How to become a networked company to win in a world dominated by GAFAnomics ? (Part 4)
This is Part 4 of a four article analysis on the network economy by FABERNOVEL, adapted from GAFAnomics Season 2 by our analyst Kevin Echraghi. You can jump to: Part 1, Part 2 or Part 3.
GAFAnomics [ga-fɑː-nom-iks], noun:
A modern, networked, economic system spurred by the eponymic GAFA (Google, Amazon, Facebook, Apple) but also encompassing Unicorns, Chinese tech giants and all other companies changing our lives through technology.
The 4 powers uncovered in the previous article (Magnetic, Real-time, Infinite, Intimate) all originate from network structures. So it seems safe to assume than any company wishing to benefit from the associated competitive advantages has to think and structure itself as a network.
In order to do so a company can take two complementary approaches: connecting to existing networks and/or creating networks of its own. These two approaches can be declined in 5 strategies, varying in terms of value created and difficulty to implement.
1. Plug in: Limited Value, Easy to Do
Know how to leverage GAFA’s massive networks
Many companies see GAFA as a threat to their business. This is often true. But GAFA are also infrastructures that can be easily leveraged. There are two main ways to do this:
- Think of GAFA as distribution channels that connect you to the world: Amazon and Apple’s digital stores connect you with millions of customers in just a few clicks, while Google and Facebook can bring you massive, highly-targeted traffic — AT&T, for example, spends around $80m on GoogleAdwords each year. Uber itself would be nothing without the AppStore for distribution, Google Maps for navigation, or Amazon Web Services for storage.
- Tap into GAFA features to improve your service: for instance, FedEx’s online service is built on the Google Maps engine, and Chase Bank’s app users can now log in with iPhone’s TouchID.
2. Partner: High Value, Easy to Do
Deal exclusive partnerships with GAFA to create a competitive edge
Some large companies have already implemented this strategy very successfully. BMW integrated the Amazon Cloud Player into their cars, Southwest Airlines offers Apple’s Beats music service for free on their flights, and Audi partnered with Amazon to test e-commerce deliveries into trunks of customers’ vehicles in Munich.
3. Compete head-on: Limited Value, Hard to Do
Unless you think you can create a billion-member social network or a better search algorithm than Google, this strategy is not for you. Many have tried, and many have failed. Remember when The Wall Street Journal tried to create its own social network, or when Microsoft tried to create its own iPod? Even Google itself failed when it tried to launch its own competitor to Facebook.
4. Differentiate: High Value, Hard to Do
Compete by going where GAFA have not been
This strategy requires a lot of up-front investment in technology in order to reach critical mass, but it can pay off. There are three ways to achieve it:
- Target geographies that are not covered by GAFA: Baidu in China and Yandex in Russia are both major search engines in their respective countries.
- Target niche customer segments: in spring 2015, the firm Silent Circle introduced the BlackPhone 2, a highly-secured smartphone designed for security-oriented corporate users. Nokia’s HERE maps, which Audi, Daimler, and BMW recently acquired, offers a Google Maps competitor optimized for car drivers.
- Leverage your specific assets and image to differentiate: thanks to its knowledge of the sports sphere and its strong brand, Nike launched Nike+ and fuelband, entering the IOT market. It also launched the Nike+ Fuel Lab in 2014, aiming at developing unique software for athletes, encroaching on GAFA’s territory.
5. Co-innovate: Very High Value, Easy to Do
Experiment hand-in-hand with GAFA
Legacy companies will find the best returns on their investments when they work with GAFA to explore new business horizons. Many companies have leveraged their core business and seized the opportunity:
- Facebook partnered with Eutelsat, the satellite giant, to provide internet access in Africa.
- Apple partnered with IBM to create apps for the B2B world, and asked Hermès to design a wristband for its Apple Watch.
- Google employs this strategy frequently, partnering with firms like Abbvie (on the Calico health project), Levi’s (to create innovative fabric for Project Jacquard), Mattel (to build a VR device for children), Disney, and many others.
These co-innovation projects are win/win opportunities, where no partner has more negotiating power than the other.
As Kevin Kelly, Wired co-founder, puts it:
“There is no future for hermetically closed system in the Network Economy […] Every time a closed system opens, it begins to interact more directly with other existing systems and therefore acquires the value of those systems”
So in GAFAnomics, rethink your strategy, break silos, open up and connect to the networks to thrive and disrupt your own growth.
