Freewheeling on organisations and platforms and Facebook

A little while ago, I had the opportunity to talk to some people about multi-sided open platforms and their threat to traditional companies; the “traditional companies” I chose to speak about were eBay and Amazon, just to make a point; and I characterised the emergent competitor as follows:

• 25m participants, already an eighth the size of eBay
• No 1 photo site on the web, more photos than Flickr
• No 6 site in the US, but tellingly No 1 for both males and females in the 16-25 category
• Only four years old

As you probably guessed, the answer was Facebook. Ever since 2004, I’ve found Facebook to be fascinating; as with Second Life, I haven’t actually done very much in it, I try and learn from watching others, particularly my kids. And they don’t mind, they don’t see it as my spying on them (although I did ask my eldest, who’s 21 now, whether she minded before I signed up…..her answer was to be delighted, to befriend me electronically and then…. to upload and tag some truly embarrassing photographs of me. Children!)

That day, I had learnt two things about Facebook. One, that they had launched Facebook Marketplace, seemingly a competitor to Craigslist. The second was far more interesting, at least to me. I received an invitation to join a group called Booligan, apparently set up to barter textbooks.

Booligan hasn’t really done much since, from what I can see; but, as in chess, the threat is stronger than the move. Facebook represents an unusual community in three respects: One, there is high homogeneity in the base community, everyone was a student; two, unlike Amazon or eBay, the community does not come to search and transact, they come to converse; it’s Cluetrain all over again; and three, the community has stayed independent.

Now that’s what I call a ready-made marketplace, a bunch of buyers all dressed up with nowhere to go, furiously talking to each other in multimedia speech. So, when I was looking at this a few weeks ago, with Booligan in the forefront, I considered whether Facebook could become a true rival to eBay or Amazon. I realise that there is some analogous equivalent to software bloat in the textbook industry, sadly, albeit only occasionally, with the apparent collusion of the teaching class: students were regularly prescribed newer and newer editions of key publications, artificially depressing the secondary market for textbooks. But maybe that’s changing. Maybe Booligan (or something like Booligan) will come up with a working barter model for textbooks.

The barter approach is itself interesting, because of the nature of the core Facebook crowd. A reasonable number are likely to be without credit cards, and as a result may feel disenfranchised from participation in traditional web transactions. This is particularly of note in the non-Western parts of the world, rumour has it that there is a largish population there.

So if someone were to “enfranchise” these people, with something along the lines of microcredit, the developments could get interesting. Which means that barter plus microcredit structure equals competitor to eBay. And targeted book buying could become a competitor to Amazon. You know something, they don’t have to be particularly big to be particularly threatening.

There’s the opportunity for other things to come into play as well, in the context of people reviewing and annotating the textbooks in an opensource manner, a sort of Cliffs Notes written by a wise crowd.

Moving swiftly along. With all this as background, I was fascinated to learn about the Facebook announcements over the last day or so. Facebook Platforms.

What realy intrigued me about the announcement was the list of companies intending to launch applications on the platform. I quote from TechCrunch:

A number of third party applications will also be announced, including Microsoft, Amazon, Slide, RockYou, Box.net, Red Bull, Washington Post, Project Agape, Prosper, Snapvine, iLike, PicksPal, Digg, Plum and others. Seventy companies in total are currently developing applications.

What a perfect example of the change that has taken place in the last twenty years….. a platform, a many-sided marketplace, consisting of consumers, open and transparent, with erstwhile platform creators now taking space and time on the edges of the marketplace.

Which brings me to my final point. When I was in Boston, I had the opportunity to meet up with an old friend, Professor N “Venkat” Venkatraman. He picked up on some of my observations in a worthwhile post about platforms, particularly about their essential networkness.

Venkat speaks about the scope of platform architectures straddling multiple and different industry boundaries. I think it’s more than that.

I think every enterprise is now required to be a platform. Open. Multisided. I think that we are watching this happen in front of our very eyes, and that it has significant implications for the 21st century firm. Each firm a marketplace where competitors can roam freely, converse with your customers, consort with your staff, connive with your partners and supply chain.

That’s when we’re going to find out what we’re made of. Which relationships have been built on solid ground and not on sand. Which relationships will sustain through business cycle downturns. Relationships involving customers, partners, staff and competitors.

Covenant not contract. In a contract, at the first sign of breach, you say “How will you compensate me? In a covenant, at the first sign of breach, you say “How can we fix this together?”