KEY QUESTIONS
1. How do you scale processes beyond your company?
2. How do you leverage your user/developer ecosystem to create value?
Every business is an engine. It needs to do a certain set of things
repeatedly to create value. If you haven't figured out that set of
repeated operations, you probably haven't created a scalable
business yet.
Ford needs to repeatedly assemble cars, Google needs to repeatedly run its crawler, Facebook needs to repeatedly get users to interact with other users.
THE BUSINESS ENGINE AND REPEATABLE OPERATIONS
Every business goes through three stages:
THREE APPROACHES TO BUILDING A BUSINESS
So this is the formula for building a business. You figure out how you are creating value. You identify a set of operations that repeatedly create value. You figure out a way to efficiently conduct these operations repeatedly.
There are three broad ways that businesses conduct these operations repeatedly and get things done:
Let's think through the problem of navigating the web for the most relevant information for the day. Three companies try to solve this in three very different ways:
These three approaches correspond exactly with the three models for problem solving, mentioned in the previous step.
A BREIF RECAP OF THE THREE APPROACHES TO PROBLEM SOLVING
The 'stuff' approach: How can we create more stuff whenever the problem crops up?
The 'optimization' approach: How can we better distribute the stuff already created to minimize waste?
The 'platform' approach: How can we redefine 'stuff' and find new ways of solving the same problem?
Essentially, the three approaches to building a business now are: The 'stuff' approach: Get employees to do the workThe 'optimization' approach: Get algorithms to do the workThe 'platform' approach: Get users to do the work
Depending on which approach you take, the way you build your company could vary significantly.
A platform thinking approach to building a business involves figuring out ways by which an external ecosystem of developers and users can be leveraged to create value. The iPhone app store does this, YouTube does this, and so does Wikipedia.
UNDERSTANDING REPEATABLE OPERATIONS
It's important to note that we are talking about repeatable operations. Writing code is not a repeatable operation. It is a one- time infrastructural activity, similar to building out the assembly line or setting up the factory. The operations that the code automates (e.g. login management) are the repeatable operations.
WHY ECOSYSTEMS, NOT ALGORITHMS, ARE YOUR COMPETITIVE ADVANTAGE
Most problems that could be fully automated are already automated today. The next level of scale will come not by automating alone (and letting algorithms alone do the work) but by leveraging an ecosystem ( and letting algorithms synchronize disparate actions).
There are very few companies that compete purely on the strength of algorithms. Google is a rare example of a company whose competitive advantage lies in a set of very complex algorithms that it fiercely protects. Facebook, Twitter, YouTube etc. compete not on the strength of their algorithms but on the strength of their ecosystems.
The algorithms are easily replicable but the ecosystems aren't. Hence, building a business where the ecosystem scales the value creating operations is quite different from building a technology- only company.
PLATFORM THINKING AND SCALE CONSIDERATIONS
Scale is achieved by making repeatable processes more efficient (faster/cheaper) and effective (accurate).
One of the ways to infuse platform thinking into your business is to look at a problem that is being solved manually, and repeatedly, and see if it can be solved by external users instead.
Facebook realized that it would have to translate its interface for every new foreign language. The norm was to do it with an in- house or outsourced translation team. Facebook chose to crowdsource it, building not just a more scalable model, but in many cases, better translations as well.
This is also demonstrated in the evolution of an online community. Quora started off with employees asking questions and answering them. Over time, it transitioned both these activities from the employees to the users.
The problem that comes with this, of course, is that you let out control and with that you need to build in checks and balances to ensure that no one is gaming the system. Quora and Reddit offer good examples of bringing in these checks and balances and scaling them along with the community.