The Evolving Future of the Platform Economy
By: Simone Cicero
Tags: Platform, Ecosystem, Design, Innovation, Business

Crypto impacts

The uptake of Crypto technology in business and products is being actively explored now for more than a decade. It was in 2017 when Chris Dixon dubbed crypto tokens “a breakthrough in open network design” and 2018 when Ben Evans touted crypto as a potential “market reset” technology.

The crypto industry improved and evolved radically since 2017 and some essential design breakthroughs have increased even more the capability to design functions that connect both financial and governance incentives to dynamics of participation, investment, and collaboration: bonding curves, curation markets, mechanisms of voting on proposals, mechanisms of fund allocation and much more. We’ve been covering in the past how the existing — at the time — patterns of token design overlapped with the key entities and elements of a platform strategy and it’s not the aim of this blog post to go back and explore deeply the possibilities that such a landscape provides at the moment.

In the context of this blog, we mainly want to investigate the broader, systemic impact of crypto on the future of platforms and the related value chain, with a focus on core capabilities of crypto such as smart contracting, transparent data layers, sovereign identities, and the possibility to embed financial, governance and access rights into tokens.

One of the key aspects of the penetration of crypto is indeed its broader capability that crypto tokens design give designers and architects in terms of capabilities to design financial and other types of incentives into an ecosystem mobilization strategy: according to Akseli Virtanen, co-founder at Economic Space Agency and Robin Hood Hedge Fund, “Cryptoeconomics opens to us economy itself as design space.”

Dixon successfully captured the radical innovation that crypto tokens offered designers with his famous graph as follows:

Adapted from Chris Dixon in: https://medium.com/@cdixon/crypto-tokens-a-break-through-in-open-network-design-e600975be2ef

According to Dixon, while traditional network effects provide a value function that grows at lower stages, only when numbers grow, as they only provide use-value, leveraging token design teams are able to create financial utility for users at the very start and let this utility diminish on the longer term when the use-value ramps up the resulting value function is flat and the proportion of financial value and use value rebalance over time. Essentially, if we couple these broader capabilities to design financial incentives in networks, with smart contracting layers that are able to execute on shared rules, including aspects of governance, this gives rise to new possibilities to see shared coordination infrastructures emerging and cooperative integration layers of which many organizations can share ownership, governance and execution duties. As an example, a group of firms could co-own a shared procurement infrastructure and a system of towns could co-own and manage a shared currency system or the management of an electric microgrid this way.

Particularly interesting from this perspective is the potential of progressive decentralization patterns — as first identified by Jesse Walden — in funding and getting off the ground shared information coordination and work coordination infrastructures. If we quote from a previous article we released on this blog:

Jesse Walden touts crypto-networks as “pioneering a new form of “cooperative capitalism” and explains that “beyond the ability to crowdsource funds from members of the network, crypto networks can compete with better-capitalized corporations on other dimensions — especially those that require high degrees of trust”. […] one organization may take care of creating [these coordination infrastructures] within time, transitioning the ownership and governance of a broader set of stakeholders, effectively acting as a keystone ecosystem species, at least for the time needed to get mass scale collaboration on these intermediate structures off the ground.

Another convergent capability that blockchain technology has evidently brought to attention is the possibility to create data layers where information is openly available and verified. In July 2019 PWC touted that blockchain-enabled so-called “Self Sovereign Identities”, digital identities owned by the very user, instead of being issued by a particular third party, could “represents a major breakthrough, the impact of which will extend far beyond what people typically think identity means”. As Choudary reminded us during his recent interview, the potential of open-public identity and reputation registries, which I must add, could easily be based on a crypto-token powered DAOs that brings forth the incentives for the operation of the infrastructure, may well represent part of that “standardization of the supply” trend that, according to Choudary, could help mitigate monopsony-monopoly patterns in the market, thus hindering the power of winner takes all dynamics.

In terms of value chain then, the major impacts can be identified in the emergence of the role of investor (sort of co-entrepreneurial user) and a more prominent role of the financial incentives in the value chain. Further impacts are:

the progressive unbundling of demand aggregation from supply standardization (eg: identity, reputation)

from (eg: identity, reputation) the emergence of co-governed shared mediation layers between firms and organizations more in general (work coordination, financial coordination, etc…)

between firms and organizations more in general (work coordination, financial coordination, etc…) the overcoming of vetting towards permissionless, reputation centric selection processes

Other key technological impacts

There are two other major technological advancements that we believe may have a lasting impact on the platform-ecosystem future: 5G (and more generally pervasive, low latency connectivity in things) and the evolution of computing beyond serverless into further modularization and so called “conversational programming”: the capability to vocally and visually mix and match cloud based software components to quickly create solutions.

Let’s start from the latter: to quote Ben Basche, Senior Manager, Product Development at MultiChoice Group, the future of cloud computing can see the emergence of “an ecosystem of Intent-defined, high-level serverless components close to the user (checkout flow, online store, blog, subscription widget, dashboard, etc…)” and a codeless, natural language-based control panel on top of it, thus bringing “Software moats” to zero a consideration that is fairly resonant with one of Simon Wardley’s now-famous imaginary Twitter conversations, from 2018, highlighting how the impact of technology such as conversational programming (what Basche defines “a codeless, natural lang control plane”) might have on the application development value chain.

If we add — on top of this — the effect of 5G technology, mainly a broader penetration of real-time sensory information in complex contexts such as industrial ones, or more generally a broader penetration of connectivity across the infrastructures deployed locally thus improving further our capabilities to connect and organize it, the effects on the value chain that we can extract tell us about broader composability of infrastructures and resources on side and — on the other — an easier way for designers to move from an abstract idea of organizing into tangibly deployable technological solutions, on a much nicher, smaller scale. In a few words, deploying smaller and more niche technology solutions to organize a certain ecosystem will be increasingly possible as technological barriers will continue to disappear and access pervades all resources and infrastructures in a process of “onlinification”.

Global Disruptions and emerging narratives

We recently published a deeper reflection on a new landscape of risk and its implications on organizational evolution which we suggest the reader to explore, but for the sake of this exercise, we want to explore how three main global risk trends will impact the value chain of platforms and ecosystems.

First, the so-called “decoupling” of US and China and more generally the end of globalization as we know it, with a world that moves away from US cultural and trade domination towards a more multipolar perspective. Digital markets are also fragmenting regionally: as Nicolas Colin exposed during our podcast conversation “the illusion that digital markets will always be global” is now over with now often competing regulations that often reach beyond the country of residence of the internet users accessing digital services globally. Furthermore, according to Choudary (still on our podcast conversation), sovereign states initiatives to deploy digital — and non-digital — coordination infrastructures (in trade, logistics, finance, communication, IT and more) and that of imposing those as standards globally is going to be the place where the geopolitics of technology is going to be played in the future, as China’s Belt & Road initiative well represents.

Secondly, the Covid-19 pandemic can be taken as representative of two more major trends: an increased unpredictability level in the economy and society and the growth of narratives increasingly focused on health and sustainability. Major impacts can be expected and are already being experienced — as a major consequence of this rising unpredictability — in terms of job loss, and growth stagnation and they’re pushing towards a renowned focus on economic contexts that for long have been deprioritized: the household, the community, the city, the region, the nation. Indeed de-globalization or “slowbalization” has been playing out as a pattern since 2008: according to PIIE and “the pandemic adds momentum to the deglobalization trend”.

Massive public investments and subsidies are being currently deployed worldwide to rebuild key infrastructures and revamp the economy — many linked with sustainability and salutogenic narrative — and the involvement of citizens in the rebuilding of less brittle and more resilient production processes that can be subsidiary and integrative to the private-public dichotomy seems a likely outcome and a direction where to concentrate the productive potential of otherwise jobless citizens. Indeed, as we have highlighted already in our previous research update on the emerging risk landscape it seems likely that an increasing level of stress on supply chains can be expected as a result of the rising complexity and unpredictability and that building parallel redundant supply chain lines is one of the key strategies to pursue to ensure operational continuity.

As a result of those trends we can expect a series of value chain impacts: first a trend of relocalization and partial decentralization of elements of the lower part of the value chain (such as in manufacturing). This will play out mainly through M&A consolidation (at least on a regional influence scale), and then with increased composability, reuse, and circularity for resource optimization. Furthermore, an increased value perception in security, health, and resilience is to be expected in parallel with two major labour-related trends: more inclination towards parcelized work (in lack of traditional employment) and more interest towards entrepreneurial opportunities related with the project of rebuilding the economies of essential through a broader engagement of citizens.

Putting everything together