BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

How To Succeed Like Apple and Amazon

This article is more than 10 years old.

Apple Inc CEO Steve Jobs (Image credit: AFP/Getty Images via @daylife)

Apple and Amazon are forcing analysts to rewrite the rule books. Neither conforms to the linear growth patterns of the past. Apple's results seem barely believable, they are so far off the scale. And Amazon, a retailer, the disruptor of big box stores, stepping into own-device production and then growing an apps community, and a content production community.... companies are supposed to focus on their core competency not just pick and choose what they want to do.

But these two champions of American enterprise are showing the way. They are leaving the majority of companies scrambling to uncover what, exactly, would allow them also to ignore the basic tenets of management theory, and to succeed wildly.

Yesterday, I said the cornerstones are: Platform, ecosystem, connectors, Cloud, and a new form of leadership. Those five dynamics allow new things to happen. But what about the how-to? What are the essential lessons or the right steps to take for big or small companies? It's complicated of course but here are some topline actions that challengers need to think about.

#1. Core competency is dead and if it isn't kill it off

The idea of core competency grew in an era where enterprises wanted to be conglomerates. It was accompanied by plenty of evidence that once a company tries to step outside what it knows really well, once it tries to use skill-sets it has not mastered, it suffers. Today, and into the future, a company needs to manage interactions - and at huge scale. That's the basic skill. Master it and Amazon-style adjacencies become possible.

Imagine these new facets of industrial/commercial economics that make it so.

a. Communications is now instantaneous and subject to huge surges, as people latch onto an idea, product, concept, personality. Wildly successful companies create platforms that allow them to manage these highly scaled, global, instantaneous communications. Examples? Siri and Kindle are interfaces to massively scaled interactions, as is Facebook (though we wait to see if Facebook has a commercial future without a device or interface innovation).

b. The ecosystem often creates the end-product. What consumers actually consume is an app or a book, an interaction. The wildly successful enterprise creates the platform on which these interactions take place, interactions that deliver to increasingly narrow bands of customer needs. The platform owner does not need to create the product or service, it needs only to enable it.

You could argue that the core competency is alive and well. We just need to call it the platform. But that would only disguise the massive shift in enterprise operating systems that has taken place. Challengers need to emulate or recreate that shift for themselves. They need a new sense of what the enterprise operating system consists of. It is not being good at customer care or invention or branding. It is the creation and management of platforms for highly scaled interaction.

# 2. Creating the platform

One of the questions executive teams began asking four years ago is: How come Apple can attract tens of thousands of developers to its platform? And get all that free labor? And those advocates? Many of the companies that saw it happen concluded: Apple has a design advantage that we can never replicate. Ecosystem business strategy is closed off to us.

Amazon of course has replicated it. It used its experience in developing a review community and it has now built an apps community as well as its vendor ecosystem and its writer community. To get it absolutely right Amazon also created a device that did what iTunes did, controlled digital rights management and made e-publishing a credible,  low friction business.

So you might ask does it need a device and IPR management value chain to work? No. Google has a vibrant ecosystem around AdWords/AdSense. There is a vast global community of people who call themselves SEO experts, who have created an educational ecosystem around how Page Rank works. There are agencies who will create copy for you, content marketing strategies and thought leadership strategies, to get you attention on the Google returns pages. Google hired none of them and paid none of them. It created the opportunity.

Being able to create opportunity for vast numbers of micro-businesses, and a smaller number of larger businesses, seems to me the essence of the platform and ecosystem strategy. To create a successful platform strategy you need history - Apple had a developer community. Amazon had experience of seeding and developing its reviewer community. To grow an ecosystem you need to have experience of dealing with large groups of people in an anonymous way, through terms and conditions not contracts. Who has that? Every company with a register button on a public website.

The platform is essentially a set of rules for how people will interact around an economic opportunity - it supports highly scaled interaction, so it needs robustness; the best platforms are seamless and never fail, so it needs investment. But if you get to the essence of a platform it is a set of rules for doing business. It is, in a sense, the rules book for ther new enterprise and ecosystem OS.

A preliminary requirement of platform and ecosystem growth is a different kind of human capability.

#3. Take the wide view of capability

When the X-Box Kinect came out one of the first things that happened to it was adaptation. Surgeons began using it to simulate operations. Animators and film makers like Bryan Robbins at Spotless Films got a hold of it and created motion capture capabilities.

Humans are more capable that we give ourselves credit for. We are trapped into a modular mindset. Work, 9-5, objectives, instructions.

The most potent invention of the past fifty years, the World Wide Web, which we all use everyday, was created by an individual in his spare time.

One of the most profound changes around us today is a well educated, intelligent, capable but highly frustrated population.  Legions of talent have to sit through the 9-5 everyday, and do the obligatory additional hours to show willing. But they want a life.

Apple let coders seek new opportunities. Amazon does it for writers. But look around. MapMyFitness does it for people whose priority is health. Forbes does it for people who want to be opinion formers. Banks could do it for people who want to achieve financial control - if only banks would think about their customers' capabilities, and how to truly enhance them.

The fact is technology is facilitating much broader expression of creativity and capability and that's how new ecosystems will grow. Companies that want to adopt paltform and ecosystem strategies have to ask: what capabilities do I unleash, which frustrated creative groups will I attract, where is the economy killing initiative that I can liberate?

#4. Creating the ecosystem

When GE launched its healthymagination program it was explicit about its purpose - to grow a new ecosystem in cancer diagnosis, care and cure. They are pouring $100 million into breast cancer, just to grow the ecosystem. Why? Because GE acknowledges that the problems it tackles are now to big for any one company. Here are the strengths and weaknesses of their approach. I hope it illustrates the present and future of ecosystems.

GE's first round of funding has gone to five worthy organizations and giant GE is partnering with each of them - at seed funding. Big companies don't do that but GE is trying to be different.

Strengths: humility, seeking knowledge, looking for new partnerships.

Weakness: not seeing the consequences of what I call paradigm completion.

GE's move is the most explicit statement that many large companies have run their course. Their paradigm is complete. Time to move on. But what GE is not doing is realizing the power of the ecosystem. Its investment are by and large within the existing breast cancer paradigm.

So here is an ecosystem approach. GE has created five new partnership. It might need 50,000. It needs to scale its interactions with many thousands of organizations, all of whom need an incentive of some kind to become involved in solving large problems. The way to do that is to invest in Citizen Science or DIY Biology because Citizen Science and DIY Biology represents latent creativity, suppressed education and intelligence, capability we need to draw on.

When GE can scale its interactions to 50,000 biologists we will see, I believe, immediate progress that will shatter existing paradigms of diagnosis and cure. That is an ecosystem approach.

It is possible for companies to create these vast ecosystems in entertainment (Google/YouTube) though it could be more widely adopted; content (Amazon and Forbes) and here too it could spread; applications software (Apple, Android) where it now dominates; and in pharmaceuticals and health care (even though the will is lacking); and in manufacturing through 3D printing.

As technology enables more people, the ecosystem approach will help overturn more paradigms. Large companies will become channels through which innovation flows, managed on platforms that enable hugely scaled interaction. The platform and ecosystem should force us to rethink work and the role of talent. In fact it already has. We're just waiting for the challenger companies to catch up.

Follow me on twitter @haydn1701

You might also be interested in:

My book co-authored with Nick Vitalari, The Elastic Enterprise. It covers many of these issues.

How the five dynamics affects leadership, covered in this article on new leadership habits.

Or an account of how Apple develops its adjacencies and strategic options.

And a look at the top ten trends in business.