Media Watch: Media

Today, platform wars ain't what they used to be. On the one hand, there's Facebook - playing a textbook game of platform strategy, but slowly suffocating the utility of its own network. On the other, there's Apple - ignoring many of the rules of platform strategy, but radically redesigning the long-suffering mobile value chain with the iPhone App Store.

How do we make sense of this? Why do Facebook's elaborate games of platform strategy seem to be destroying value, while Apple's platform anti-strategy promises to explode the boundaries of value creation in an industry where those boundaries have long been held to be fixed and immutable?

Yesterday, we saw platforms as mechanisms to strategically control complements. Strategists and economists studied platform wars intensely - with Annabelle Gawer and Michael Cusumano's excellent Platform Leadership being perhaps the reference work for strategists.

Today, I think there's perhaps a simpler and more powerful way to think strategically about platforms.

Let me advance a simplifying proposition: platforms are markets. The most useful way to think about platforms today is simply as markets.

The App Store's name is revealing: it tells us that Apple doesn't see a platform to be manipulated, but a market to be made. It is that understanding that's at the heart of Apple's furious domination of the mediascape.

Markets - and networks, and communities, as I've discussed - are strategic weapons of shock and awe. Why? Here are three ways in which they radically alter the structure and dynamics of entire industries.

Markets alter the basis of competition. Apple took something terminally closed - the mobile value chain -and pried it radically open. Facebook - still thinking in yesterday's terms - took something radically open - the www - and is trying to make it a little bit more closed.

Apple took something radically evil - the mobile industry - and is making it a little bit more good: finally, now that it's usable, there's an incentive for you to get stuff that's actually useful on your phone, instead of just being a zombie whose head is getting ripped off by suits scheming up hidden charges in boardrooms.

Facebook - still thinking in yesterday's terms - took something radically good - the self-organizing incentive for people to share knowledge with others on the www - and is making it a little bit more evil: exclude people from accessing it, trying to pollute it with ads, subvert it with pseudo-friends, silo it across mini-networks, dilute it to the point where low-quality apps proliferate like weeds.

Markets cause strategic domino effects. Markets are strategically radical: once the basis of competition has been altered, an economic tsunami is unleashed, often unstoppable. The dynamics of competition shift irrevocably. In mobile, for example, Apple's market driven approach has each player striving to be more open than the last.

Markets atomize the value chain. The App Store is radical, ultimately, because it atomizes the value chain: where once a handful of scale-driven players could produce and distribute mobile apps, today, any number of players can enter. What was once monolithic is shattered into a million pieces. If the market can coordinate those millions of pieces effectively, the new value chain is hyperefficient. The industrial era DNA of incumbents simply can't fight that kind of radical fragmentation: it's too slow, dull, unimaginative, and evil.

Ultimately, Apple is playing a textbook game of next-gen strategy: using markets to alter the basis of competition, topple incumbents with domino effects, and atomize the value chain. Incumbents playing by yesterday's rules are trying to fight a limit break with a spoon.

Facebook is doing largely the opposite: clinging to yesterday's basis of competition, signing deals with incumbents instead of toppling them, largely failing to atomize media - unless it's for zombies, vampires, and werewolves. Too often, that's where platform - instead of market - thinking leads.

What would it take for Facebook to stop thinking platforms, and start thinking markets? Well, simply start charging people for apps, for a start: that would amplify incentives for crappy apps to go the way of the dinosaur. If advertisers are subsidizing apps for people, Facebook's market will always be distorted - because advertisers need consumers more than consumers need advertisers today.

The understanding that platforms are markets is one of the most vital differences between revolutionaries and laggards across today's strategyscape. Who else knows that platforms are really markets? Google, of course. Who's blind to it, and still plays by yesterday's rules? Microsoft, AOL, Yahoo. But that's just a start: the most interesting examples come from players outside tech industries altogether: Ford, the Gap, and Bear Stearns, to name just a few players trapped by platform logic.

This conclusion also helps us answer another critical question on the minds of today's investors, entrepreneurs, and would-be revolutionaries: when will today's crop of startups start making serious cash? The answer: when they shift from platform logic to market logic.

That's a subject for another post (or maybe a book :) - for now, let's discuss. Is platform thinking holding players back - are there players who are still using platform thinking to great effect? Who do you think who should be thinking in terms of markets instead of platforms? Where else do you see players shifting from platform thinking to market thinking?

Companies just starting innovation efforts often begin by getting a group of people together and telling them "It's innovation time!" I've never seen efforts like this succeed in meaningful ways.

Instead, we suggest that companies begin innovation efforts by creating an innovation strategy that details clear targets and tactics.

Clear targets help internal innovators know what they're shooting for. A reasonable starting place is to imagine what success looks like five years in the future. Are you seeking to double your business? Hold it steady? Something else? Setting a target that is several years in the future can help to de-politicize a potentially charged discussion.

Then think about the sources of growth. How much can you reasonably expect your core business to contribute? In some industries your five-year contribution might be below today's contribution, and that's okay.

Next, look at what's already in your development pipeline. What can you reasonably expect that pipeline to contribute in the future? One tip here: make sure to risk adjust your pipeline. If you assume all of your projects will succeed, you are being wildly optimistic.

Now, calculate the gap (it will almost always be a gap) between where your projections suggest you will be and where you want to be. That gap is your target for new innovation efforts.

Then think of the tactics that are on and off the table. A lot of people think that creativity and chaos are friends. We disagree. Instead, we find it helpful to carefully consider what you want innovators to do, what you'll consider, and what you don't want innovators to do.

One way to make the tactical options tangible is to use this "Goals and Boundaries" visual (from Chapter 1 of The Innovator's Guide to Growth).

The figure (download it here) represents the "goals and boundaries" of innovation. Note how the figure includes a diverse set of elements, such as steady-state revenue, channel, business model, and brand. Customize the vectors for your context, and gain consensus about what's clearly in bounds, what's on the fringes, and what's clearly out of bounds.

Gaining consensus on this visual will help you to evaluate ideas and to guide innovators in their exploration efforts.

Formalizing targets and tactics is a great way to kick-start your innovation efforts. Start allocating resources to support your strategy, and you are on your way to innovation success!

Pervez Musharraf was the object of his affection, but George W. Bush could not save his skin. The president of the United States could not save the president of Pakistan because leaders of even large and powerful countries -- or, for that matter, of large and powerful companies -- ain't what they used to be.

Gone forever are the days when those at the top made the decisions and made them stick. The world has changed and those too myopic to see it pay the price.

Musharraf's fall from power was described by the Financial Times as being "swift." But it was not. For well over a year there have been clear and obvious signs -- which the Bush administration failed fully to recognize -- that Musharraf's political life was in danger. The threat came from below. It came from citizen-activists who, beginning in March 2007, took to the streets immediately after their president overreached. Arrogant and overconfident, Musharraf made the mistake of unilaterally suspending Pakistan's chief justice and firing some 60 other judges.

From that point on, it was all downhill. The Pakistani people continued to protest -- while Musharraf's support continued to dwindle. In November he declared a state of emergency, and in December his top political rival, Benazir Bhutto, was assassinated. Though it took until now to get him formally to resign, by the end of last year Musharraf's reign had, in effect, come to an end.

Why was the decline and fall of his Pakistani counterpart so difficult for the American president to accept -- even after the handwriting was clear on the wall? Because George W. Bush prefers to deal with his own kind, with other men in positions of power. This is not an aberration; it's not uncommon for leaders to seek out other leaders, on the assumption that they can settle things between them.

But the incumbent president has relied on personal diplomacy more than most, a disposition that has not served him well. Even in the last few weeks it's clear he was a fool for having supported to the nth degree Georgia's careless, reckless head of state, Mikheil Saakashvili. And he was far more the fool for having declared the first time he met him that Russia's bloodless strongman, Vladimir Putin, was "straightforward and trustworthy." As Bush described it at the time, "I looked the man in the eye . . . . I was able to get a sense of his soul."

It is easy enough to understand the temptations. Not only do leaders assume that between and among them they can control the ways of the world, there's all that bonding and camaraderie, and all that pomp and circumstances whenever they meet and greet.

But the cold truth is that personal diplomacy never has been failsafe diplomacy. Moreover, at a time when leaders are more vulnerable than they were in the past, putting all your eggs in their one basket is strategically stupid.

Falling in love is easy. But breaking up is hard to do.