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How platforms will eat your business

by Matthew Smith | 17 May 2017

Most people have heard the phrase “fourth industrial revolution” to describe the current period of global change, but few have lifted the hood on this period with as much detail and insight as Adrian Turner, Data61’s CEO. #5 How platforms will eat your business

What’s driving the change – change of businesses, economies and the way we live our lives in general – are platforms, Turner explains.

No industry will be immune and technology companies that are purveyors of these platforms are set to get bigger and bigger, he says. 

Platforms are infrastructure on top of which third parties, including customers, create additional value, blurring the lines between producer and consumer, Turner outlines in an op-ed in the Australian Financial Review published recently 
here.

While during the industrial era we focused on the manufacture, delivery and servicing of products in a one-way flow of value from corporation to customer; in a data-driven world corporations co-create value with customers and partners, Turner says.

The first industrial revolution occurred in the late 18th century with the invention of the steam engine, the second in the late 19th century with the arrival of the internal combustion engine and electricity, the third occurred in the 1960s when transistors became a dominant technology, which underpins every electronic device we now take for granted including cars, TVs, mobile phones and internet-connected devices.

The World Economic Forum devoted its annual meeting at the start of the year to the fourth industrial revolution, which InFinance covered here.

Capitalism into feudalism

“Think about our eBay posts. Or take Facebook. We create the content, the companies provide mechanisms to facilitate our interactions. We get some utility; they get to capitalise on our posts. When Alphabet, the largest media company in the world, produces no media content it’s more like a feudal system than a capital system,” Turner notes.

At the core of platforms are learning algorithms that make automated optimisation decisions using data feedback loops, Turner continues.

“These algorithms are mathematical formulas that… make decisions that affect every aspect of business and our lives; whether we’re creditworthy, whether there will be a spike in energy consumption today or whether a medical intervention is needed,” Turner says.

Possibly the most well-known platform in the world – retailing platform, Amazon – has been making waves in local press and amongst retailing companies as it makes its service available in Australia.

InFinance raises the possibility Amazon will be a competitor in the SME loans market in this recent article.

Unbundling

Platforms blur industry boundaries by unbundling the vertically integrated offerings of today, Turner points out.

Tesla is now an energy platform company, with the car and home as consumers and producers of renewable energy.

Apple, too, is evolving into a healthcare company with its HealthKit apps, which have quietly moved the focus to health diagnostics using the company’s sensor-laden electronic devices and app developer ecosystem, Turner notes.

Uber has its sights firmly set on transportation and logistics with the acquisition of Otto, an autonomous vehicle software company. It’s a move that shows the company is gunning for UPS, FedEx and our own Australia Post, Turner says.

“These structural changes are not yet part of the Australian psyche,” Turner notes.

“Their abstract nature, coupled with our infatuation with technologies that make our lives easier, make us blind to them. What we are going through is a wholesale restructure of the way we work, live and play underpinned by a whole new basis of competing: platform economics,” he says.

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