This report contains a brief overview of the key topics The Future Is Here's James Wallman presented, and the Design Hotels' executive team discussed, on 10 May 2016 at La Granja, Ibiza.

The sketches are intended to reflect — and be neater! — than those produced on the day. (The originals are at the bottom of this report, in case you'd like to see them.)

This report contains:

  1. What is a platform, and why does it matter?
  2. Understanding platforms
  3. The problem with platforms
  4. An innovative model for Design Hotels
  5. What changes if Design Hotels follows this path

1. What is a platform and why does it matter?

Understanding the concept of platform businesses is essential because platforms are disruptive and dominate vast industries within a few years of launch.

In the 20th century, to get bigger, or "scale" as people like to say today, a business had to own the means of production. To get bigger, they had to scale internally. 

Now, in the 21st century, that's changed. The fastest growing companies — and most valuable — in the world scale externally.

A good way to see that is the difference between pipes and platforms

Instead of creating the supply, and selling it downstream to consumers. platforms don't own the means of production. Instead, they are like marketplaces. They provide the infrastructure, the space, the place for producers to sell to consumers. 

The pioneers, and now classics, of this platform model are: 

  • Alibaba — world's largest retailer, owns no stock
  • Uber — world's largest taxi company, owns no taxis
  • Airbnb — world's largest hotel company, owns no hotels

Rather than produce, these companies are platforms for other producers to sell to consumers.


2. Understanding platforms

Many find the Business Model Canvas useful as a way to innovate their business model. But in the case of platforms it isn't so useful. Every piece of the left hand side of the puzzle becomes some version of "the platform — managing, developing, upgrading etc". It also makes the customer segment odd: since the customers are both consumers and producers. It makes revenue structure complex too (We didn't put that in because it would make the image look too messy.)

The solution is to use the Platform Business Model Canvas, as conceived by Paul Sangeet Choudary.

The platform business model canvas neatly illustrates: 

  1. how the business revolves around the value that it creates
    (note that value is created by "core value units", eg listings of goods, which can lead directly to sales)
  2. that the platforms principle function (its way of creating value) is by facilitating interactions between producers and consumers
  3. that those producers and consumers arrive at the interaction via various channels
  4. that the producers and consumers have to pass through filters before the platform creates a match
  5. It also sums up the key activities of each part of the business:
    1. Producers create
    2. The platform curates and customizes
    3. Consumers consume
  6. By doing so, it highlights that the platform must make each of these actions as efficient, repeatable, and scalable as possible, which it can do via… 

Rules, Tools and Trust

To facilitate effectively, at scale, you don't need to referee and personally oversee every core interaction. Instead, you create a culture where the right sort of behaviours happen. You do that through:

  1. Rules
    1. Nudge users to compliance and the desired behaviour
    2. Create simple pathways for producers/consumers to follow
    3. Use cues, notification, feedback
    4. Core questions: 
      1. Who do we want to create core value units?
      2. Who can create core value units?
      3. How can they create core value units?
      4. Can we make that simpler, reduce steps?
      5. Can they do it passively?
      6. What differentiates a high quality unit from a low quality unit?
  2. Tools
    1. "Kill the skill barrier" with tools that make anyone look good
      Think Instagram's filters: making crap photographers look like they have talent since 2010
    2. Allow for "emergence" — when users develop behaviours you weren't expecting
      Watch out for it too
  3. Trust
    1. This is quality control. 
    2. Have mechanisms that identify, differentiate and encourage good behaviour

 

"Interaction first" — how Uber makes the exchange of value friction-free

But before you've worked out the sort of rules and tools you need to create — and this will likely take some iteration — you need to design the core interaction where consumers and producers can "meet", create, and exchange value. 

Note that there are 5 types of value: 

  1. Money
  2. Attention
  3. Reputation
  4. Influence
  5. Data

We think the best way to understand this is by thinking about how Uber faciliates the exchange of value — as Uber's commoditised offer is simple to understand.

(But note that platforms work for services as well. For example, Task Rabbit.)


3. The problem with platforms

But there is a major problem with platforms. The model looks like it is designed for exponential growth — witness the examples of Uber and Airbnb. But…

  • What if your business isn't mass market?
  • What if you don't want your business to be mass market?
  • What if your target consumer is a niche?
  • Won't becoming a platform mean you lose control and your soul? 
  • What does it mean if you want to grow revenue, but not your user base?

We believe that the platform model — that your platform model — can drive exponential growth in whatever type of scale you are most interested in.

There are, for instance, many examples of platform which serve niche audiences. Read this post for more on niche platforms.

The key to not losing control and your brand's soul is to design the rules and create the tools so that you architect the choices that suppliers make.

 

And so, having described and discussed platforms, at this point in the day, we paused, to consider Design Hotels' existing plans for growth…

 


4. Design Hotels' existing plans for growth

Two key ideas emerged: 

  1. Programming: special events that entice the creative community
  2. Membership: taking notes from Soho House's model, and leveraging the existing Design Hotels community to increase the time/frequency/amount they spend with Design Hotels

4. An innovative model for Design Hotels

This led to the creation and discussion of a new model that combines the best of both Design Hotels' current ideas and platform thinking.

We think it's perfectly possible for Design Hotels to use their existing ideas, map them onto the platform business model, and innovate a new pipe-platform model. Here's a Sprungbrett for what we believe this would look like: 

  • Programming:
    1. Create: To begin, Design Hotels create the programming
      (NB, this is old school, "pipe" method.)
    2. Codify: at the same time, Design Hotels seeks to abstract this method: that is, to codify how to do it. 
      (NB, from here, this is new era, "platform" thinking.)
    3. Curate: Design Hotels share that code with willing partners (ie producers)

Note 1: we advocate the "lean method". Design Hotels should employ the learnings of the lean startup movement. At each phase, you should design your test so that you can measure success or failure, and can then learn, iterate and improve.

Note 2: we advocate seeing your guests/members as producers of programming too. After all, it isn't only the hoteliers who have great ideas/contacts. The Design Hotels community is a global, creative tribe who are likely to be able to put on compelling programming — with the right rules and tools.

  • Membership:
    1. Encourage interaction within the Design Hotel community
    2. Create a series of "question and answer" sessions — at present via your current social media presences — where members ask, and members answer. 
    3. Consider gamifying this process, giving value via points, status, and access.

5. What changes if Design Hotels follows this path?

We believe that embracing the platform model will be hard at first. But that it has the potential to reap fantastic rewards.

In the Airbnb model, Airbnb effectively outsourced the creation of rooms/beds. They managed to scale quality as well as quantity through effective rules and tools.

In this innovative Design Hotels model, Design Hotels can outsource the creation of content (ie programming) that engages both producers and consumers (and therefore creates more value) by designing the right rules and tools. We think that's an entirely new — and exciting — challenge. And one that will lead to powerful growth.

If Design Hotels follows the platform path, there will be some cultural implications. We believe these are simple:

  1. You're now a startup — an organisation whose first aim is growth, and whose primary task is to work out what business it is really in. To achieve what startup gurus call "product/market fit". 
  2. You accept that the old ways won't work anymore… that the world has become complicated, complex, challenging, unknowable — because it's changing very fast. For more on this, read Why You Need a Futurist.
  3. "From the pyramid to the pancake" — the arrival of the internet and its first revolutionary business model (platforms) is heralding a time when power is distributed. This has implications for the future of work and leadership. For more, see the Future of Leadership.

For more on how platforms work, read our post on the Platform Revolution.

Any comments on the contents of this report? Please contact James Wallman.

We look forward to working with you create this innovative hybrid model, creating more value, and fantastic growth.


And in case you miss the originals, here are the scribbles from the day: