies, you can look at anything. There’s so many factors you could look at. This sort of gives me a target list to dig deeper in. and then I go from there. That’s just first pass. Anyways, if you disagree or you know, let me know what you think, send me an email. And I think that’s it for today. I hope that was helpful. I think this is sort of a good bookend to the first, you know, 25 learning goals. And we can sort of put this as one and then we’ll begin something new next week and we’ll start building the next level. So anyways, I hope that was helpful. As for me, I am going to go take a walk on Well, it’s not really beach where I am. It’s more like a rocky shore, but I’m going to be here on the island for another three to four days and then fly back to Bangkok where I hopefully will not get quarantined on arrival. I don’t think I will, but you know, if the audio quality is not awesome next week, it’s because I didn’t make it back to my apartment and I got quarantined somewhere for a week or two. So we’ll see what’s what. Anyways, I hope this is helpful. Welcome to everybody who just signed up. and please do your homework for this week. And if you haven’t signed up, please go over to and sign up there. There’s a free 30 day trial. That’s it for me. I will talk to you next week and cheers from the south of Thailand.

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