Sangeet Choudary on Amazon's wake-up call for business

March 6 2018
AFR

Amazon will use its vast economies of scale and access to customer data to extend its operations into healthcare and global shipping, which should provide a wake-up call to industries and governments to accelerate their own development of “platforms” to ensure they remain competitive in the new economy.

That’s the view of Sangeet Choudary, the CEO of Platformation Labs, who told the Australian Financial Review Business Summit it’s time for the energy, mining and retail sectors to ramp up investment in platforms that support their own communities of users, a move that could counter the growing dominance of the “usual suspects” of Amazon, Google, Facebook, Apple, Alibaba and Tencent.

Nation states also should be creating platforms around their small businesses and exporters, to help lift global trade and allow them to retain benefits from control the flow of data. Countries including the Netherlands, Singapore, Ireland and Denmark are all developing trade-related platforms that could also help them retain intellectual property of their digital businesses, he added.

“We are at an important point in time, where countries need to figure out what this means for their position in global trade,” he said.

Supply side supplied

“As trade moves towards digital, and more trade happens on platforms, countries that are not strategically located in trade flows can now start to exert greater control in the geopolitical arena.”

Manipulate behaviour

Platforms create the digital infrastructure for producers and consumers to interact and set terms of governance. Machine learning techniques are being used by platform operators to understand patterns and manipulate behaviour, said Mr Choudary, who was cited as one of the leading management thinkers last year by the Harvard Business Review.

Amazon is looking to expand into healthcare, he said, although it could find this challenging given patient data is highly fragmented. He called for pharmacies, hospitals and medical device companies to  collaborate around standards to allow some medical information to be shared.

Even though Amazon had created massive network effects in the retail sector, he encouraged consumer brands to also develop their own platform communities, calling out herb and spice maker McCormick’s work developing a platform on food preferences and allergies that provides it with data to drive future innovation. Similarly, Nike is creating a health and fitness community with health applications and Sephora is using in-store skin tests  to recommend cosmetics based on data.

Network effects supplied

New issues

Platforms will emerge in heavy industries and mining, where digital versions of industrial processes can allow external developers to provide analytics and visualisations over the data. In energy, platforms will be used to monitor consumption and send surplus power back to the grid.

While regulators have typically acted as a barrier to this, “we are increasingly starting to see a shift where regulators also understand they need to regulate the sources of production for energy and [help] create free markets,” Mr Choudary said.

The rise of platforms also create new issues for society, including whether creating a system of reputation-based access to products like credit will increase disadvantage, by pushing up interest rates for more vulnerable borrowers. “If not architected well, it can lead to more unequal societies than we have today,” he said.

Regulatory resistance supplied

Platforms will also require a rethink of labour empowerment, given the winners are the platforms themselves and niche producers who differentiate themselves, while “the rest of the economy gets increasing commodified”.