# Gaining Ecosystem Advantage

Data: 11-01-2025 21:42:57

## Lista de Vídeos

1. [Introducing our Gaining Ecosystem Advantage webinar series](https://www.youtube.com/watch?v=ldkJKbyExQs)
2. [Building ecosystems in healthcare: Pipe dream or the way of the future?](https://www.youtube.com/watch?v=JMeaDMoX22k)
3. [Bridging the physical and the digital](https://www.youtube.com/watch?v=ZGCEfLtmK3U)
4. [Regulating Ecosystem stalwarts: Success envy or re-balancing inequities?](https://www.youtube.com/watch?v=PokVwHT2szo)
5. [Building ecosystems in payments: Can Mastercard deliver profit and purpose?](https://www.youtube.com/watch?v=N-6fp4xdXjE)
6. [Leading a sports-based ecosystem in a crisis: how far does authority stretch?](https://www.youtube.com/watch?v=WuTXy3wrzMU)
7. [The Ultimate Frontier (and why China’s ahead)](https://www.youtube.com/watch?v=RzDhLn6obmk)
8. [Building an insurance ecosystem: Lessons from the PingAn Story](https://www.youtube.com/watch?v=xjLJwd-PZjI)
9. [Repositioning the news media ecosystem: putting readers in charge](https://www.youtube.com/watch?v=JM4Z6_mN3bI)
10. [Will regulation reshape the structure of the tech ecosystem in 2022?](https://www.youtube.com/watch?v=4php_Nyqqfo)

## Transcrições

### Introducing our Gaining Ecosystem Advantage webinar series
URL: https://www.youtube.com/watch?v=ldkJKbyExQs

Idioma: en

some of the world's most valuable
companies owe much of the success to
shifting their offering from individual
products and services to digitally
enabled bundles offered through a web of
collaborations with partners and
complimenters in our gaming ecosystem
advantage webinar series david lansfield
and i met with a superb lineup of
executives who have first-hand
experience of setting up scaling up
adapting analyzing or constraining and
regulating business ecosystems join us
as they share their experience and
perspectives on a hot topic where
buzzwords often prevent us from seeing
what drives the difference between
failure and success
[Music]
you

---

### Building ecosystems in healthcare: Pipe dream or the way of the future?
URL: https://www.youtube.com/watch?v=JMeaDMoX22k

Transcrição não disponível

---

### Bridging the physical and the digital
URL: https://www.youtube.com/watch?v=ZGCEfLtmK3U

Idioma: en

so welcome everyone to the second
session in our series
gaining ecosystem advantage from the
london business school today's session
focus on focuses on bridging the
physical and digital focusing
particularly on majid
alpha teams retail and real estate
ecosystems
in the middle east and north africa my
name is david lansfield
i've designed structured and implemented
more than 15 ecosystems dating back to
1998 can you believe it i'm that old
this is
involved work on strategy business model
design culture and leadership
working with some amazing organizations
i'm now a strategy advisor and executive
coach and a contributor to harvard
business review
and a former senior partner in strategy
and i'm delighted to be joined by my
co-host
professor michael jacobides michael is a
world authority as many of you know on
ecosystems publishing one of the most
read
papers in the strategic management
journal on ecosystems
and managerial publications like hbr
slain management review
the ft and the world economic forum he
is a senior advisor to bcg the
consultancy and to his company
evolution limited and the chief advisor
on the digital economy
to the hellenic competition commission
welcome michael thank you very much
it's a great pleasure to be with you uh
here in our conversation series
and it's a great pleasure to be able to
introduce
a friend and an alumnus so um
i think that i've known ahmed for now
nearly 20 years
um i was a
freshly minted assistant professor in
lbs when i met him when he had
joined london business school after he
uh had worked with
procter and gamble um and um
don't quite remember was before or after
buzalen where he worked
uh and um he did merit his distinction
in the mba way back then
and we've uh kept in touch and it's been
good to see him develop as the uh now
the chief executive officer of uh
majid alfortan properties that is the
leading uh real estate
uh operator and developer uh in the gcc
uh region uae egypt bahrain and lebanon
uh and before that he was doing the fun
part of the ventures
um the majid delta tame uh ventures and
doing all of the
interesting stuff that engages uh
clients in entertaining cinemas fashion
and such like
but more relevant to the day one of the
issues that we will want to discuss is
the experience
that he has had in dealing with both
a cyclical and a structural
challenge the structural challenge
because of growth of e-commerce
that is taking some of the established
giants
like those that operate malls are
perhaps some of the fanciest and biggest
but also cyclical and cyclical because
it was not just the cycle of the economy
but covet that totally shattered it and
he's done some
fascinating work has presided over some
interesting work that bridges
the physical and the real the
traditional
ecosystems that malls are orchestrating
all of the shop owners trying to attract
the customers moving now into the
digital enablement
so it's a great pleasure to have you
with us uh it's been fun working with
you over the years
um ahmed and welcome to our series
uh thank you professor michael for uh
for having me and thank you for hosting
this session i
very much look forward to our
conversation
fantastic so today's session is one
where we hope you leave with some
some tips some lessons and insights for
your own role in
in ecosystems and we will invite you to
post questions and comments keep them
kind
and clean in the comment box and we'll
come to those as we go throughout
um but perhaps we could start ahmed with
you know let's get specific you know you
run a big property portfolio i think
many of us have been guests of your
malls your stores your hotels whether
you live or work
or travel to the regions you operate in
but when the pandemic hit
tell us about you know your most
immediate strategic commercial and
people decisions and
what was going through your mind well i
mean
we're on a huge portfolio of real estate
but we we tend to think ourselves not as
a real estate business
but more of an experienced company we
are in the business of what we call
creating great moments for everyone
every day
we do that in a variety of ways we do
that through 28 shopping malls
16 hotels you know 13
million square meters of residential
communities
and obviously when the pandemic started
hitting us you know our business
came almost to a complete home and i say
complete
with a bit of a twist because obviously
you know 80 percent of our business was
shut you know
leisure entertainment travel leisure
entertainment shopping but 20
of our business remained very much open
to provide essential services
supermarkets
pharmacies other services remittances
for some of the workers
in the gcc et cetera so while we had 80
shot 20 percent had to work even harder
longer and perhaps work a bit
differently to be able to serve our
customers and look after
the safety and well-being of customers
our
own talent as well as the community at
large so we almost had to work on a dual
track
and that required one
very quick reallocation of priorities
and resources
we've even moved almost you know a
couple of thousand people
who used to work in our entertainment
business that was completely shot
to work in order fulfillment for online
orders for our food retail business we
had to shift cash very quickly we had to
shift our communication style
very quickly you know from quarterly
town halls to almost weekly
virals with the ceo it felt like we
slept in one world and woke up in a
completely
completely different way and the
decision-making
process within the organization had to
change
rapidly i think there were no difficult
decisions per se
we're a value-based organization we're
very clear about our purpose
and our values and value-based decisions
came naturally to us and we felt that
most of the decisions were
pretty much straightforward but what we
struggled with
is the pace of decision-making made
meaning
there are certain decisions that we
needed to make very fast almost on the
fly
and some decisions that we needed to
take our time and be more deliberate
about
so it's almost like i think fast things
slow the side fast the side
slow so you know preserving cash very
quick easy decision
over communicating very intuitive
because when it came to big financial
decisions we found that
in most instances we should not yield
to peer or external pressure to make
hasty decisions
and one such big decision perhaps we can
explore later
was around extending grant relief
and rent waivers for our tenants which
is quite a significant decision
for a company terrific i mean that
brings us to the question of the
uh extent to which you are sharing uh
not only the upsides with
the pain relief with some of your
ecosystem participants
i want to combine that i.e the way that
you manage your ecosystem participants
with another challenge in managing them
and i'll take us back
uh i think literally just a year before
coffee happened i remember we shared a
stage in dubai and
we're discussing about the
transformations
that happen in retail and how
you were trying to also work with
some of the retailers and trying to
convince them to
go with you in the journey of
transforming this experience of shopping
which is not always easy so how did you
manage
the relationship with your ecosystem
partners
because you already have you know the
difficulty of aligning them
even in good times how does the change
when
the crisis erupts all of a sudden is it
made easier
is it made harder and what about these
structural
issues of ensuring that they can follow
you in whatever vision you have
for how retail should look like i think
initially it was a more difficult
conversation to have and over time the
crisis has actually
made some of these discussions easier
let me explain
we think of our shopping malls not as a
landlord
tenant business we think ourselves as a
platform in fact
you know shopping malls arguably are the
original platform business model you
know
we built a space or a marketplace for
resellers to be able to come in and
transact
we bring traffic through parking
structures and marketing that will
provide amenities
uh cool and warm air and all of that
stuff that's pretty much a marketplace
marketplaces digital marketplaces build
a
stack technology stack you know on board
sellers and provide them with services
like checkout a basket et cetera
the only difference between our platform
and the digital ecosystem is that we are
very data poor
digital marketplaces know who's buying
from what
at what time for what price shopping
malls are pretty much a data blind
platform and has no capabilities in data
and digital
so what we've been focused on for a few
years is trying to bridge that divide
data wise and capability wise between us
as a pure brick and mortar
ecosystem and the digital ecosystems
of digital market space and that
required a number
of structural changes first we had to
consolidate
all of our in-house tenants if you will
cinema the ski slow our own food retail
business and our own brands
to make sure that we are able to collect
all customer data and we create what we
call
the golden customer wreck what cheese
buy
cheeses both in our food retail what
cinema
movies are being watched by our
customers etc
and then we went out to our tennis and
said listen we have this
fantastic data pool that we would like
to cooperate
and we need to come up with use cases
where we move away when you open a new
store or
launch a new collection in our malls we
offer you banners and parking
advertising to when
we can offer you look-alike customers
that you can personalize and target
offers
we move away from you know scratch and
win and raffle type
promotions to more personalized and
targeted campaigns and in order for us
to do that we need to exchange
data that was a very difficult
conversation
with covet and with the requirements for
us to extend tenant
relief we actually mandated that
part of the tenant relief is contingent
on
sharing data operating on loyalty
customer insight digital data analytics
not to twist arms but to show a clear
signal to the ecosystem that this
is the future of our our business
what we've also done is that we started
seeing that there are other
partners that we never really thought of
to enrich our data
things like you know partners like you
know payment gateways and
banks and telcos so pre-covert
we used to be able to capture 25 of the
transactional data
in our shopping malls with covert we
came up to 75
half of the gap was bridged by data
exchange or cooperation with our tenants
and half of it by partnering and you
know cross fertilizing data with payment
gateways
and banks so essentially we've been able
in 12 months
to achieve what we've struggled to
achieve almost in five years within our
ecosystem
that's incredible we're as you can see
everyone we're warming up this
conversation nicely so p
please do join with your own comments
and questions we want this to be more
than a three-way
three-way chat that's an amazing story
i've met in terms of that acceleration
and the deal that you struck
um you know in terms of you know sharing
the data in that in that context
tell me a bit more about the
conversation then how did you get more
personal how did you prepare for such
important critical conversations when
frankly you're dealing with
operational people other issues within
and outside the ecosystem how did you
personally
prepare for such a you know it's a
sophisticated conversation right it's an
important one how did you do it
i think the first step was to try to
deflate and divert
the conversation away from random
discussions and
although we did not make any specific
grand concessions
the outset what we sense that we're
suspending rent collection
will stop okay so essentially you're not
paying us that
we will figure it out in a couple of
months we're running our models we're
going to come back to you in a targeted
way
and figure out a win-win you know
solution
for the rent so so take the rent or take
the commercial
paying out of the discussion and then
focus it really on the substance
of what should we do together to even
succeed on the long term
our ecosystem we estimate that
and i hope i get sort of the number
right we
generate around some quintillion bytes
of data every day our own ecosystem
our own shopping malls hotels our own
you know car for outlet cinemas
etc that is a great ass that is a
fantastic ass
it also is a great responsibility in the
context of concerns on
privacy cyber security uh
all of that but it's a fantastic asset
and that's an asset
that you can use i would say in a very
effective way within an ecosystem
and to engage in some sort of data
diplomacy
offering that data for free not just
offering the data in raw form
for free but offering that data with
consumer insight
with ready-to-go use cases but don't
offer it frankly to everyone i mean
we would struggle to have that
conversation with many tenants
for a variety of reasons we picked less
than a handful
of tenants that we believe are
like-minded
progressive brands and tenants that
understand the future of consumer
engagement
omni-channel enablement and the
conversions of the digital and physical
world and we started using you know data
diplomacy
with ready to go use cases to start
generating value
and once we have this value we're now
having the conversation with the rest of
the ecosystem
to say hey look that's what we've been
able to achieve that's
the incremental value and let's not
squabble how to
split the value now but let's just
acknowledge that there is incremental
value and we'll
we'll come to how we sort of share it at
a later point
so this is how we approached it and
i'm hopeful that we're heading in the
right direction
i mean that is great and uh in a way i
guess that what you're doing
is that you are delivering on the
possibilities that
a platform orchestrator such as yourself
has and
in many other moles does not quite
deliver i.e
the possibility for aggregating the
information not just the demand
and also finding something that does not
make sense and it's impossible to
do in a tenant by tenant basis
might be able to uh come together and
create
some joint value a couple of questions
on that one is the a little bit
more tricky and sensitive one which is
that
most organizations tend to be very
protective though uh and
anything that relates to data and
knowledge of customers
so you know relating back to what david
was saying i'm just wondering
uh how do you overcome this resistance
because i can certainly see
what value there is i'm just thinking
that quite often people tend to be a
little bit more parochial
and there needs to be an education
precisely because
in all of these digital um ecosystem
players
we have totally considered normal that
they
not we will not only sign all the data
off to them
they will make money from them they will
target uh their offerings
and we're going to be fine now on the
other hand when we see other
companies that are not part of the big
tech firms like whoa
we wouldn't want that to happen how
would we and there's a very interesting
dynamic there
in terms of the way that we approach
that and you know you did something
which is fairly brave
saying well hang on a minute we may be
able to still deliver
some of this value how are you able to
manage this tension um and
what do you think about this you know
gap that exists
between you know the license that we
societally give
to big tech and anything they can do
with data which is fine
um as opposed to what you see here
regulatory uh pushback's notwithstanding
well the short answer is with great
difficulty as you could imagine to
strike that balance
i mean big tech for us as a real estate
company that thinks of itself as an
experienced provider
is both an inspiration and a
competitiveness i mean big tech is an
inspiration in terms of their
management i would say innovation you
know agile methods
squads and sprints and we're trying to
learn from that in our own
business and certainly in our own
digital offers they are also a source of
inspiration for you know their ability
to monetize
and manage and manage data but they're
also competitive and we are competing
with big tech for
shared wallet share of mind and share of
heart
across all of our our of our business
and we realize that we cannot do that
alone without
our partners in the equal lead
one thing we try to do in one particular
segment about each system the luxury
segment which is
probably the most difficult to crack in
terms of cooperating on customer data
because
luxury brands are super protective
of their customers as well as you know
do not believe that there is any until
recently at least don't believe any
crossover exists between
a luxury customer and a fast fashion
what we've been able to do is run
use cases that does not depend on
exchanging data but generate value
for the luxury so for instance through
our
golden customer record and our loyalty
program we're now able to identify
luxury customers and would be luxury
customers and we offer them
three premium reserve parking that
essentially you know barriers open up
you as you drive through them all to a
particular parking spot and then we're
able to track their spend across
luxury brands as a result and then we go
back to the luxury
retailers and really that play that back
to the things that you think you know
your customer
well i can tell you that you know you
are luxury brand a
but actually your share of wallet if you
consider luxury
group b and luxury group c is 10
you think you're doing a great job and
here's the data that supports it and i
have that data that i'm willing to
in a way give it away today for free in
exchange for us cooperating on
co-marketing on loyalty on payments or
making
the customer experience more effortless
across the board
because one thing in our digital
ecosystem that's a big challenge
unlike sorry our physical ecosystem
compared to digital
ecosystems the digital ecosystem
experience is very smooth end-to-end
when you go on any digital platform it's
a very smooth
in the physical world you're being
handed over from mall to tenant to
tenant to the parking
operator so the way for us to make that
as
effortless and seamless as possible is
to be able to share
data to be able to cooperate on payments
and loyalty to make that
experience as seamless as possible and
hopefully we are going to be launching a
very
exciting product a couple of months that
we call the
one-click or all-in-one sort of payment
that allows you
with one click whether you're playing
with apple pay or samsung pay or what
have you
pay at any tenant automatically earn or
burn points
the data respecting all privacy laws etc
is exchanged between
you know different players in the
ecosystem
and then that makes the experience
comparable to what you
get on an amazon for instance where you
don't feel that you're moving from
one seller to another yeah
gosh i'm breathless listening to this in
terms of the the amount and the scope
and the and the dynamism of your
portfolio ahmed
um i think you've covered tell me
otherwise muno the question about
customer data privacy
uh i think you've covered that in some
depth tell me who raised the comment if
you want anything more
edward clayton a familiar name edward
you know you've asked a question about
what major business model shifts are you
anticipating as a result of the
collision
of covid digitalization and demographic
culture shifts so there's a big picture
question for you as we and i want to
then come back to you on a question of
innovation in a moment i mean the name
edward clayton does sound familiar i
think
edward and i are ex-colleagues from
blues island perhaps
are not mistaken uh so
there are many profound and somewhat
unpredictable shifts that we see
uh but there are also shifts that you
can push
one big i would say transformational
shift
in the commercial real estate business
model specifically for shopping mall
centers around the rent relationship
and the estimated rent value how do you
calculate
rent for a shop at the most
basic basically yes classically and for
a hundred years
you know it was location and sales
good location premium rent
high sales even more more
with the transformation that we're
seeing in customer behavior and the
opportunity that we see
with digital data and analytics across
our
ecosystem the store value in our opinion
will no longer be driven
entirely by how much sales you generate
within the four walls of the store
it will have different components that
go into
rent computation one of it is certainly
sales within the store
but a large part of the value of the
store is around
customer engagement the experience that
that you provide and on that note by the
way we're seeing a trend for what we
call highly experiential tenants
to take on actually more space rather
than less space in all this
this is happening as we speak more show
roaming more opportunity to tell the
story
etc and the third and growing component
is the halo effect of the store on
omni-channel and e-commerce
and we now know from our own data and
third-party data
that when you open a physical store on a
particular catchment area
e-commerce sales automatically grow up
when you close that store
e-commerce sales go down that there is
a inverse proportion relationship
between
your proximity to the store and
e-commerce states the further away you
are
from the nearest physical store the less
this is difficult to quantify unless the
ecosystem
has very clear you know
mechanism for data exchange and a new
rent formula to that emerge that
captures the value of the store
beyond sales within the forum this is
fascinating because i i think that what
you're saying is that we are seeing
a transformation two levels one of them
is a transformation of retail
and some of the things that you're
suggesting are how does retail change
and the second which is the interesting
corollary
is that there is now a stronger role for
the local orchestrator
such as the mall operator because some
of the benefits that you discuss
are rather difficult to be achieved in
more diffuse areas
perhaps even those who manage particular
um areas particular parts of the city
may have a new challenge
um ahead of them but what you are trying
to do
is use your role within one mall to
help usher in the new reality of what
makes sense for the customer
and how as a result we are rethinking
the relationship between you as uh
the orchestrator and the manager of the
platform and these participants
now that means that there's going to be
quite a bit of work especially
um for those who own and operate malls
because they need to think about more
than just prestige and
development and finance and high rents
which
traditionally with no no disrespect to
how hard all these things
were were the things that was driving
the business and now you're saying
no no we have this other component so
this is probably the thing that is
least understood by people on the
outside and i know that
you have been in the forefront of
thinking about both what are the changes
in terms of the retail and also
how on earth can we catalyze
this in order to make it more attractive
and frankly make our moles more
attractive because
you know the the part of these changes
so let me
dive into some of the details and let me
ask you about some of the things that
hold them together and here in your case
the part of that is
the data proposition which of course
requires a lot of hard selling
the other thing that you mentioned that
i would like to ask you to give us a bit
more
information about because i think it's
it's another really interesting
component to what you guys do has to do
with
the loyalty program or anything else
that essentially gives
the more level perspective which makes
it attractive
for the customer to come in but still
enables the tenants to say
okay and i see why this is good for me
rather than
why this is sort of stealing part of the
relationship that i have which is
the thing that all retailers or customer
facing companies care about how do you
manage that
can you just give us a very quick
overview of how this is run how this is
managed
from your perspective so our first
i would say entry point in some of these
explorations with our partners is around
shifting their mindset around our value
proposition
our value proposition is no longer good
well merchandise space that's easily
accessible clean
friendly and secure our future value
proposition
is actually about providing them with a
suite of
software tools consumer insight tools
customer engagement tools personalized
marketing and so on
and omnichannel enabled
and these three value propositions
collected
is what the future of commercial real
estate is all
is all about and real estate owners
who can't see it or can't afford
invested it
will fall behind and you would see very
rapid consolidation in the sector
we believe as a result
one way to bring this value proposition
to life are some physical changes that
we're making to the property
for instance the the location the size
and accessibility of store routes
to enable omni-channel enablement
and delivery from our properties to make
it as fast and as seamless as possible
especially for our properties that are
smack in the middle
of very affluent city center locations
across
in some instances about re-cutting
stores so what
the first the front half of the store
is a traditional store and
the back half of the store is actually a
dark kitchen
or a dark store that acts as a micro
fulfillment center and i think they
trend towards micro fulfillment rather
than large out of town
locations as people demand more and more
hyper delivery
hyper grocery services so there is a
physical element
but the other element is is how do you
tie it all together from a customer
perspective and here the customer is not
the tenant that actually the end consume
and during the pandemic we made very
clear that we need to stay
in touch with all of our consumers even
if we're offering them zero services
you know our moviegoer customers for
instance we offer
people corn on delivery even if they're
watching netflix just to keep the
emotional connection
right in you know cinemas at the roof
uh top of our parking structure
but one meaningful way to keep the
connection with the customer is a
loyalty program
that essentially acts as not a loyalty
program per se but a digital companion
that allows you to
earn burn browse offers etc across
all of our malls all of our hotels all
of our retail outlets as well as third
party
so sort of over the top digital
lifestyle
companion that you carry in your pocket
you can pay using
that app you can earn points burn points
reserve a car parking spot you know
browse uh offers in the mall
chat live with some of the tenants are
now live on our
personal shopper you know book a haircut
in our
concert store so it becomes more of a
lifestyle company and
in doing so we are relevant to the
customer and the customer is willing to
share their data otherwise
why would they share their data i mean
with ios 14 now many customers are
opting out to share the sharing data
across apps
because they don't see value the problem
is not
you know ios 14 the problem is you know
the data was being
used lucratively so but the customers
didn't see value
so we're very keen that we give as much
value back to our customers
in terms of personalized target offers
freebies
cashback different things that different
customers value differently
but remain relevant through that loyalty
probe and that loyalty program is an
over-the-top loyalty program so if any
of our tenants
want to run their own loyalty program it
doesn't conflict with it at all it's
actually
an added layer as i said we see it as
a digital lifestyle companion
you um you've described yourself we're
going to have a bit of a quick fire
round ahmed
we've got lots of questions coming in so
we're going to go through run through
some of those questions
and no particular order so forgive me
audience if i go to different different
places you describe yourself as an
experienced organization obviously
your real estate um you sound like a
technology company as well
are you a tech company that's one of the
questions short short answer yes or no
we're not a top company we are a
experienced company
with technology capabilities i guess um
the one thing i'd say this question for
me you've talked about how as an
orchestrator you've pioneered innovation
in difficult times and i have to say
it's a very impressive story how do you
encourage others
whether it's tenants or others to
innovate if you like how do you create
the conditions for them to innovate
if you like as opposed to you driving
the innovation what sort of things do
you try and do
whether it could be new entrants or
existing tenants what's the things you
do
so it's not all about you yeah i mean it
starts
you know at the very start of any
relationship with any tenant it starts
with really selecting the right tenants
or the right partners for our ecosystem
unlike a a digital ecosystem or a
digital marketplace
we don't have infinite inventory i mean
we have very finite input
and we do track at a very granular level
what we call the brand performance index
or the experience quotient of all
tenants
and we make sure that we continue to
co-invest
upsize and reward tenants that offer
great experience
and actively take off our ecosystem
poor customer service or poor
experienced so i think that's
that's that's a fundamental point and it
i mean classically this is around
merchandise mix
that that you have to do and sometimes
you sacrifice short-term rent
in return for long-term sustainability
and customer customers
let me let me go from the inspirational
to the to the slightly more prosaic
um julia nemouni asks how do you have a
fact that you need to
invest in technology and data sharing
and more experience the fact that
retailers
have less money available to pay for
these services do you have to accept
lower returns long term well
not all retailers are created let me
put it
so the self selection you were speaking
about is not going to
be attributes visa be the customer but
you know you think that there is
some potential of the right selection in
terms
of their ability to uh cover their uh
space ren
and your technology cards so so more
more specifically
there is obviously a bit of like a
covert roulette if you sell you know
ties and shirts you probably haven't
done well last year if you sell yoga
pants and
you know loungewear you've done you've
done very well but if you look at the
results
of the or the earning releases of many
of the retail companies
the high customer experience retailers
who themselves have invested in
technology
are doing super well i mean all the
luxury brands are having
record years one brand that we're
familiar with because we represent that
brand
in the region lululemon has had a record
here it's now a 50 billion
you know dollar cap company so certainly
there are big winners and big losers
in in the retail space and what we're
seeing is that the big winners
are big winners for a reason and these
very same reasons of investing in
digital
experience etc make them better partners
for
our our ecosystem
terrific let me just ask now um as a
matter of
time because we don't have much left to
see what our audience thinks about some
questions so we're going to have some
calls
can we have the ports launched because i
would love to have
your views on some questions uh that
we're asking the audience
uh let's launch them one by one could we
open for one please
so the first one is who should take the
hit in the ecosystem
when there's a downturn in business and
it's what uh the
audience now thinks so please vote
and hopefully you voted let's see what
the results are we'll
have all three of them um ahmed and then
we'll have your
uh your views and more than one can we
see the results of the
uh of the poll please it should be
shared
amongst ecosystem participants uh but a
huge majority
uh here uh and interestingly uh much
less about ecosystem participants who
have not performed well
there is quite a bit of procedural
justice terrific let's go to the second
poll
which is not about sharing uh about the
total value creation let's uh
launch our second poll now who will win
in this mixed world is going to be the
traditionally physically based firms
that reinvent themselves
is it the plays that master the
deliverability of hybrid models
or is it the fact that whatever we do
the digital stalwarts are unstoppable
please vote and let's see the results
so interesting um i think that's
probably good news
um for you ahmed but we'll let you uh
have a view on the 75 25 vote
for the last two options and let's
launch the third
poll okay so what do you think are the
main
issues in building ecosystems and here
we are asking you to take make more than
one choice
because you're probably in this session
because you're concerned about it
and we want to ask you what you think
the main issues are
and here is where i would love uh
perhaps more than just
your assessment of what people say ahmed
is it getting
customer buy-in is it getting
complimentaries by
him is it getting the cust the
technology interface
and the user experience right isn't
getting the data strategy right
or is it just getting my colleagues
understand that this thing what this
thing means
and that it matters uh for those of you
who don't have the luxury
of leading an organization vote away
and think what uh what matters it'll be
interesting to see
what you think makes a difference and
now let's watch the results let's see
what people are saying
really interesting really interesting
if you get the technology interface and
ux right and if you get the data
strategy right
i think the message is you can get the
customer
buying the compliment to buy in and
people are
a little more relaxed about
making sure that the case for change is
made because
presumably uh if you are not blind you
can see it which is
not always the case i would say but
perhaps but not
a representative sample um that is
voting here right now
ahmed what do you make of what the
audience thinks
so i i i can't see the results anymore
but perhaps reflect on the last one on
what really matters i think in the case
of classic physical ecosystems like ours
that are trying to transform and
bridge the physical and digital worlds
it's really getting the buy-in from
inside the organization and you know
this is a classic innovator's dilemma
when
when business is okay declining in parts
but growing in others it's very
difficult
to get certainly colleagues who've grown
in a certain mindset in a certain
industry framework to break that frame
and start thinking about digital data
so in our experience you know
changing the mindset of the leadership
of the organization
building new capabilities and delivering
new muscles
has been the biggest the biggest
challenge
on the question of who bears the pain
in our experience over the past 18
months
and i'm reminded by you know that
now seemingly distant announcement you
know put on your
face mask on first before so helping
yourself before helping others you have
to be able to breathe
before you you reach out and help your
travel companions
we're very fortunate to be a very strong
company financially with a solid balance
sheet and investment grade
rating access to global debt capital
markets and
one of our very early and quick actions
was to make sure we preserve that
not just out of self-interest which is
very important and i'm glad that we are
now out of it
we're the only real estate company in in
the region that hasn't had any rating
action or probably one of the few real
estate operators in the world that
haven't had generating action we
maintained our credit rating
but also knowing that if we're not
strong enough we're not going to be able
to support our ecosystem to weather the
storm
and then come out of it in a more
sustainable
sustainable fashion so i think it's also
a matter of
affordability who can afford who has the
biggest vested
interest to emerge differently and
hopefully stronger
out of the slump and
three you know good old you know balance
of power
in negotiation uh we think about
everything we're doing in our ecosystem
not
in terms of one asset but across a
network of 28 assets across
across the region and how this network
would provide
a very different value proposition to
any global brand
versus a one asset or a two asset
commercial real estate company
one thing that's striking once this is
what you said that made it
and you're placing some long-term bets
on you i mean you have some long-term
um you know developments in saudi the
mall of saudi obviously contributing
division 2030
so we've talked about the weathering the
storm in the short term and the
innovation you've accelerated
but you are still investing in 5 10 15
20 year projects at the same time yes
you have a strong balance sheet but how
did you
how did you hold your nerve on those
sorts of projects at a time when perhaps
business wasn't quite as
strong in the short term yeah so
i'm reminded i think by one of the
classes i had in nbs around the you know
prisoner of war mentality
you know it felt almost like one was a
prisoner of war in his own house when
working from home
for such an extended period of time and
i think it's balancing
having faith that you will eventually
come out of it in decent shape but at
the same time being realistic enough to
deal with the brutal reality and the
brutal facts i think
it's called the stocktail thailand
paradise
and it's proven to be that dual
mentality that has helped
many prisoners of wars in vietnam and
elsewhere
to be able to you know survive
and actually rejoin life after
release from captivity so i feel this is
probably the one lesson that has served
me
well remaining fairly optimistic that we
will somehow find a way
but at the same time dealing with the
brutal fats
as they come sharing them with the team
sharing it with the wider organization
and being humble enough to admit along
the way that none of us have all the
answers and we have to admit that
moving forward there's still plenty of
uncertainty around
variance and long-term impact on
customer behavior economies
etc inflation there are plenty of
uncertainty and ambiguity out there
that's wonderful michael any final
remarks
uh i was just wanted to to uh to very
quickly reflect on the fact that
earlier on one of the questions was how
will you be doing that
and um being able to make the returns
and i think that
the proof in the pudding is that um
the bet that you have taken is that in
order to be successful
in operating the moles you need to focus
on the experience
in terms of the customer um and making
it as seamless
and in a way equivalent to what we are
being spoiled to learn
in the digital world but also to
ensuring that you don't only think about
the physical with a bit of an
afterthought of the digital
but linking the physical and the digital
in being able to ensure that not only
the overall experience is attractive
but that you as a mall operator can
become
more interesting and at the end of the
day
more appreciated even from the financial
community
and i would say that that probably has
not come that easy and again i'm going
back to the
pre-crisis discussions that i recall as
having about
needing to convince people of the need
to
undertake this investment um any
thoughts for the people that are
in the process of trying to change the
mentality
in their organizations or change the
view of their peers
making them think about how they can
find
um both the words
and the motive ability of convincing
how to change the paradigm
yes i'm sorry i'm
perhaps reminded here michael with
what rumi said you know a few centuries
ago
yesterday i was smart and i i wanted to
change the world
today i'm wise and i want to change
myself i think we
we often emphasize or estimate the need
to change others
versus the need to work on ourselves and
lead ourselves
and change the way we look at things and
change the way we act without
us demonstrating a different mindset
leading sometimes by example and making
small sacrifices along
the way perhaps showing some
vulnerability as well it's very
difficult to change the world
i mean it all starts with changing
ourselves as
as leaders and that is for me perhaps
something that has stuck with me over
over the years i know it's
great for this african but but that's uh
that's something that i've always kept
not only the terrific way of closing the
session it's also the perfect segue to
what we will be doing in three
weeks from now which is speaking about
changing the world and thinking about
old regulatory backlash against big tech
uh um another fun uh adventure that some
of us have been
involved in with christina cafara one of
the leading practitioners
on that um in europe but for me ahmed
it's been a pleasure as always uh to
have you join us and i look forward to
more such
sessions thank you very much thank you
thank you thank you very much thank you
david thank you michael
it was a refreshing to see somebody with
such commercial acumen
with a sense of humanity and a clarity
of how you've explained how you made
decisions at critical times i know it'll
be a considerable use for other people
involved in ecosystems so
thank you all the links are in the chat
in terms of signing up to the next
session the recording will be available
and do give us any feedback on what we
can do in future sessions but ahmed
michael
what a wonderful conversation i hope
everyone enjoyed it thank you

---

### Regulating Ecosystem stalwarts: Success envy or re-balancing inequities?
URL: https://www.youtube.com/watch?v=PokVwHT2szo

Idioma: en

welcome everyone my name is david
lansfield today
on this bright sunny summer day we're
going to be talking about
regulation of course platforms big tech
and the topic is regulating ecosystem
stalwarts
success envy or rebalancing inequities
this is the third in our session in our
series
eco gaining ecosystem advantage from the
london business school
our aim in this series to give you some
insights and tips some ideas some
lessons that we hope will help you in
whatever role you play
in ecosystems and today i'm delighted to
be joined by
my co-host and esteemed colleague
professor michael jacobides of the
london business school
and dr christina cafara let me introduce
you both
briefly but fully as much as i can so
michael is the sir
donald gordon professor of
entrepreneurship and strategy at london
business school
a world-renowned authority on ecosystems
publishing some of the most impactful
research on the topic including his
paper in the strategic management
journal which is the most cited i
believe
of all of them today so congratulations
michael as well as other
publications such as hbr slain
management review the ft and w
f he has also co-edited a special
edition
which is due out in september next month
of the on
industrial and corporate change on this
very topic so look out for that and
we'll share all these links with you
he's a senior adviser to bcg his company
evolution unlimited and a chief advisor
on the digital economy for the hellenic
competition commission
there you go minecraft there's more but
that's as much as i can cover today
christina is a world-renowned
competition economist
who has led the anti-trust and
regulatory team in europe before charles
rivers associate associates for
many a year she has led the economic
analysis of
many many landmark cases involving some
huge names
google microsoft amazon apple uber
samson hollywood studio sky and many
more and i can't think
of a competition authority or court that
she hasn't been in front of
for professional and good reasons
christina michael you're very welcome
my name is david lancefield my brief
introduction is i've been involved in
ecosystems
since the late 90s designing scaling and
actually in some cases
involved in the regulation of them so
that's who we are
this is however not a lecture today this
is a debate so
we hope as we warm things up that you as
we have in other sessions
you get involved by giving your comments
questions keep them kind and clean
and we have a good discussion in the
next 45 minutes or so
so michael why don't you warm things up
on this topic and invite christina to
give her
thoughtful i'm sure provocative views as
well indeed and i've had the pleasure of
sharing uh the stage with christina
uh more than once and uh this is why
she's been a guest of a
number of different activities um
christina um for the people who are not
quite as familiar or
part of these debates um uh as as
you um can you give us a sense of why it
is
that we are undermining and
wanting to uh restrict these companies i
mean you know there are people who
basically say that this is punishing
success
uh and the fact that you've got all
these great companies
that are achieving so much our days are
different
you know we enjoy ourselves looking at
staff and
having all these suites of services from
google and facebook can connect us to
the world with instagram
whatsapp what's the deal if it weren't
them
the world would be a better place
wouldn't it is it just envy
what's the story envy um thank you
michael and david for having me here i
am delighted to be here
um i need to do what i always do you
know with
all of these discussions uh david you've
done it for me to some extent but i
think disclosure is particularly
important when one is working in a
gifted
environment for or against parties so
my disclosure is i've worked uh several
times
opposite google in a number of matters i
advise
the attorneys general in the us in their
complaints against google
i do not work for or against facebook
but i've done work for amazon for apple
for netflix for uber for microsoft
and more so that you can place me
what is driving this is
suddenly in the regulatory environment
that i
know well and sort of breathe and live
in
there is a very diffuse sense that
even as recently as seven eight ten
years ago we thought of this
digital world as something that was
going to provide us
with huge choice we as consumers were
going to be able to seamlessly switch
and multi-home and we were going to see
overtaking and leapfrogging on the part
of companies
so that market power was not transient
we were not going to see
huge uh market power being created but
everything was going to be moving along
and the kind of strong sentiment now is
that what we have actually seen relative
to this nirvana that we had
is being the funneling of our attention
into three or four
major pension brokers so as consumers
we have a limited number of of choices
and let's face it the census that some
of these markets have ticked we're not
just talking about
whether with the win behind some of
these markets may take social
social searches social networking estate
we are talking
about markets that are quasi monopolies
and so there is a sense that this in
turn
has led to um fair bargains all over the
place
uh unfair dealings between these
giants and consumers and the businesses
that are reliant on them
and therefore uh there is a a a
very established notion amongst uh
regulators that something needs to be
done because these
unfair bargains this exclusion this
exploitation that we are seeing
is endemic systemic is not going to be
cured
by the market alone so this is really
what's behind
well and before i i leave the floor to
david for the next question
perhaps i should add um for the people
who
haven't been following this debate that
even the question of
what is really bad is up for grabs and
it is a little bit different in the us
and uh the european union the americans
following uh
the success of the chicago school and
reforming
antitrust think about the welfare
criterion what does that mean
that if you cannot see a reduction um or
an increase in price on a specific
market
you should not bother at all with
anti-trust whereas in europe
and i think many other authorities are
saying well if you have these poor
people working
um as the delivery agents for the livers
or the taxi drivers for
uber you should kind of care whether it
is uber and deliveroo that captures
all of the value they don't have any
other way of competing
and if this is done in a patently unfair
way so
we're still struggling to even identify
what the objective of regulation is and
part of the discussions part of the
debates that are currently going on
is that we are rekindling open issues in
antitrust
that lie dormant because of this
extreme inequality in terms of these
orchestrators
and the complimenters and by the way
that's the reason that i turned into
regulation
because part of my strategy advice made
me realize that we were creating
monsters
and you know didn't feel very nice
sleeping at night thinking
about that and ironically this is
something that the anti-trust community
is only now starting to more formally
recognize so
just a bit of context because it's
important for us to think about
this in the context of what is antitrust
there
for what does it remedy what should the
criterion be
which way is up which ironically is not
really
an open question so that saw that you
had something to say and then david
apologies i'll try to step back can i
jump in i mean because i think you put
the right emphasis there i mean there is
in parallel to this growth of the market
power this limited number of giants that
is ongoing a review a rethink
of what is the role of antitrust quite
plainly my position
is that antitrust so far has failed
it's failed because of inherent reason
antitrust
looks at one thing at a time it looks
backwards rather than forward
it never captures effectively the
conduct that is going on
but the bottom line is that we are in a
period of deep rethink about what is the
role and the scope
of antitrust and we're pivoting really
sort of heavily
globally towards regulation regulation
being a different tool and the trust is
you've done something bad i'm gonna just
investigate it and punish you
exactly regulation is i'm gonna just set
down the rules as to what the do's and
don'ts
are and i hope that you follow them and
uh i'll try and make you follow so we
are in this big people
but in in a in an important way
there is a big thing about the entire
construction the motivation for
for it in in the u.s of course all of
you who are based there have followed
the the sort of the the way in which the
progressive
line is now pretty much in power
at the doj at ftc we have leaders who
are very much
of the brandesian school and they have a
very different way of thinking about
antitrust
than the previous generation i mean now
we are at a point in time and this is
why i talk about a pendulum swing in
which in the u.s
people are thinking about going back to
the original rule of antitrust that was
dispersing economic power and therefore
dispersing
political power in europe we don't quite
have that kind of
understanding of antitrust but we're in
the deep breathing stage as well
so this is really
you made a powerful statement in the
middle of that which i want to emphasize
which is obviously you said
today antitrust has failed in this in
this area hence the
and you talked about the shift to x anti
regulation having worked with quite a
lot of
sector regulators not because sector
regulators
you know the instruments the tools the
people the resources is fundamentally
quite different
in an ex-ante world and i'm curious if
it has failed
and we are making that shift what new
mindsets tools practices do will these
regulators need in order
to um like set the right rules of the
game if you like and then intervene
appropriately against these
these organizations that are you know
very capable um
and and very capable in both not only
their business practices but also how
they interact with the authorities
i'll i'll just start but i think michael
should really
take this forward my sort of first
first answer to that is that it is a big
concern because there is
a delusion that by going into exam
regulations somehow we're going to find
the tools
but this is not teleco this is not
teleco regulation if you think of the
business model of telecommunication you
think about deutsche telekom british
telecom
telecom france telecom they had similar
business model there was dave that
they've dated this voice
and therefore when you kind of think of
a sector of regulation
that essentially says don't margin
squeeze don't do this don't do that it
is fairly applicable across the board
the real
problem and this is where i think the
brussels regulators are
totally behind is that they're trying to
set some rules that fit every business
model
based on anti-trust practice
yes and to me this is a big concern
michael knows that you know i've pushed
this line that we need to really be
much more sensitive to conditional
regulation on business models
because otherwise we're going to
completely fail mindful over to you
absolutely so let me just agree with
everything that you've said
and david perhaps it's worth giving a
bit of context one of the reasons that
we are where we are
and why we're speaking about ecosystems
is that you have seen
as a result of both information
technology and ironically
deregulation in terms of not allowing
people to
uh engage in particular secular
activities you see
that what used to be fairly clear and
well circumscribed now is up for grabs
why are we speaking about business
models why are we speaking about
monetization well i'll tell you why
because it used to be that there were
regulations that say there's only one
way that you monetize
if you are a bank or if you
are um a pension plan or if you are an
insurance
basically you're going to have some
deposits difference in there
then things started growing up there's a
tons of creativity
in the way that you were able to
monetize and people said great
now with information technology going
down you can pick
things and put them together in new
bundles that you hadn't thought of
before
so the idea of sexual regulation has
already become a thing in the past
what you are seeing with all of big tech
players is that they're starting to be
multi-sector salaries that bundle
everything from healthcare to
lifestyle to search to music to what you
read
and basically they draw on another very
important regularity which is that we're
lazy buggers
we don't like choice although we say
that we like choice and economies do not
unfortunately accurately describe our
choice behavior
um uh if you think about dick taylor who
won the nobel prize
in 2017 he basically explained
how um we basically take the default
and that firms our choice architects now
we start saying
i now see why this alexa versus siri
combat is so important and why if
someone
is taking advantage of my own behavioral
properties
we need to deal with that and in order
to deal with that
you need to show those firms that have
the models that can take advantage
either of the
final customer or of the other
complimenters that they have
which takes us back to some of the
things that christina had also been
arguing
consistent with some of my old earlier
work and industry architectures and now
the architecture of ecosystems we say
well hang on a minute we need to start
understanding the rules
of the game here we come to another
important issue
and the important issue has to do with
are we able to understand
i have to admit that starting to speak
with regulators i was a little bit
scared
so cristina i did not see even a base
understanding let alone the
sophistication
that is going to be needed to understand
how the world is moving
i remember in a panel that uh that we're
on
one uh a tech analyst from york
um quipped that the
regulator that regulates google in
europe which is the irish regulator
has a budget as big as the kombucha
budget for google
that is to be one of the companies that
they regulate and that
creates a base answer the privacy side
that's on the privacy side true but
for the irish for the rhi but i think
that to me
that suggested a general problem and the
problem
is that there is both a lack of
competency which is historical because
we haven't needed to bother about these
things as regulators that was not our
turf
and right now we have new types of
issues
that we're dealing with we have
economics that go much more quickly
markets that tip competition that cannot
happen
which means that there are some firms
that are going to be able
to have a lock-in and of course we say
oh but look i'd like us
but look at um you know other
ventures that were by the wayside yeah
but
six seven eight years ago uh structure
was cemented
and there is almost no mobility which is
historically entirely unprecedented
the same companies whether you go in the
u.s or in europe so
the question that i have for you
christina is how hopeful
are you that we will see some change
given this massive disparity in
horsepower
and also in even the base resources
that exist between the regulators and
the regulations uh not just because the
regulators
earn a 10th 20th 100th of what the
regulations
actually make in similar positions and
you know we know people
are in both and you can think about what
their paychecks are
but also in terms of the underlying
power how do you think that's going to
pan out
i confess i'm very worried about this
because i think
that when i speak to some of my us
clients
they come out with uh a pretty
disheartened view they say europe is
against us
europe is unprincipled and i say it's
not that europe is on principle
europe is uninformed when it comes to
business models
uh there isn't necessarily driving this
unprincipled anti-american segment but
there is
a lack of understanding of of the
business model and what is going on
and just to give you a couple of
examples uh some of the
of the regulation which is now going
through the parliament has
big rules like do not self preference
but what does
do not self preference mean when you
just boldly stated when your google or
your facebook or your app
or your or your amazon it is not clear
right so this is the sense in which the
regulation is in part
uh not going to be self-executing not
useful
not understandable then you have the
question of
how is it that these kind of regulators
are positioned to comprehend what is
really going on
and i think it is it is a a worry
because if i look at yesterday's press
release by the european commission
taking to phase two
facebook facebook customer it is exactly
the same
press release that they used the year
before on google fitbit it is exactly
the same press release that used five
years ago
in microsoft linkedin the narrow markets
the concerns are the same a bit of
foreclosure and this and that
and you know it is mind-blowing in a
world in which the discussion over there
is about metaverse this intermediation
of app stores
uh fortress of content and
the impact of the the att
changes of apple the regulators here are
still
sort of talking the same tools that they
use
across the piece so i think in uh to
conclude
i am reasonably more hopeful that the uk
is making an effort in this space france
is making a bit of an effort
germany is making a bit of an effort
where i'm totally terrified is the
european commission it is entirely stuck
in a rut of 10 years ago without
understanding of the technology without
the without this the resources
and ultimately proudly so because they
don't really make any effort to
understand it
um it is it is quite shocking in the us
let's face it the u.s enforced nothing
they did nothing for 20 years right you
guys until
you know before before since microsoft
nothing happened
and now in the last two years we've seen
a big upswing
the drum roll from the state ag's and
we've seen complaints from doj and ftc
and so on okay
but we know that the resources are
limited and so i think i think that
that that is uh is something to watch
we've got we're warming up nicely we've
got um we've got a first comment from
catherine and i'd encourage others to
add comments or questions as we go
through
catherine asked the question is the
revolving door between regulated
bmf it firms and the regulators
pronounced as it is between the u.s
securities and exchange fcc
and the private sector
it's not really happening the revolving
door
in dc is between big law or has been
between big bad law
and the agencies not really so much
uh it's the other way you tend to have
people from the agencies going
into into the companies and then being
used to lobby
pretty much you don't find competencies
going
in it's people from the agencies going
out
and becoming lobbying tools yeah in
europe we don't have revolving doors
full stop so that's a problem
i just want to give one example from
from the past where and i take all your
points about
uh sector regulation and the limitations
of it in the world we now live in and
you've described eloquently
but i remember when ofcom the uk
communications regulator was developed
and i was
heavily involved in different aspects of
both on cases and the organization at
different stages
and but there was whatever you think of
the organization i think most people
would say it's a relatively capable
regulator um and if there was a step
change compared to the five predecessor
regulators in
leadership funding um people
from many from the private sector and
the best public sector people
and i think her mindset shift of being
more externally focused yes there were
certain things they
perhaps didn't do so well they over
consulted and made things a bit
complicated and
so forth but in this area given
the complexities of the business models
the dynamism the change
the amount of change i mean i am an
optimist by nature and spirit
but these were in relatively narrow
clear market definitions right
and they and it still took a number of
years in which
some would argue the companies did you
know some companies did pretty well
as they finally got up to speed in some
of these areas we're now in a model
where it's quicker
more complex um you know it's not easy
to delineate so even with
more funding step change in leadership
and
you know a revolving door if one could
exist more
i just wonder what the model is is the
model of a sector regulator
with greater powers funding and so on
the way forward or is there is there
another model that could help
move us forward in this area well i mean
there is a a a view which is put forward
forcefully by for example the
brandisians the most
progressive kind of a wing in the u.s
that says listen
this is all too complicated if you go
rule a reason
and you start nuancing you're just going
to create a mess let's just create some
very simple clear rules you cannot do
mergers if in a market there are
less than four others if the market is
concentrated let's
kind of argue that you cannot
discriminate and just be very clear
about what that is
not discriminate between customers
between users uh
and effectively if you are ultimately
the equivalent of a common carrier let's
call you that okay let's kind of call
that store
ultimately a common carry okay and they
have to just basically give
give access so there is a very
extreme out there view that a more
nuanced
anti-trustee-like approach would be
uh would be a mess i personally have
a lot of sympathy for the position that
the uk regulator
has taken it's an anti-trust regulator
but they're very pragmatic as you'd
expect the uk to be
and in fact instead of kind of creating
rules with the pretends to apply across
the board
they have gone the way of creating codes
of conduct without this book
so they are going to tell apple this
is what we think the problem with you is
let's discuss it and this is what you
cannot do this
is my amazon this is microsoft history
so it seems to me that at least if you
do it
at persona you spend more of a chance of
capturing the features of the business
model and that's better than kind of
going the way
of crazy rules that are so
draconian i guess and i think that
another component to that
is that again we're trying to rethink
what
is the underlying basis in the theory
which is
what underpins the special issue uh that
is going to be coming out in september
in industrial corporate change with
a number of the uh of the leaders in the
debate um
writing in it and i'd be happy to share
that let me now go to another question
badly as it's directed to what i
mentioned that neil put in which is
perhaps a bit of a comment
more than a question uh and he says that
um uh
neil mentions that michael says that the
situation is unprecedented
it strikes me there are powers of the
gilded age in the usa in the
19th century then like now there's a
change in techno economic paradigm
and i see that there is quite a bit of
truth in that
and i think that we have a more profound
change in the underlying economics of
the businesses and also the possibility
of crossing sexual boundaries and of
leveraging the data
and the information for the customers
amplified by
the predictive knowledge of artificial
intelligence
in order to benefit the companies that
have possession of that data
so i would say that if you think about
the changes in economics
which were driven by economies of scale
earlier on
they are more significant for the for
your socio
techno-economic uh underlying structure
which leads to problems which is what
many of us who study
these businesses say hey these are the
new types of problems
this is how you should address them and
you should look at
nature of problems and as a result what
implications these
things have let me just mention a couple
of other things
if you think about what helped redress
the market power then
it was the fact that the wrong guy ended
up being president of the united states
the president was assassinated the uh
guy who was
um just a colorful character that nobody
ever
expected to do something ends up um
becoming the president and roosevelt
starts pushing
hard in terms of some of the regulation
uh when the first series fine against
standard oil of new jersey gets handed
down
about a century and 10 years ago john d
rockefeller is playing golf
and he apparently continued playing his
game
when they gave him the then whopping
fine i think it was 11 million dollars
which was
a startling amount way back then and
what he said is
judge landa or whatever his name was is
going to be long dead
by the time that any of this money gets
paid and that
to some extent was what happened with
the microsoft case so yes
there is some interesting um uh
continuity there and to some extent the
concern of some of the exposed issues
or the hesitance that christina was
mentioning in terms of
the actually following up on that is
disconcerting
so christina let me turn that into a bit
of a question and here's my concern
but i want them to turn to the
opportunities now first with a concern
when you hear of significant cases
like the us changing its attack and
engaging in serious cases like the one
that it had for google
um uh or later for facebook or uh the
new triumvariate
uh including lina khan in the federal
trade commission
you see the stock prices of these stocks
hardly noticing at all let me contrast
that
with what happened in china when the
chinese government decided to start
cracking down on edutech and when they
decided that they don't like
just how powerful wechat has become
their stock prices
collapse now someone might say
the markets are fairly rational they
understand that the chinese mean
business when they say it
the americans are going to be swayed by
the lobbying power of big tech
is this what's going to happen or do you
expect changes what is it
that is happening and is it that the
stock market is
seeing further ahead than us um
busy bodies who are trying to speak
about these topics
it is a puzzle why after all of these
years
of attempted intervention the stock
market keep
kind of basically effectively
delivering great great capitalization
great value essentially
uh uh supporting these companies and i
think it witnesses
to the fact that there is no belief that
these regulators ultimately are going to
do anything
impactful this is my sort of unfortunate
conclusion at this point i think when i
say antitrust has failed
look at the history of the european
commission with the best intention
they have fined google on three
successive occasions they have
pursued cases that on paper one could
argue are decent
but they have failed to make any impact
on outcomes google is sailing ahead and
progressing very nicely thank you
so the question is what is the belief
about what the regulators can do
even the breakups which are certainly on
the card
for the us cases in europe we are much
more vain and we don't kind of break
companies out
because it's not very polite but in the
us there is an ambition to do that
certainly the state agencies are
considering this
there is a view that that creates value
not destroys it
right and so if you were to just carve
out youtube and separate it does that
destroy value not necessarily so
the market is at the moment no price
again anything worse than that
um and and the reality is that when you
look at the way in which antitrust
operates
let me just give you this this little
sequence i mean look at the history of
the european commission intervention
they started off
10 years ago looking at the keys which
was about shopping google shopping
comparison shopping now
one might decide that comparison
shopping is not really so
existential and fundamental to the world
but that's the case they had that's the
complaint they had
and they spent seven years doing that
case and while they were busy doing that
case and google was uh-huh
uh-huh google was occupying mobile with
android and then the commission wakes up
and says oh
2015. oh look at that google has gone
into android maybe i should look into
that
google says you're welcome in the
meantime i got 100
to the market in the meantime i'm
occupying attack
and i'm occupying iot and i'm occupying
health so you see
the regulators is seven years behind the
curve every single time
and so that is the the what the the
market is pricing it
the view is whether the regulator could
do something else
by telling this company's example you
cannot do this you cannot do that but
i'm very skeptical that these rules can
be
self-executing enough because you know
what's going to happen all of my clients
have said well we're going to have
a nice compliance officer who's going to
do a nice compliance report who's going
to say
tick tick do not sell preference take do
not do
christ discrimination i don't do you're
talking to me
you're talking to me i don't do any of
that okay
come after me hello see you in five
years in luxembourg maybe
so this is really the reaction i mean
they uh
and a number of these companies they
will do explicitly be doing these
cost benefits of you know as you say a
bit of intervention here
waiting and then looking at the you know
the gains they can get in these periods
i know some of them actually do that you
know quite
prominently what is that it's pretty
depressing though what does that if you
were a complimenter or another
actor in the ecosystem a smaller player
and you were feeling so you're being
squeezed by one of these
orchestrated stores i mean
i mean look at the story of yelp look at
the story of yelp yelp has been for
seven years trying to make their case
now you can think that yelp maybe is not
a great business
but they've been trying for years to
make the case that they've been robbed
and and and marginalized by google you
have
the amazon storage you have the apple
app developers who say well
you know we see there is there are cases
ongoing
against apple of course there is that
the case there are other cases
maybe maybe the app ecosystem will need
to change
uh but this is moving much faster than
the regulator the regulators in brussels
have taken
four years to open a case against that
and i
i'm saying this is some advises up
they've taken for years and then the
case is terrible
and then so you you kind of say well
okay
in the meantime of course there is att
that is the metaverse there is
content fortress everything is gone
somewhere else
while we're tinkering with you know some
minor thing on the app store
it's crazy well but on the other hand
and i'd like to continue on the line of
thinking that david has because
part of that is let us think as engaged
citizens as
people involved in business um into an
exercise of understanding what we
as a society does to big tech and that's
an important topic
but i want to steer clear of that and i
want to see what are the implications
for other firms because most people who
um will be listening to us
are complimenters they are not either in
big tech or aspiring to be a big tag
um so for these complimenters i do think
that there are changes
that will um hopefully uh be happening
whether you are in the uk and you see
what the digital market
unit and uh its enforcement will try to
do
you will have some changes and by the
way some of these changes are not only
relevant for big tech
they're going to be relevant for other
sectors as well and that takes me to the
next
uh and final set of questions that i'd
like to ask you which has to do
with what impact that has because
conceptually speaking
we are now entering this interesting new
either
whereby regulators are saying i will go
and check myself whether what you're
doing is
the right business model or the wrong
business model if you take the logic of
thinking about the architectural
ecosystem
or looking at business models which i
agree with it also
says that you will have regulators
trying to sort out
what's the right business model and
what's not which is a much more engaged
way
of coming together so i'm thinking that
regulation
all of a sudden becomes much more
relevant for strategy
so that is an interesting and new
challenge that people in the c-suite
need to look at
i.e regulation is changing and i'm not
going to hand it off
to some people that are in the sleepy
backwater of my firm
but to someone who's going to tell me
how the map
of strategic opportunities and of the
things that work and dirt work
is changing now if we think that a bit
of this is happening
what can we expect what do you think the
current regulations
might do for the way normal businesses
not
the big tech but normal businesses are
able to do
what they're allowed to do possibly
because we're not allowing big tech to
do
or what is changing in the environment
around them
what do you think the bottom line is
going to be for
regular non-big tech firms i mean there
is of course a great deal
of uh willingness on the part of
regulators to do something that favors
the opening up of bottlenecks and favors
smaller firms
uh being able to do business in a way
that is not crushed or squeezed or
marginalized by
by these guardians what i think remains
the case and
and is is to me still a big obstacle
is you talk about ecosystem and business
models the understanding of this inside
regulators
is zero okay because the way in which an
agency
thinks even today is very much still
driven by the classic antitrust
categories
so to see an example the facebook
customer
press release yesterday i'm not talking
about any secret information
identify a a problem in that merger
because they defined
a very narrow market for crm supply in a
and then a market for online advertising
digital advertising the same things they
found wrong with google fitbit the same
things that they worried about in
linkedin
nothing has moved in five years the way
to think about this
needs to change because it isn't this
narrow anti-trust markets
that are the problem in these narrow
antitrust markets you find the digital
company who is able to say
well i i'll give you a remedy i'll give
you some undertaking
uh i'll do something which is ultimately
unenforceable i i get my merger i go
ahead i do what i want to do
so there needs to be a broader
understanding and thinking about
how how these things work the other
point that i'm super animated about and
i'll be brief and we haven't had an
opportunity
to touch it but it is one of the reasons
why we are in a different part of time
today
from before is that again we are in a
world in which much of the market power
is
ultimately created as a result of
privacy violation
we have rules that have to do with data
protection that are not
enforced in europe we do in the us you
don't have a federal
data protection regulation to something
in california but that's a big problem
because these companies have been able
to create the moat
that they sit inside because they have
proceeded
to violate data protection
systematically we're trying to deal with
that with data protection regulators who
are
totally inept in the sense that they
don't have resources they're fragmented
and so we're sending them out to fly
google and facebook
with a plastic knife because we are not
dealing with the marketplace
so there are so many pockets of
issues that need to be dealt with
understanding the business model not the
narrow little anti-trust market
understanding talking to data protection
people and understanding the source of
the market power
what are the data protection violations
that support that market power
that is something that's not done and i
i am
at a at a bit of a despondent stage with
regulators i think their intentions are
good
but i fear the worst either children in
effect
ineffective or worse
and lena khan what do you think of her
her potential and her role which is one
question from you
nina lina is a friend of mine she i i
have a lot of time for lena because she
she she has been at the receiving end of
a lot of disparaging comments so she's
only 32
she's only written a famous article lena
is a very deep thinker
and and i think she really wants change
i think i think
i have hopes for what she wants to
achieve uh and i think we should give
her space and time
because she is you know she is saying
that what
we are presiding over what we presided
over over over the last 20 years has
been increasing concentration increasing
consolidation mergers always going
through big bad law
passing anything we haven't blocked
anything
and it's time to end because the economy
is too concentrated then margins are too
high and
this is not favoring smaller firms than
consumers
and i just just just to to give the
context for those
uh who don't know her selena kam five
years ago was a doctoral candidate
um uh who uh had finished her phd in
her phd uh which was uh what was uh
claimed fame uh when it was published in
the year low journal basically said look
if you look at firms like amazon they
don't necessarily
care to create dominance because they
want to get bigger margins by
consolidating
they make money because they grow
quickly in anticipation
or the capital markets work in
anticipation of their growth
so if i own amazon i don't care to
increase my prices i could have to quash
everyone else because i make much more
money as jeff bezos and i can go up to
space
not because i have higher margins but
ironically because
of the way the capital markets work they
are already
giving amazon the benefit of the
expected doubt that once it becomes so
dominant it'll do anything you want so
if you essentially model the stock price
of amazon
it already assumes it then basically she
was showing that it was not possible
to find blame given the traditional way
in which that we defined the markets
similarly with apple today apple has a
very small
part of the market people are going to
say oh but they're not dominant
yeah they're not dominant but you're
locked in because if you've got an apple
phone and you've got an apple watch and
you've got an apple tv
you are not moving and you are taking
whatever conditions are given to you
and by the way if you are tinder and
you're trying to make people date
and apple says i'll take 30 of uh what
you pay
plus some extra benefits for me you
can't say no because you can't tell
people in android
you're gonna date whoever you want as
long as they don't have an iphone
there's no choice you can do that if
you've got uber competing with lyft
everyone can take whichever one they
want
apple has them locked in in ways that
the current
model does not accommodate so part of
her contribution
it was to be showing in which way
this is different um and i think that
her meteoric rise
shows and that's the upside for us
business school types
that if you want to contribute fresh
thinking you may be able to make a
difference
so i think that that's partly the
hopeful message but of course the
question
is to what extent will this
fresh thinking be able to impart change
um christina is a little bit more
skeptical
on the account of what today's
regulators are
and my curiosity is much more about
any potential upsides even limited even
perhaps in countries like the uk
uh which is more advanced than a number
of other countries in terms of the
sophistication
of the authority the competition market
authority um as christina was
have mentioned has a much more pragmatic
view that integrates
a number of the issues that we saw
uh we saw that in the digital
advertising review but do we not
see some changes if you're going to see
the hottest areas
where you think changes will happen
christina so let's forget the pessimism
for a while and let's think
about what might change what do you see
change if you're going to say that's my
bet
what's your bet well i mean i see that
regulation is coming in
there's no question we're still at the
stage of discussing it and i think there
is still
a window for possibly making it better
but
let me just give you an example you were
talking about amazon one of the things
that
is not understood by regulators about
amazon there is a presumption
that amazon has inevitable incentive to
crush the sellers right
the empire and player kind of story you
cannot be the empire on your own
platform and at the same time that other
people sell but the reality is
that amazon is making a commission on
third parties and it is making a margin
of what it sells itself and in any
individual case when selling a product
it has a
choice i make more money on the third
party or do i make more money if i make
a seller product myself and in many
cases this is the format
so the presumption that is there that
inevitably there is
incentive to foreclose there is not
quite clear
so you see that's why i'm saying there
needs to be subtlety you cannot
start from the presumption that you know
on amazon has inevitable incentive to
to foreclose you need to see what they
do which is problematic
which to my mind has got to do with the
way in which they interface with sellers
it's a question of
conduct but you know again is there an
inevitable incentive to self-preference
themselves against others i don't
necessarily think so
but what is changing i mean regulation
is coming in
we have an opportunity to feed into that
process
and try and make it a little bit more
subtle and less
and less uh and less i think crude
uh because i i i do worry that otherwise
if there is no understanding of what's
going on we're gonna have something very
good
it sounds like there's gonna there's
gonna be need to be a step change in
understanding
of the ecosystems in which they look at
a a step change in the dynamism in which
they how they act
different mindset of actually getting
outside the building virtual or physical
to actually get out and
and re-looking at some of the the the
methodologies and processes which sound
i have to say i've
been involved in some of this in the
early 2000s when they looked at tv
markets so i don't recognize that at all
it was about five years out of date even
then and that was a simple market
compared to what we're discussing now
um well it's maybe moving in the
direction
i'm just mindful all the time because
it's already
a time and this is a discussion that
could go on for a much longer time
one very quick last thought because ai
was mentioned and ai is very important
ai amplifies many of the things that we
see because
of the way that information can be used
uh
by uh the the big firms and because
privacy regulation
in essence may have unanticipated
anti-competitive side effects
uh part of the papers that were speaking
about that special issue deals with
some of these uh concerns as well and
there are a host of new things that are
coming up to give you one example
people who have been taken off for an
experiment on facebook
um eventually report greater happiness
and stop
uh using facebook um and uh
they don't want to start it again but
more importantly
fiona scott morton and others was
involved in a study
that looked clinically at the impact of
social media that showed that they have
very similar addictive
neurochemical reactions than mild
recreational drugs and alcohol
we write to regulate mild recreational
drugs and alcohol
if these create similar addition
addiction should we simply say
oh people should do them more if we're
all lazy
and then people can take advantage of it
should that be on or off the regulation
table
lots is going to happen and i do think
that organizations will need to think
about
both implications of regulation for big
firms
big tech and such new opportunities and
how their own possibility of acting as
complementors is going to change
this is an area where i think that
everyone needs to contribute
so it's an area where we hope that
you're going to be
both more interested in and more engage
them uh but we couldn't have
asked for a better brief window into
that
so from me at christina thank you very
much very much
presentation uh and discussion rather uh
on all that and we'll see you in three
weeks
but david um final words from you i
think it's been stimulating provocative
a bit challenging at times not quite
depressing but i think there's a there's
a clear step change that we need to see
i think my sense is we're going to have
lots of comments and as
we're warming up after this session so
keep them coming through to us
the next session was with mastercard um
can it deliver profit and purpose which
is on wednesday the 1st of september the
link's there
keep your comments and ideas and
questions coming michael
christina thank you for your time
thoughts energy and stimuli
you

---

### Building ecosystems in payments: Can Mastercard deliver profit and purpose?
URL: https://www.youtube.com/watch?v=N-6fp4xdXjE

Idioma: en

so welcome to the london business school
and to our fourth session in the series
gaining ecosystem advantage today's
session focuses on this question
building ecosystems in payments can
mastercard deliver profit and purpose
we're going to be delving into questions
such as how does mastercard one of the
world's earliest platform plays manage
and evolve its ecosystem how does it
manage its partnerships when the
landscape is changing so much and how
does it manage both internal and
external ecosystems which include big
businesses all the way to startups and
with all the changes in fintech how does
it compete with some of the new payment
ecosystems such as dlt blockchain and
web 3.0
payments fintech inclusion big brands
it's all here in the next 44 minutes
what more could you ask for for a
wednesday so my name is david lancey and
i'm delighted to be here with my co-host
professor michael jacobides hi michael
hello good to be here you are of course
the sir donald gordon professor of
entrepreneurship and innovation at the
london business school a world-renowned
authority on ecosystems publishing many
many cited papers including i think the
one of the most if not the most read
paper in the strategic management
journal on ecosystems we'll share the
link to that and all the other
publications you have in hbr sloane
management review and so forth you are a
senior advisor to bcg and to his company
evolution limited the chief advisor on
the digital economy for the hellenic
competition commission and a visiting
scholar at the federal reserve bank of
new york which is particularly relevant
for this discussion today
now as you know those of us who joined
us in the previous sessions and we are
inviting some wonderful guests from the
world of business consultants in
academia to share their experiences
lessons and research
and to that end i'm absolutely delighted
to welcome kelly devine the uk and
ireland president of mastercard
responsible for everything in that
sphere and more no doubt the strategy
the direction of the business and the
success and performance of that business
and you've also held previous senior
management roles at american express and
i'm really happy that we were both
colleagues back in pwc
a few years ago
how many yes my own background is as a
strategy consultant i've been involved
in ecosystems for the last 25 years or
so more than 15 in designing stretching
and implementing them and i published in
hbr and other places and i'm in a
previous life a former senior partner in
strategy and so today is about stimuli
ideas practices experience we want a
debate so please get stuck in put your
comments questions keep them clean in
the comments box and michael and i will
delve into them as much as we can
so let's get going so kelly mastercard
big business i'm sure many of us if not
all of us have a card in our wallet
purse pocket um i won't show mine i was
going to do that actually but i thought
i might be giving away data for the rest
of the world so we know about the brand
of course but
we probably don't quite understand how
the network how the ecosystem works
before we delve into all these
fascinating topics so we know about
merchants banks and customers
but just paint the picture of the
ecosystem that you operate and then
we'll delve into some more of the detail
yeah well we'll do because there is a
lot of confusion if you like as to what
exactly is mastercard do
so if you think about it when you go
into a shop make this real real life you
go into a shop you you tap your card you
pay with your cards and you you you
leave the shop with your goods
and no money has changed hands in that
moment but what has happened is that the
shop believes it will get the money so
there's some trust that's been sort of
created in that process that's really
critical
and what sits behind that i suppose is
on on your behalf you have a bank who
makes that work for you we call them an
issuer because they have issued you with
a card
there's the same on there on the shop
side we call them an acquiring bank
because they've acquired the transaction
on behalf of the bank and in essence
mastercard is the blue in the middle
that sits between that issuing bank and
the acquiring bank so
thousands tens of thousands of issuing
banks globally tens of thousands of
acquiring banks globally we join them up
and in essence we allow data and funds
to pass between those groups so
when you're doing that transaction are
you who you say you are do you have
sufficient funds
how much money ultimately needs to
change hands is the merchant a good
merchant you know are you likely to
receive your goods if it's online
that that blue in the middle is the part
that mastercard play and i
we manage other ecosystems with the main
ecosystem we manage the card ecosystem
that's it it's largely the issuing banks
and the acquiring banks and and at one
step remove of course the consumers and
merchants that go with that ecosystem
very exciting so so this this describes
pretty much what was you know the
monopoly in terms of doing these
wonderful connections and there was a
few organizations that did that uh with
slightly different tactics and you know
i remember we were teaching strategy
cases of you know the competition and
the is mastercard and visa and the
positioning of american express but it
was a handful and diners went by
by the wayside a long time ago although
it started early um this has started
changing and it started changing because
now payment technology
is uh
much more dynamic
it's more dynamic partly because we have
significant opportunities of connecting
bits and pieces of information and
brokering this trust role it's also
changed because regulators want to
induce more competition so as a result
of all of that we see new players that
have grown spectacularly if you compare
with the traditional intermediaries that
have taken decades to build the strength
that they have
you look at new names that are coming up
you know square in one part of the
business or stripe in another part of
the business can you give us a sense of
how the world is changing and the nature
of other ecosystems what are they are
they simply players that connect with
you
are there different ecosystems that
provide a similar service by providing
new ways of combining them can you give
us a sense of what the competitive
landscape is between businesses that are
themselves platforms or ecosystems how
does that work out help us understand
that a bit
yeah
it's a it's a complicated world you've
sort of got layers of ecosystems on top
of each other i think we
our philosophy is very much to be an
open network so so we have some rules of
engagement if you're going to be an
issue in bangkok or acquiring bank for
example
so if you're going to sit on our network
we have some rules
that's critical for the trust piece so
you know as i said someone has to know
they're going to get their money someone
has to understand that if the consumer
if you dispute that transaction say hang
on a minute my flight didn't take off
because the government changed the rules
on me at the last minute i know i'm
going to get my money back so so we have
rules but beyond that it's an open
network so that means players can
participate in relatively traditional
roles so i outlined the issue of firing
role
quite traditional you know the way that
the network has worked for the past 30
or 40 years
but people can can come in
and use that same functionality that
same spirit to do very very different
things so they might pass data along the
network to look at someone's things like
digital identity you know the network
could be used to do that the network
could be used to
to to do a transaction you know buy now
pay later is a good one where some of
those transactions run on a card rail
some of them might run on other rails
the consumer doesn't necessarily know
which rail they're running on
so so i'd say one of the one of the
spirits isn't open as an open network
and therefore you will see other people
do all sorts of interesting things with
it and we don't seek if you like to
control that we allow the innovation to
happen on the platform that we've
created
in terms of the other the other
ecosystems that compete if you like with
with ours
the the shift to real-time payments um
or the creation of real-time payments
capability in the uk quite a long time
ago but but globally is taking off like
wildfire in essence means you've got a
really viable alternative to card so
you can now make a real-time payment
open banking but all of these solutions
are kind of starting to evolve and
absolutely you see completely different
players
sort of um vying for
for success in in that space
you um you talked about multiple layers
of ecosystems and what clearly is a very
straightforward picture he says with a
hint of irony um how do you keep a
handle on it you have a portfolio but
how do you keep a handle on both the
ones that you
manage in the with all the rules that
you refer to the ones that you stimulate
because they're in mastercard's interest
and if you like the platform that you
want to create for others
how do you keep a grip of it and how do
you evolve it in terms of you as the
leader of the business one of the
businesses within mastercard yeah i mean
on many levels i guess on one level
there's a sort of rule enforcement piece
if you like we have a franchise team
whose job it is to say
you know you're participating do you
comply with the rules are you doing
something particularly risky and
therefore we have to look at that in a
different way
lots of debate at the moment for
instance about crypto
crypto transactions that happen across
the network and what's an acceptable
level of risk
for consumers and and someone
participating in that system and how do
we manage that how do we make sure we
comply with whatever the regulator is
telling us so there's a there's a sort
of very brass tax management of the
ecosystem that's critical because of the
trust piece we have to make sure we
deliver on that
and then as you say you're going to have
different levels of engagement depending
on what it is that the person's trying
to
the company's trying to do with the
system
we i mean we manage everyone from the
traditional banks fintechs
and people doing completely different
business models i mean you mentioned
blockchain people using blockchain to do
you know proof of provenance of goods so
not necessarily even to do with the
payment digital identity things that
sort of move related to the payment but
moving away from the payment
and the digital players like tobacco and
google who clearly
connect into different parts of our
ecosystem in different ways
governments ngos huge range of
stakeholders
and i think that the challenge i suppose
is
how you
you clearly have to understand what that
huge group what those different
stakeholders need and want you have to
be able to adapt react be add value to
those different groups so you need
people within your organization have a
huge breadth of sort of expertise but at
the same time you have to stand for
something you can't actually be 20
different things for those people
you know you have to be mastercard but
you have to bring mastercard in a way
that makes sense to the different
parties that you're operating with and i
think that's
it as someone managing the business that
i'm managing it's a way that likes to
turn them back on again here
um
but um it's um that that i think is the
challenge that that's tough is how do
you adapt but at the same time you have
to stay cool to something that you stand
for
so before we go into how you do it which
is a fascinating question that we will
want to explore uh significantly uh more
more in greater depth uh let me just ask
you uh the final sort of big level
strategy question if you think about
some of the changes that are going on we
have technological change with the
possibility of um
authentication changing in different
ways um you know distributed ledger
technologies also evolving and um
real-time information that's sort of one
big group of things the other thing that
is changing is regulation either the
regulation the regulatory attitudes to
things including um you know the the
attitudes and you mention um also uh
blockchain related stuff that people
want to either invest in or transact
with uh but also uh the rules for
engaging i mean the eu for instance has
pushed for psd to the payment
directive which transformed uh the uh
playing field now from your vantage
point what do you see as the most
important forces
in shaping your world moving forward is
it the competitive action of firms who
say hey payments now should be part of
what we do is it um the creation or the
emergence of new players or uh is it um
the regulation and the fact that
regulators come in it may be all of the
above but
what do you track as a leader who has to
figure out what's going on before we go
to how do you manage the ecosystem in
particular the obvious answer is is all
of those things i think if i'm if i'm
trying to try to pin myself down
i i think
over the past five years the next five
years
what the technology actually enables
has fundamentally changed and will
fundamentally change
you know things like in the last five
years real-time payments that
fundamentally enables things that 10
years ago would have just been a pipe
dream and i think the the evolution of
cbdc's etc is going to do the same thing
in the next five years
foundations in the next five years i
think it will take effect if you like in
the five years beyond that and and so
yeah absolutely of course you then layer
on what is it consumers actually want or
small businesses or you know of course
you lay on what who you're trying to
serve and what they need of course you
layer on what direction the regulator is
trying to take the market in and what
they're trying to enable
of course you layer on what your
competition are doing but i think right
now the most exciting thing is that the
the foundation the very foundations on
which the ecosystem is built are
fundamentally shifting if we were to you
know if we were to sit here now trying
to design a car a payment network that
did that thing i explained in the middle
of connecting you know
banks with with shops banks you wouldn't
design the card network you would design
something different
so so the the grains of sand are
shifting and i think that's the most
exciting part of the of the paint
ecosystem at the moment quick quick
follow on because that's something that
is not really happening in europe yet
but it has happened in southeast asia uh
if you look at pele is like grab they
have used uh grab is this uh company
that managed to beat uber in places like
singapore and then dominates malaysia
and so and so forth but what is what is
fascinating with grab and it's malaysian
competitor gojek which is the other big
uh southeast asian rival is that they're
now changing their call into a payment
scheme services bundle a super app where
the payments are absolutely um integral
to their offering do you think that that
is a trend or is this a blip do you
think that
the subsuming payments into this
one-stop shop is going to be part of
what we might see there or is it that
the regulation is so different in asia
that europe or the us will not really be
facing that and then uh we'll go back to
how you manage the ecosystem i think
you're right we haven't seen outside of
asia that idea of the kind of super app
but every you know that into which
everything is pulled under that that
just hasn't
i would say that hasn't taken off
why that is i don't know
someone who's really interesting on this
topic is it worth looking at is ashok
raswani he's the head of um
the retail bank at barclays
internationally who talks about their
mobile banking app they have something
like 15 million customers and he talks
about their mobile and banking app if
you like as a as as a as a
an extraordinary way of being able to
engage with his customers he's got 15
million customers and almost every day
in the uk which i find absolutely
remarkable people check in pretty
typically most people check into their
banking app once a day
so that is an extraordinary engagement
channel and and so i can understand why
everyone is pivoting around whether it's
the bank app or the payment side of it
because because it's something that's
important to people and of course it's
convenient factors people don't
necessarily think about it that much but
it's a huge engagement opportunity
and so it whether it's banks trying to
exploit that whether it's you know
someone who's paying their drivers and
trying to to think about how they expand
that relationship whether it's someone
prepaying someone's salary i i think we
will see people explore that
whether the fight whether the finance
super app takes off in europe
not sure
yeah i want to delve further into this
strat i'm going to stay at the strategic
level to following michael's lead as
always before we get into the how um you
talked a number of times kelly about
what you stand for and i'm i'm
interested in the if you like what i
would call the strategic identity of
mastercard in a world of the newer
players you've just been talking both
been talking about and the traditional
competitors
visa amex so what do you stand for and
in the world's
worlds of multiple layers of ecosystems
what do they feel like the capabilities
you've got to be you've got to really
master in order to not just preserve
what you have but really evolve and
innovate beyond that so identity and
capabilities how would you describe it
for mastercard
i'm
i think mastercard has
a few things that kind of unique about
it i would say one is the
is a willingness to disrupt ourselves
well i joined masterclass something like
six years ago now one of the first
things we did in the uk when i arrived
was
was the move into the account to account
business by the acquisition of openlink
and i know
many businesses who would have said you
know we're doing quite nicely in cardiff
thank you we'll
we'll we will try and defend our corner
of the universe if you like
um rather than
move into a new space which we don't
understand what the model might be we
don't know what the economics might be
we don't know what our role in it might
be it could disrupt everything that we
do today
but but we have some sense that's where
the future's going and we're willing to
back ourselves to take that risk and
build a successful business off the back
of it and
i think that willingness to take risks
to innovate and by the way not just to
do that ourselves but to really do that
in partnership with with the people we
work with our partners and customers i
think is something that's really unique
to mastercard so that that's the one
philosophical pillar if you like
i think
working in service of your partners if
you're an ecosystem
we create the platform on which to some
extent we bring innovation someone
ourselves but just some extent what we
do is create the platform on which
others can innovate if you look at the
likes of monzo or revolut or someone
lots of their businesses start with a
card because you can work on a master or
a visa yes
and and relatively quickly take a
product to market i say relatively
because i'm i'm making it sound much
more simple than it is
but but i think if you're gonna run a
business like that operating in service
of your partners and making sure you
have that mindset
is is is really critical and so i'd say
that was a sort of second pillar
and then the third and this was really
started by our previous ceo we've had a
new ceo who stepped in the beginning of
this year but
our previous ceo had had this idea of
how you combine
doing well by doing good and and yes
and i think it's easy to be relatively
skeptical about corporate slogans like
that so if anyone is feeling that way in
the audience
i relate to that initial reaction
but it is
it is very genuinely embedded in in the
masterpiece but there is a belief
that by
by raising all the boats if you like
that is beneficial to mastercard and
therefore it is a sustaining activity
that mastercard can invest in because it
it ultimately contributes to our
business but at the same time
contributes to society and i think
wedding those two things together it's
not a phenomenal side of your desk type
activity it is integral to your business
model
and to your business outcomes i think it
is also something that we've been i
think lots of businesses thinking about
it now but i think with the ceo we had
we were
ahead of the game a little bit in in
having that conversation internally and
externally so you've answered the
question you can deliver profit and
purpose um and we're not even halfway
through there you go um
it's quite a big the observation i make
before up hand over to michael we've got
some great questions coming in which we
should go to too is uh
it's one thing to talk in that way that
you just described but for an
organization that has grown up you know
in a big successful profitable
organization to pivot in the way you
described of disrupting yourself and
doing good for others both in the
ecosystem and society that's a pretty
big cultural shift um and and very very
hard to do so depending on time we might
want to delve into that
in a moment in the sort of how but
michael i know you all let me let me
just just before we we jump into the
questions and there's a number of
interesting things that have already uh
uh come up in the chat um
i was thinking about what you were
saying a moment ago about the potential
attraction of payment um as something
that um as you said people really care
about and i remember um it was now
nearly a decade ago i think it was
probably 2012 uh sitting uh waiting in
one of these buses in in davos i was
speaking with margo giorgiadas who was
then the president of the americas in uh
uh in google uh she was the the cfo and
i was like well okay just tell me um and
i think it's easier after a couple of
bottles of wine what is it that you
focus on uh how is it that you build uh
your ideas of um what you will focus on
in terms of ecosystems and she was like
well okay the first thing that we do is
the toothbrush test
is a toothbrush test well i mean
you must
whatever we do must be something which
you do regularly and may affect your
life like brushing your teeth and it
needs to be part of your routine it must
affect individuals and i think it's
really interesting because i would agree
with you and certainly you know banks
telcos have done the same thing have
failed to capitalize on the fact that
they are parts of individuals um
everyday activity but there are bloody
nuisance i mean you know the when when i
first taught a course with barclays i
remember that you know part of the haha
look at our world is you know uh you're
more likely to
get a divorce than um
to close the bank that you opened when
you were a student
um and i think that that gives some
amount of entitlement and i think that
part of this um
dynamic that you're talking about
creates
significant um options for customers and
the world that you have described is a
world whereby you need to be much more
responsive
and the cool thing about payments is
that you're responsive in something that
matters and if you play it right well
perhaps then you're going to have an
upside now in order to do that uh you
need to connect with others and now i'm
going to move from um a little bit more
into the how because when you say that
we're going to do stuff partly you need
to make some good strategic decisions
and decide which areas you're going to
be involved in and which not and you
know how you will respond to the
business models but then as you decide
um how you're going to do that you
probably want to think about engaging
with people outside your own
organization and now we're going to the
second part of ecosystems not only the
bundles of goods and services but the
groups of
other participants that move outside
your organization where you are seeking
for new ideas and frankly the capital to
support them in some of your partners so
that you can collaboratively go to
market now when we think about that when
we think about mastercard being more
open for these partnerships
in an area that's so ill-defined it's
not that you know you know that you need
to build a well-being ecosystem apple is
trying to do that for instance
and okay we're going to decide you know
how we engage you are in a world that is
moving very fast how do you do that how
do you engage with other organizations
and how do you invite them into the fold
in order to find ways of creating joint
value i think to some extent it comes
down to this idea of of your approach
and i
we've we've always had the view that
it's that it's better to have people be
be have the option of being part of the
ecosystem and derive value from the
ecosystem and and hopefully contribute
to the ecosystem then it is better to
have people on the outside sort of
sitting and innovating by themselves so
i think that the first part of that is
simply being open to it
and being willing to have conversations
with people without quite understanding
where it's going to end and what some of
the risks and opportunities associated
with these conversations might be
but a sort of willingness to embrace
them i i think that's one piece of the
puzzle
i think
i think the second piece is an
understanding that you can't necessarily
control what all of the outcomes
will be to your point these things take
a very very long time there are lots of
things that we've
we've done we've designed we've tried to
bring to market that that haven't worked
they've either got stuck at the stage or
we've taken to partners they get stuck
at the stage where they ultimately go to
the end users
so so
you know an acceptance of failure and
acceptance of change what you thought
you were doing
will ultimately evolve in into something
else i think is is kind of another piece
of the puzzle
but i think there's also a sense of a
big ambition you know
a mastercard and this has really been
been under perhaps our new ceo has set
this this ambition for ourselves to be a
multi-rail payments company to move away
from being card for those of you who
looked at our logo we we don't use the
words mastercard anymore the card where
we do use it is a small scene
so there is this ambition to be
something more than card to be to be
however the payment is being made
that we can be relevant and add value to
that transaction
and i think if you have a
a macro goal in mind albeit you don't
necessarily have an understanding of all
the believers that you're going to
approve to get you there i think you
have a way of starting the conversation
with those potential partners from
outside of your organization you have a
framework in which to engage with them
sorry i'll have to have a quick
follow-on that's attitude i get it what
about structure uh i mean
speaking you know or working with large
organizations one of the things that
they complain is you get the dedicated
people who are driving the ecosystem
part and the like onboarding customers
my legal department
systems and you know they have all the
right intent and it goes nowhere
how do you manage it
we're not tall like that um
we've we've i would say the last 10
years we've we have had to learn a lot
because we've had to onboard different
sorts of customers right we we had a
world those of you who know masterclub
will know that if you go back 15 20
years we were owned by banks you know we
were owned by the traditional bank so we
understood perfectly how to work operate
with those sorts of players and and they
understood how to operate with us
last 10 years that's completely changed
the nature of partners that we on board
whether that is fintechs or huge you
know apple's type you know
diverse partners work differently don't
understand us frankly don't understand
or care why we do things this way just
because we always did
so it's been a huge learning curve for
us we've had a number of programs in
place that had to shake up
vast waves of our organization
everything from relationship management
operations onboarding the kind of
value-added services that we we provide
the level of of um
complexity that people have to have to
engage with us every you know the
financials
it we we've had to review all of that to
make it easier for different kinds of
organizations to work with us but but
that work is never done that's not like
oh okay we're now easy to work with is
it it's it's a constant battle if you
like
to keep on chipping away at the
complexity
and it's making sure your your actions
follow your your your words or intent
because i i could give you i can't
because confidentiality requires our
list of organizations that talk a great
game of ecosystems and then they
basically uh give you a rule book um
which and some of those rules around
innovation or i mean just squash it
initially so there's something about
okay how does it feel for the other
party in engaging with a big
organization and again your work's not
done but fabian and james have been
incredibly patient um with their
questions you can probably see them
there let's do if you can say thank you
for asking those keep the questions
coming everyone so fabian asks or you
can read it probably kelly what do you
see to be a great key growth challenge
of entrepreneurial innovative fintech
actors in your ecosystem so that's one
part of the ecosystem and then james
asks about the threat
disintermediation threats which michael
alluded to earlier in apple pay google
pay
and so forth so both sides of the
spectrum how would you um what's your
what's your take on both of those kelly
i mean fintech growth i guess
i mean that
there's there's much talk about you know
what's the path to profit versus the
path to scale
i
i don't i don't know how much i have to
add to that debate beyond what's far so
you know vast vast waves of material
written on that one already
what i what i can see within that market
which i think is really interesting is
that going back not that far we we got
digital banks who in essence were trying
to replicate the services of many of the
main banks but do it in a different way
better newer more customer oriented
agile platforms etc etc and and there
were a number of those and they've been
relatively successful i would say with i
mean with clearly a path to run but that
have made huge strides in the past few
years
the new entrants we see these days are
not doing that it's almost like that
space has been absorbed already what we
see now is much more niche players
coming into the ecosystem looking at
relatively small spaces so for example
that could be
targeting different demographics so
we're seeing a huge growth in for
instance islamic finance startups or
with fintechs that are arranged for
instance at lgbtq and how you support
you know the particular needs perhaps
potentially of a certain community so
we're seeing sort of niche plays on on
who you're serving we're perhaps seeing
niche plays on
um
the product itself so lots of growth for
instance in the in the salary card space
so how do you support people in
in in um drawing down salary that they
have earned
lots and lots in the um inclusion space
so you know how we start to serve people
who have perhaps not been well served by
the traditional banking system or who is
difficult to serve through yes
so
in the fintech space beyond the stuff
everyone talks about which is how do you
find profit in that space i think that
the question that the newer fintechs
have to ask is where is the space that's
left to play in you know
just coming in to be another monzo i'm
not sure is the answer right i think
people have to have to find something
new there's plenty out there but we are
seeing really really different different
models
in terms of the disintermediation
question and before you go on that i'm
being cheeky as i am just to sort of
keep the energy up um how would you
describe your relationship or
positioning vis-a-vis
apple or google as you ask that question
i'd say we're we're strong partners i
think there's there's
lots and lots that we
lots and lots that we do with them
globally and i think it comes back to
that philosophy at the beginning of
us we're not deciding the answers for
consumers consumers will decide products
that that that make sense for them
our job is to create the competition and
the optionality that enables consumers
to have those choices and if we can do
that in a way that we're part of that
conversation
then that's obviously the optimal
outcome but i think the day that
mastercard tries to decide that we know
what the answer is
and two to to start shutting players out
from being part of that creative process
that's the day that i would i would
start to worry about where we're headed
but
so yeah i would i would say it's just
it's a really it's a partnership
approach i don't think anything else can
work i see uh ramy farris says that he's
a big admirer of how you transformed
into a technology company and i think
that you know one of the subjects of
what we're listening to is that this the
requirements now as a result of both
technology and uh regulation that
essentially free up different types of
entrepreneurship is that the skills that
you need are vastly different and i
suspect that even the job descriptions
that you guys have um have evolved
significantly
over time
but let me now move to his question
because he's he's asking how mastercards
competes in the asian market with super
apps like wechat and alipay um are
important and we already spoke about i
spoke about uh grab and go check um as
uh now everyone tries to combine
payments uh and uh bring it into the
fold and again i think that there may be
differences in terms of
what um
apple and google are concerned of doing
in their reputation for their own
standing with regulators in europe but
what about asia do you know i know it's
not your market uh but what's your
bird's eye view of what mark mastercard
um is doing there
yes so not my area of expertise to to
caveat before we start but
it i mean
the market is evolved completely
differently i guess you know qr codes is
a is a good example that's something
that
well prior to covered where we're now
used to qr codes maybe qr codes have got
a path in
in the uk that i didn't think they had
but historically i would have said
that's not going to happen here
but then you travel to many parts of
asia and and that's something that's
that's absolutely ginormous so
i i think there's an exception that the
markets have evolved in in a very very
different way mastercard
often have a
a traditional role that we play as in
cross-border payments because whilst you
might have local schemes and you get a
bit in europe you get it a little bit
more in asia
where you perhaps have legal schemes
that that play mastercard's traditional
role has been in the cross-border
payment so if you're you're traveling to
to
from from asia to to europe
your spend would be like
perhaps on a mastercard or a visa and
network
i guess the challenge for us is is to
find
a regulatory support and engagement in
some of those markets it's not always
easy to enter
those markets and to find a strong role
to play and sometimes that's been in
different ways some of the work that
we've been doing in markets like uh
indonesia for example
has been
absolutely traditional card rails but
we've also been doing work to run the
accounts for account payments
network there so if you want to make a
a you know
transfer money to your to your you know
someone who you split dinner with or you
want to make a payment on a qr code
that's backed by an account to account
payment that's running on a mastercard
network as well so sometimes the way
that we participate in these markets is
not going to be via the traditional
let's try and win a card business
portfolio it might be by doing something
you know completely different
and if i may just i wanted to point that
out because that belies another
important issue which is that uh big
ecosystem plays don't always need to
orchestrate sometimes they need to
partner and we heard your answer both in
terms of apple and google and in terms
of what you're doing in indonesia
and and also to say whose else's
ecosystem can we ally with uh to give
another example of an area that i know
you guys are working with uh our second
interviewee uh was ahmed
ismail the ceo of majid al-futem
properties which is uh one of the
biggest uh
proper real estate owners in uh the gulf
and also owner you know of all these
fancy malls down there
and the uh their loyalty scheme is run
by and in conjunction with mastercard so
mastercard supports that in uh ensuring
that people who want to have digital
access can engage with them so i think
that sometimes people have the sense
that we always need to be driving them
what i find fascinating is that you know
because in the example of mastercard you
know the participation as a partner
which i think underpins this importance
of you know being more open rather than
being you know ego driven in your ego
system as opposed to thinking that you
need to manage everything but we've got
a couple of things in um in an
implementation so david yeah
who said there wasn't a red thread
between our guests in this series who
said there wasn't um
kelly i mean i will come to the the
great questions we
as i'm gonna talk and read at the same
time who said men can't do that the um
i'm curious are you pioneered within
your own business um if you like
societal issues you're indeed tackling
societal issues like financial inclusion
you talked earlier about open banking
and the need for trust of course in
terms of sharing data um
and you know you looked at also i think
you've launched a new access card with a
third party h look at it here hi 55 on
managing short term debt between paydays
now of course there'll be a commercial
interest but you are also tackling
societal issues and you did it
a lot of what i've just described in
during the pandemic where a lot of
people were suffering in this country
and many others
tell us about your if you like your
process of selecting those issues and
the the role that your your organization
ecosystems play in enabling it because
there'll be some organizations who
frankly talk a good game and then wait
for others and then join in you've
pioneered in those spaces what made you
do that and what were some of the
challenges that you faced in if you like
tackling those issues while still making
sure that you pay your own bills if you
like
of course it starts with a belief that
you want to make a difference and you
want you know you want to be a
responsible corporate citizen that has
to be a driving force but but i think
beyond that we believe that it's own
the way it can be most impactful and
most sustainable is if you do it in the
areas where your business
your business expertise your business
capital your
what you spend your time on
can be leveraged so i think what we've
really tried to do is to find the things
where we can bring something meaningful
to the table so hence we've been really
focused on financial inclusion and
digital inclusion because we do have
the expertise and the network of people
that we can bring to bear on that topic
and i won't go into all the numbers now
but i think it's very easy to see that
in a country like the uk
that that
we have a high level of financial
inclusion a high level of just inclusion
sort of what's the problem a little bit
let's focus elsewhere but the stats of
you know more than a million people who
don't have a bank account more than 12
million people are not what you or i
would probably call digitally included
you know they might
might have a phone but their data might
only last in one week for the rest of
the month they don't have any data so
and if you're digitally excluded of
course in this day and age you're fairly
financially excluded as well so
real problems in which mastercard and
all of the partners that we that we work
with have have something very genuine to
contribute that we can embed into our
business
and at the same time of course the more
people who are financially included
ultimately that that is the benefit of
mastercard but i think that's the good
part that's what creates the virtuous
circle that's what enables us to really
invest seriously in those in in those
areas so
that's what i would say if you want to
set a meaningful corporate agenda in on
on a sort of social topic it has to be
something where you have some right and
relevance to play
absolutely now in the final questions
that i see and in the final minutes that
we have i see two different categories
so i'll try to take one leaving uh the
other one for david some of them are
about you know uh
future and uh where will the sector be
and the other is about implementation
and where you want the organization to
be so let me take the the questions um
um like uh
uh used arnaz or um uh irons
who are asking well um what are your
views in terms of you know the
alternative payment mechanisms uh and
whether we will see
um
new possibilities and perhaps even new
ecosystems arising or whether we're
going to see the apples and the stripes
of this world becoming big monoliths
because perhaps there is a thin edge of
the wedge but one of the problems in
tech revolution is that we have seen a
reduction in competition so is there a
ferment in payment uh before we move
into areas uh where we will see again uh
consolidation um and do you think again
there's this question of whether google
apple uh or bnfpl fintechs um are the
biggest concern that you have that's on
the big picture and i'll
leave david the final word in the
question on implementation
oh that
that i need my crystal ball to answer
that one i think
um
i i think we will see ongoing innovation
from from
from from new people i i don't think
we're going to see a convergence around
one or two
huge players i think that
the direction things are going in is too
distributed and it is too open the
regulators have a very very clear agenda
in that space
for example
and i think it's to create the platforms
and ecosystems and
and different um
payment infrastructure on on top of
which genuine innovation can take place
i think you can see that if anyone's
super interested in this topic the psr
have announced their new strategy for
the next five years and that's exactly
the vision that they lay out for the uk
so
i
perhaps it's my my optimistic nature but
i think that's the direction it's going
to go on if i answer that
we've had
more questions in the last three minutes
than we can cover but that's that's
wonderful everyone um i want to go back
to a question actually from the ankita
asked right the beginning which is
around the behavioural aspects of
ecosystem michael's point about eco eco
and egos
so cheeky another cheeky question to um
finish with which would be
if you had to look at your ecosystem
strategy the implementation of it within
your own purview over the next year
which behavior and mindset would you
love to build
and which one would you love to leave
behind as you as you plan the year ahead
um
within mastercard bill build on is in
service of your in service of your
partners
right that that's what makes an
ecosystem work ones we could get rid of
um
that sense of this is how things are
done today right i'm not saying we're
not chipping away at that one but i
think if you're trying to trying to lead
an ecosystem that's evolving you have to
you have to let go of the things you
think you need
and i think that's a very potent lesson
um kelly it has been an absolute
privilege and great fun uh speaking with
you uh of course we don't expect your
crystal ball to um be any less foggy
than any other but
certainly helps push our own thinking um
and rest assured uh the challenges are
common uh including all the big tech
firms who may be speaking ground about
how well organized they are in their own
ecosystem but you know when you work
with them you see that it's as much of a
mess as anyone else so
the question is how can we
adjust uh and adapt our own approach um
given the changes that we see around us
i think that the world of uh payments is
an absolutely fantastic area and we're
going to see a lot more innovation uh
and it's great having thoughtful people
like you to
help shed some light so as far as i'm
concerned terrific discussion and thank
you very much
thank you for having me wonderful kelly
thank you for your candor and clarity
thank you

---

### Leading a sports-based ecosystem in a crisis: how far does authority stretch?
URL: https://www.youtube.com/watch?v=WuTXy3wrzMU

Idioma: en

welcome to the london business school
and to the fifth
session in our series gaining ecosystem
advantage today we're going to be
focusing on sport leading a sports
ecosystem in a crisis
how far
does authority stretch we're going to
focus on rugby although there will be
parallels or many other sports so i hope
this piques your professional interest
in ecosystems and all the topics around
it strategy leadership negotiations
managing a crisis as well as perhaps
your personal interest in sport as a
participant or a viewer my name is david
lansfield i'm a catalyst strategist and
coach i work with senior executives
professionals and entrepreneurs helping
them make become even more extraordinary
i worked on ecosystems back to 1998
before the term was even used working
across 20 countries and 15 different
ecosystems i'm a contributor to harvard
business of uniform uniformer senior
partner in strategy and
my co-host
professor michael jacobides is otherwise
engaged on something very important in a
maternity hospital we wish him and his
wife very well he'll be back for the
next one and as you know we're inviting
some wonderful guests from the world of
business consultants in academia to
share their experiences lessons and
research and tips on how you whatever
however you're involved in ecosystems
can
succeed in that difficult and
challenging world to that end i'm very
happy very very happy
to see somebody i've known for a while
now darren charles the former ceo of
premiership rugby
and of uk tv and various other roles in
the media world
um
including for example bbc studios as
it's now called darren is also a board
member at viz rt group an antenna group
an advisor to cvc partners so the idea
today is to share some fresh insights
some tips we want this to be more than a
two-way conversation as fun and
enjoyable as it will be so please do
share your comments and questions in the
in the box the chat box we'll pick those
up as we go and
be courageous today
bring them forward early what we tend to
find is that within five or ten minutes
to go we get a whole flurry and i don't
want to frustrate anybody by not
answering them so come forward with
comments questions whatever you like
there are no silly questions yeah so
darren welcome fantastic to have you
here today thank you david and
um let's say say hi to everyone that's
joined the call hope you uh find this
interesting and there's some good
takeaways from it
indeed there will be don't worry so
let's talk about rugby
um
it's a sport people may or may not know
or play but just paint the picture for
us in terms of the ecosystem of rugby in
terms of the product if you like or the
service
before we delve into your role in it and
and the challenges particularly between
the pandemic and and beyond sure look
look i think it's fair to say that uh in
comparison to other businesses that i've
run
sport has the most complex uh and often
kind of opaque ecosystem i've ever come
across actually i i say that because um
you know great business success comes
when you have alignment of values and
purpose
with stakeholders and as the chief exec
you know part of your kind of unwritten
job description
if you want to be successful as an
organization is to lead that ecosystem
so
in preparation for today's discussion i
was actually mapping out the ecosystem
uh within rugby and actually when i put
it down on paper fair to say even
surprised me even though i've been in
thick of it for for another year
so i put it into kind of three buckets
really in order for uh for it to kind of
make sense for everyone because it is it
is quite complicated and i'll run
through this reasonably quickly so
so you know bucket a is what i would
call the kind of government and
regulatory part of the ecosystem um
and that was a huge part of uh
uh sort of my life as chief exec and the
life uh an impact on the business um
not just because of the pandemic even
though that did of course amplify their
involvement but there is just a huge
amount of political interest in sport
you saw it recently with football
um
it's just interesting uh to politicians
because it's very well connected to
customers and and uh has a strong voice
so so we were involved in with number 10
during the pandemic uh went all the way
to uh uh to number ten
we were involved with dcms
which is the departure of culture media
and sports
uh which has had the added complexity
for those of you that saw the reshuffle
last week that uh i think even in in the
last five or six years they're on this
sixth minister
uh uh uh
something that other countries face as
well right that's not just a uk thing
we've seen many other countries changing
that's right but it just creates a huge
amount of complexity because you start
to build relationships with senior
people and you start to get into a
cadence of how you can move things
forward and then they change and then
you've got to start again and again
it's something you just got to be very
very conscious of um
as well in government we were very
involved with treasury uh as you know it
was public that we we secured an 88
million pound rescue package for the
clubs that were in
quite severe uh financial crisis due to
the fact that their revenue had been
stopped
uh overnight and you won't be surprised
to know that actually when there's a big
when there's a big government decision
treasury's involved even if it's not
financial
treasury has a lot to say about quite a
lot of things and so you've got to deal
with all those guys we also had the
complexity of dealing with phe public
health england
critical advisors to the government on
on during the pandemic and actually we
were in daily contact with them about
how we could actually get the game
restarted
and how we could do it safely and the
rules and regulations
around that and then even down to kind
of local councils and councillors you
know clubs are active in their community
they do charity work
uh it's no coincidence that the clubs
were
a lot of the clubs open their doors to
become vaccine centers you know they're
very close to their communities and so
so in the dominant regulatory bucket
you've got all of that complexity to
deal with just in in in the first bucket
that's before you even get into the
specifics of the sport so you know when
you look at how kind of rugby's governed
and this hasn't changed uh in a long
long time
at the top of that ecosystem you've got
world rugby which is a sports governing
body
that's predominantly made up of union
representatives from around the world
uh
we sit and basically come up with all
the rules and tournament regulations for
uh for that
you've got the uh within the uk which
was
uh relevant for us being a uk business
you've then got the rfu executive the
rugby football union executive and the
rfu council you know the legendary 50
grumpy old men uh um i sat on the
council for a number of years and uh um
just
they're not grumpy not a lot of
diversity there they're not grumpy but
they are mostly men
um and again there's a lot of work to do
i think there in terms of bringing that
up today and i know it's a big focus for
the rfu
to actually to actually do that then
you've got the professional game board
which governs professional sport and
that's the kind of a joint working group
between the rfu the championship and
and the premiership and then you've got
the rpa which is the players association
which is actually looking after player
welfare as well so that's just the rugby
governance piece yes and that's before
you even got into running your own
business you've so you know within the
prl ecosystem you've got your boards
you know your normal finance audit remco
you've got your club boards you've got
your exec team
um and again you've got all that to deal
with before you even have a moment to
start thinking about dealing with your
product and your business
um and once you start adding that level
of complexity to it you know i kind of
roughly totted up that we were dealing
with 30 broadcasters uh globally we had
150 million pound tv deal to renew
whilst the game was suspended
uh which was uh uh not easy you've got
you've got 20 plus sponsors and
commercial partners you've got 13 clubs
with their commercial relationships
you've got press someone said to me
before i took on the job you do realize
there's more journalists covering rugby
than there are covering brexit
um and that was very much the case it
was a it's a big ecosystem in its uh in
its own right and that's all before
you've put a single game on so before
this show even starts you've got to deal
with that
and then to actually make the games
happen you've got to deal with the clubs
you've got medical advisory boards
you've got salary cap groups you've got
refs
organizations to deal with you've got
sporting committees which deal with all
the regulations you've got disciplinary
committees you've got a chair which deal
with infringements on the field and off
the field
um and as well as throughout all that we
had a pretty significant independent
review going on led by lord miners into
uh into the salary cap breach which is
all uh running on that so if that's not
enough
um
we also owned a third of the european
heineken cup tournament so you can
double all that because it all literally
happened in an identical way across in
europe and i'm exhausted already yeah
it's well as sam reminded me it's world
fitness day and i'm i shouldn't be
exhausted i should be fit but i'm
exhausted i mean that's fascinating i'm
sure we'll go into more detail in a
moment yeah it's fascinating i'm glad
you did that exercise we haven't done
that in previous sessions we've talked
about issues within ecosystems but even
actually
sort of scribbling out sketching mapping
out
the ecosystems you are in that you
orchestrate you participate in
as i was saying before we got on today
um it's an exercise i do with some of
the executives i work who work with who
say oh by the way ecosystems are not
that important or
are they described in one field you
start mapping out in the way you've just
done in the last few minutes
most times people say oh i didn't quite
realize that these entities were
important to us or actually it was that
complex and so on so as a takeaway
actually going into your own
organization whether you're in business
or as a consultant actually mapping out
where you play
what type of relationships you are and
how much influence you have i think it's
a great starting point so
in order to
go i'm sorry they're going down yeah no
i just can say enough
you've got to manage that ecosystem as
well and actually understanding its
complexity i think is going to be key to
to your success and and
most likely to your sanity particularly
when you're going through particularly
when you're going through through a
crisis now you know i would say the
ecosystem i've just described
is not one that
you would take into any kind of crisis
environment it was too large you know
too many stakeholders
uh too many committees and when you're
going through a crisis you need to be
decisive and
you need to be quick and responsive in
your leadership and you need to have a
very efficient ecosystem almost like a
startup because you're kind of you're
almost starting from scratch everything
you kind of knew about your business
gets thrown out and you've got to you've
got to pretty much
uh start again so look i you know for me
in summary the key dependencies
in that business were frighteningly
close to 50 boards and groups committees
and key clients that i had to deal with
plus probably another 50 or so
that can be delegated
so
hugely complicated and i think the
takeaway here is certainly not to
replicate this system in your own
business
but some of you may be dealing with this
if you're in kind of a very large and
complex ecosystem or public service
uh or whatever and look mike my advice
would be to as you just said david map
your ecosystem before you start
you know reduce it if you can you know
eliminate parts of it if you can
delegate past it if you can but
you need to focus certainly for me my
focus was on the fans and the players
and all of these things were a huge
distraction to that but each part of the
ecosystem needs to be manmarked and it
needs to be resourced
and you need a strategy for complex
ecosystems like this you have a business
strategy
you've got a people strategy you've
spent loads of time in this executing
building all that kind of stuff
um but i think you actually you know my
certainly my learning from from this
complex role was actually we should have
done more work in terms of mapping that
strategy out and and doing more to it
you know i think um
william blake said that you know i must
create a system or be enslaved by
another man's and i think uh i think
when it comes to ecosystems you've got
to give yourself permission to kind of
reassess them but make sure you've got
them man marked and covered otherwise
otherwise your life becomes
you know
pretty unpleasant pretty quickly
there's a lot of wisdom in there
uh a lot of
scars no and we we come onto that and i
wasn't expecting william blake today but
there you go
um keep you get let's get some questions
and comments there's a lot of content
and there's a lot of richness in there
so um come forward with your your
comments in the chat box if you so
darren given that you've touched on it
let's talk about your role as ceo in
that given that picture that you just
articulated so eloquently how would you
describe
your key focus your key activities as a
ceo of the premiership within the
ecosystems you just described
well i think i think the main role of
leadership in any organization is pretty
similar actually certainly across all
the ones that i've learned i think uh
what had a little more to the chaos of
the premiership uh than normal was that
we had two massive issues very early on
so
you know week two was the salary cap
judgment uh against saracens and week
20. you know i was receiving phone calls
from government telling us that they
were going to be shutting our business
down and we weren't going to be able to
play uh
anymore and all that came on the back of
an intensive negotiation to bring in
funding from private equity so you know
there wasn't a lot of time in there to
catch your breath so yes you know the
results of our first crisis were pretty
public it was written about a lot in the
papers so i won't go through that
again although there are some good
leadership lessons uh in there for
another day but the second part the
pandemic was it was probably less public
and we know when you have to stop
trading because because of a pandemic
it makes lots of people in fact it makes
everybody in your ecosystem
terrified of losing their livelihoods
losing their careers
losing their investments and as the
chief exec you've got to hold all that
together you've got to fix all those big
problems and you've got to reassure
everybody in the ecosystem that it's
actually going to be okay and
you know if i'm to be critical of myself
i think you know we did an excellent job
of keeping the business going and as you
know it started its next season with all
the clubs intact and solvent and uh and
still trading
um but you know i think one of the balls
that
i dropped was not doing enough with the
fans and not engaging actually directly
directly with the fans but i would say
that you know if you want to survive in
that chaos and come to the other side
you've really got to be clear about what
your own values are because they're
going to get tested and they're going to
get tested 20 times a day so
but we all know a crisis brings out the
best in people but it also brings out uh
the worst in some people and you've got
to be very conscious of your own value
framework for dealing with the big
issues uh you know we a good example is
we came under huge criticism from the um
pro saracens press about the decision to
relegate them from the league due to
due to salary cap issues and
and you know you've you've got to take
that so look
i i you and i have talked about this
before david you know
my strongest view on this is as chief
exec your your number one priority is to
get the culture right in order for the
business to deliver yes for the
shareholders uh um you know what i mean
by culture is values what it feels to
like to work there you know why do
clients want to work with us why do
customers want to use our services
and how do we get the right people on
the bus by creating an environment where
people want to want to do their best
work and darren when you say culture
there that's the culture of the
premiership organization but i guess you
want to instill
that in the ecosystem partners
organizations that you work with as much
as possible where you have candidly less
less direct authority although you have
influence on as you say their
livelihoods or or other aspects where
where in the we're in that picture where
the biggest
tensions if you like between the
entities and the ecosystems you alluded
to
you know there were there were lots and
i'll give you a couple of specific
examples but you know i think the the
the thing around leadership is is kind
of self-awareness that a lot of things
are out of your control you may think
they're all under your control a lot of
things are out of your control you know
financial markets are out of your
control
customers are out of your control
earthquakes um uh out of your control
global competition it's out of your
control
most everything is ultimately out of
your control but when you have a
tangible point of focus i.e your
organization's culture and values you
can actually keep the team moving
forward despite confusion despite
uncertainty yes uh and in spite of even
chaos and the reason the reason why i
say that is because actually one of the
things that got us through the
crisis was uh was
certainly got me through it was
churchill's quo which was if you find
yourself in hell keep going and you know
that having that having that focus on
your organization's culture and
in order to give you a clear
decision-making framework
when you're going through a real crisis
is is the thing that will keep you sane
and allow you to keep the team going and
getting momentum going so that you can
work through those issues and come out
of the other side
and going back to the i i hear that
that's the second brilliant quote of the
day i expect some more by the way as we
go through this um you touched on this
earlier and sam asks a great question
around you know simplification of the
ecosystem you you once you've mapped it
could you um even in the crisis have
tried to simplify could you have
delegated more simplified or
participated if you had your not to
criticize you but if you had your time
again could you have done that or was it
more about working within the existing
you know stakeholders and partners in
the ecosystem yeah i think i think it's
worthwhile going through the exercise of
working out
what is absolutely critical
to you and to the success of the
business not what is the nice to haves
yeah so
the honest answer to that question is
yeah there were a number of things i
could have cut out and delegated uh we
were we were unfortunately in that
process of kind of rebuilding a team
whilst also hitting the crisis
so you know it was uh it was a kind of
triple a triple whammy but uh but you
know look i think
again my advice is to is is to map it
and simplify and delegate and because
certainly when you're going through a
difficult period it's really easy to
underestimate how much time you need to
spend on these things you know i was
spending
you know probably 70 percent of my time
in bucket one which is the government
side of things getting the game
restarted was critical to the financial
security of everybody getting the
getting the government aid in place uh
to make sure the clubs remain solvent
um there are certain things you can't
delegate but there are probably some
things in there that i could have done
in retrospect but uh but that's really
hard though if you're you're going
through you're already in a complex
ecosystem and you're facing a crisis the
pandemic and you've got the salary cap
issue and you're building your team so
in a way you're building up the
capability of people that's pretty hard
yeah well um let's see aaron's asking a
good question which is you know in terms
of those interactions
with stakeholders they where you know
you they don't
you don't have direct authority um
they're you know you don't you can't pay
them a bonus or directly affect their
incentives what are your tips of
effectively when you've had your best
interactions
with people you know in terms of your
engagement day to day what have you what
have you done well to engage them
yeah look it is
it's very difficult to
lead without authority
in fact
it's
really tough
it's really tough to do it i i'm sort of
bordering on saying it's impossible to
do it but you know you you know you can
get because people talk about oh you
know make sure the purpose is really
clear and they'll come with you and all
that sort of stuff you're reading
articles and it's not enough is it no
it's not it's not enough so you end up
spending a ton of time trying to
persuade people
cajoling people across the line and it's
very difficult when you're in a crisis
you know you you know if if
if you're trying to if you're trying to
take a if you had a if you're commanding
an army and you're trying to take a
hilltop you wouldn't have a ecosystem
like the one that we had
you know you need clear lines of
authority quick decision making and uh
and everything else but
you know i think for me the thing that
kept it going was that you just need to
be able to lead with integrity you've
got to lead without favor
um
and you've got to be really well
prepared
you've got to have really well
researched your arguments um and then
you need to start the negotiation and
you know people talk about negotiating
deals with clients or suppliers you you
know in these complex ecosystems you're
negotiating all the time within your own
ecosystem so
uh but i found that once the fireworks
were over you know and the majority had
seen the logic of what we were trying to
do the others would eventually
uh fallen in line but there's conflict
of interest in there and i think the
takeaway from that one is
is you've got to make sure you've got
the bandwidth in order to deal with
these things because they take
significantly longer than you'd expect
so i guess you have to prioritize the
ones the moments that particularly
matter the complex interactions you have
to really focus on and if you can
delegate and share with others more and
preparation to just give some practical
when you're going into a big negotiation
or discussion with either a government
stakeholder or a commercial partner what
sort of things would you do to prepare
you'd have to do you'd have to do a ton
of work actually across a number of
different areas you'd have to do um
you know certainly certainly from a
pandemic perspective there are a whole
bunch of health issues which
you know i'm a businessman i'm not a i'm
not a a medical professional you know
whatever a lot of that was new to us and
and a lot of us in the league and we had
to get up to speed pretty quickly but
you really had to understand
uh a lot of those issues you've got to
have done your legal due diligence on
where you are
legally you've got to have done your
governance due diligence in terms of you
know some things are within your control
some things are within the governing
body's control
or whatever so just the amount of
preparation
which was huge was absolutely huge and
and i i kind of used to have a
i used to have a kind of rule of thumb
that you could determine the length of
any conference call by how many people
were on it so and i i worked out over 30
years that you know every person every
person on it would take 10 minutes so it
was one-to-one you could get it done in
20 minutes if there were six people take
you an hour when i was at the bbc you
know you'd get 40 people turn up for one
of these conference calls and you just
check in for the entire afternoon
knowing that it was going to go on on
forever and i think one of the things i
learned with this one was when you've
got these complex ecosystems like sport
you know it takes months and months and
months to get anything done and you've
just got to make sure you've got the
runway and the bandwidth in order right
how do you um
see let's think about those what are the
what were they in that in the tenure
that you had you know starting with the
real crisis situation and working
through and obviously had some
commercial negotiations in terms of the
tv contracts what were the what are the
most difficult strategic decisions you
faced for the organizations in terms of
strategy what what were the big moves
and decisions you had to take in terms
of the direction of the sport and
obviously the commercial aspects too
what would you call out on in the
journey
yeah look it's
that's probably a 10-hour discussion to
go through it all and give that a fair
given a fair response but um you know
top of mind just to pick out a few
um yeah and again
in the context of something can be taken
away i think anyone that's starting
in a
new senior role i think you know some of
the hardest decisions are going to be in
your first six months because even in a
normal normal period because
because what you're trying to do is
you're trying to assess if you have the
team required to execute the mission and
you know as a new chief exec or anyone
taking on a big team
you have a real moment of clarity in
those early months
that you have to make sure that you use
because you can see everything very
clearly before before you get bogged
down and
and everything else so you've got to
really kind of deal with that one and
again i think that's one of the big
challenges i think specific to
prl i think one of the big
big tough decisions we had to make
in kind of june 2020 was to cut
everyone's salary across the entire
ecosystem
players coaches
club owners club ceos myself all the
staff
and again it was going back to values it
was about is about we very clearly set
out that we wanted to make sure that all
of the clubs came through this and we
could yes but they all survived and they
all carried on trading you know after
the pandemic because they have an
important role not just to play in the
sport but in the communities um
you know that they serve so so that that
was really tough but i'm you know i'm
pleased that we managed to protect the
future we didn't lose a club they're all
still trading and still still solving
even though
again it's one of those things that you
take publicly you take a bit of a
beating for from from press and everyone
else that's uh uh
um that's kind of been involved in it
but it was done with the right
intentions and uh has had the right
outcome and
i guess is trying to keep a clear head
in the negotiations and these difficult
decisions is critical and when the you
know the keeping your sanity as you
referred to earlier leonardo says
absolutely you know in negotiations it's
not about positional positions it's
about you know interest options
alternatives your best net next
alternative option um and i guess
keeping commitments along the way in
terms of treating people with respect
it's very easy i've been involved in a
lot of negotiations where people may win
in the short term but they forget
there's a longer term and use the
permanent intentionally there's a longer
term game yeah they may win but actually
damage the relationship or get really
stuck in something and get the short
term payoff and then when they need to
do the next deal renew something
innovate and do some innovation in the
sport or whatever it is
people don't really want to talk to you
so
there's a real partnership issue within
sport i think i still think it's very
siloed
um you know you're touching on kind of
you know quite a quite a kind of raw
nerve within within uh
within the kind of rugby ecosystem that
it's not working together in the way
that it should do
in order to
and again as i said you know
my two guiding principles was what's in
the best senses to the fans and what's
in the best interest of the players and
and
you know once that's worked out
everything else fits into place
um you know if you've got healthy
players with long-term careers you can
have better competitions
um you know if you've got fans enjoying
the experience then the commercial side
of the business is going to start to
take yes yourself nice versus
some of those tactical things down to
some kind of you know major objectives
but uh but you know rugby has not been
professional for very rot for very long
it's been an amateur sport for a long
time it uh it hasn't been a professional
business for long and it's and it's uh
it's got some way to go but it's on the
journey
so we talked about crisis let's talk
about some more positive moments
although there was lots of learnings and
and very positive legacies you left
down
think about innovation in ecosystems you
talked about obviously the fans interest
and the players interest in that
virtuous circle you were just describing
you and as the ceo how do you actually
drive innovation thinking about okay how
do we make it even better for fans how
do we make sure that you know there's
there's innovation when you have
so much complexity around you i mean if
you're running your own business without
any ecosystem which is quite rare these
days you could probably be quite
directional and say right let's get
let's get a team a huddle together let's
do a sprint let's innovate you know
third parties how do you how do you do
that in in a more complex environment
and a high profile environment how do
you innovate
yeah it's a good question actually i
think
i think you need to constantly challenge
everything that you're doing and i think
that's an attitude i think it's not a
process it starts it starts with an
attitude it becomes a process and you
know rugby
candidly is not good with change it's
very traditional and you know for all
for all very good reasons uh it's very
traditional it's very slow to change and
whatever but
um a good example actually was
actually during the pandemic i don't
know for many of you that watched it um
one of the regulations around restarting
the game is that we had to take
orchestrated water breaks so that every
player had their own water bottle so
there wasn't cross infection so normally
people would share them or whatever and
so we had to these kind of organized
water breaks and uh
the result of that was it gave players
five minutes to to recoup
and in my opinion actually made the it
made the game more exciting and intense
because they were a little bit refreshed
for that kind of
second that second quarter of
the game
interestingly commercially would have
also allowed us to insert an additional
commercial break because there was a
five years the tv man in you coming out
you know so you know i was i was pushing
quite hard to say well why don't we just
keep this as a permanent innovation
we've tried something
we've it it's not it's not taken
anything away from the product in fact
it's actually enhancing the product and
making it better but it was uh uh
it was that kind of changes is uh is
difficult
uh um to get people to think about so so
i i think again it's part of
the traditions of sport and rugby you
know it's going to be reasonably slow
moving but outside of prl i think you
know
innovation again is linked to culture if
you
if you've created the right environment
within the organization where your
people are encouraged and rewarded for
challenging and innovating and
you know it's a bit it's a bit overused
but you you celebrate the misses as well
as successes you can harness the whole
company to innovate and i think with
everything moving so quickly now that
the pace of business is so different to
how it was 20 or 30 years ago i think
everyone in your organization needs to
be innovating um you know
not not innovating the it systems or
whatever but innovating the way that
they work and
keeping your focus as you're saying down
if i interject around yeah how does it
deliver for the main actors you know the
the actors in the system which are the
fans and the fans and the players and
and everyone sort of actually lining up
against them rather than just
like doing in your own in your own space
look i think it's part of your job is to
make sure your whole company is
innovating and success is when you step
back and you're kind of inundated with
people wanting to
innovate and change and and do find
better ways of doing things um you know
at uktv we had a separate innovation pot
a funding part of
you know quite a lot of money uh
multiple millions of pounds a year which
which we would deploy
uh to great ideas and the the only
caveat was that for it to be true
innovation it couldn't have a business
plan
um because if you can do a business plan
then that's not innovation that's
iteration and so you know that's
interesting
we had a small group of people and and
and the reason why it was so successful
is as as money got allocated into these
innovation ideas i would allocate one of
my direct reports to actually shadow
whoever
that was
uh through the entire process and then
you know we would make a massive song
and dance celebrate it yeah that's great
great sponsorship great in
because you often see in these
you know
crowdsourcing activities more open
innovation you see a lot of great work
with the generation of ideas but then
the selection and then the scaling up
often sometimes people lose interest or
just becomes one of those things you do
in a summer summer's day like an
interesting hackathon um leonardo makes
a great point of course you've got to
you've got to spend the time in
preparation and throughout whether
you're innovating or just doing deals of
understanding and really anticipating
their needs and and talking to them the
the power of a the power of conversation
in in business is critical but
especially when you're dealing with so
many different entities
your ability to flex your style
genuinely listen
um
you know hold your tongue when you when
you hear something and i imagine there's
a few characters in rugby who are not
shy of coming coming forward um when
they're when they're when they're
unhappy but just just one other point if
you go slightly laterally for a moment
we talked a lot about the rugby
ecosystem and the three three buckets
within it and then the multiple multiple
organizations who did you feel you were
competing against from a competitive
perspective strategically
for example the fans did you have that
in your mind or you mostly focusing on
it's it's a really it's a actually
really good question and and um
i think the the only way you can look at
this is is
is
you know we we very much believe that we
weren't just in sport we were in
you know what they call the attention
economy which is you know
value is created
in our business from people attending
stadiums and people
people's eyeballs being on our tv output
yeah that's that's you know in essence
kind of sport
uh and and it's the same for most
businesses actually so you know on the
first one you know you're competing with
people's life cadence and it's hard if
you've got if you're a family man to be
away
you know at games every weekend so you
start looking at midweek games you know
monday night football has been a huge
success and that's what it is it's about
you know you can't go every saturday to
a game and stay married
certainly puts a challenge on it so you
know you've got to think about
innovative ways about how you can build
a schedule to make it easier for people
to go and on the second one there's lots
of sport on tv so you need to
you need to build a narrative you need
to keep people hooked you know promotion
and relegation is a big part of that
transfers local derbies those kind of
things things that keep the story alive
throughout the entire season
uh you have to make sure the game is
fast and it's kind of you know moving
forward there's you know quite a lot of
time wasting the last 10 minutes of a
rugby game
uh and you know so you've got to be fair
to deal with the regulators and the
players are on that one but you just
need to keep it
it needs to be exciting and relevant um
uh for but you you're not just competing
with other sports you're competing with
every single thing that can take
someone's attention away and i think
you've got to be very conscious and
therefore you've got to be really close
to the fans and the customers
um in order to understand that for you
to be successful
and that has to be a mindset rather than
just a sort of
periodic exercise it has to be you've
got to spend time with them do it watch
it yeah i'm always struck with how few
sometimes executives at the top of their
organization don't actually consume or
watch their product or serve it or use
their product that much um
now they would always have an excuse of
saying well i'm really busy with x y and
zero you sort of do need to understand
your product or service and actually
understand the people on the front line
yeah the people you know
i guess the stewards the people right on
the pitch understanding their experience
to some of the challenges and so start
there you know i call it working the
edges of the organization as opposed to
if you like just in the boardroom um the
best person to sort to in a club is the
groundsman groundsman yeah what do they
tell you what do they tell you
they know everything they know
everything they they'll tell you the
things that that no one else has got the
courage to take i guess they see
everything about what was really
happening
right you got to go and talk to them and
engage with them and and uh you know the
the dullest place to be
at a sports event is in the executive
box
there you go you heard it here first um
we've got about five minutes to go i'm
sure there's some more questions and
comments people want to raise i'm keen
as you look on to the next chapter in
your career and your life down
what are you most proud of and what
would you change in your next
executive or non-executive role in your
own
skill set so what are you most proud of
and what would you change
uh i think the biggest
achievement was that
i've mentioned it already so our own
labor on it was the fact that we kept
everybody solvent
you know rugby has lost clubs in the
good years
yes they've hit the financial wall and
they've gone out of business and there's
a number of big brands that no longer
exist
in the good years so so
i'm really proud that we managed to pull
together pull the 13 clubs together
uh pull government together pull phe you
know to get the to get the protocols so
that we could actually repla start
playing the game so that we could
survive uh and and it's fantastic now
that the seasons started last friday the
next season started like
friday with full stadiums and and
hopefully touchwood business can start
to rebuild so i think that's that's our
proudest achievement that we you know we
didn't end up being
um you know an eight club league
and also we kept we kept everybody safe
we kept the staff safe we got some deer
safe yes uh it cost us a huge amount of
money to put the testing uh regimes you
know helicopters flying from from clubs
to ireland for for
for overnight testing so games could
happen huge amount of money we had to
invest in that kind of stuff but we kept
everybody safe and uh we've kept you
know uh people's livelihoods going and
then i think yeah i think that's very
impressive before you go on to what you
changed and punit asked a great question
of you know what lessons did you learned
or have you learned from other sports in
your journey i know that gareth
southgate you know the england football
manager
has gone out and reached out to other
executives i think he spoke to some
people in formula one um about their
experience so i guess elite performance
what did what did you learn from other
sports yeah not as much as i would have
hoped because we were dealing with a
pandemic yeah so we have a huge amount
of time right yeah
actually what was quite interesting was
behind the scenes it's i don't think
it's ever been written about or talked
about but all the all the sports ceos
decided we were going to help each other
so you know we we set up a whatsapp
group um
and
we had weekly calls with each other we
had when we were openly sharing
information
which under normal circumstances you
wouldn't share for competition
competitive reasons but we were sharing
with everybody they were sharing with
ours we were
we were all learning really quickly and
all the ceos just
in a very natural way just kind of
decided we were going to help each other
through it and we did
and you know across sports you know all
the different sports we were all talking
communicating with each other and that
was a very powerful group informal group
that
i think has got a lot to uh
you know a lot of credit for uh getting
the getting sport in the uk back
back happening again
that's fantastic and that's great i mean
you'd hope that some of that spirit will
continue um at least at least some of
the foundations at least yes we'll see
we'll see so what would you looking
forward and i know you're a person that
takes your own development very
seriously and you have non-exec roles
you have an advisory role now what's the
one thing you would now
do more of let's be positively do more
of in those future roles based on your
experience that you just talked through
in terms of a mindset of skill or
practice
yeah i think we've covered we've covered
some of it i think i would i have uh
felt more comfortable uh abdicating more
responsibility
going into a crisis
um
but again look our
our
time wasn't
normal it was you know quite unique um
uh and so you know i i think i think
that would have made life a little bit
easier uh uh for me i think that's
probably the main one of just kind of
being comfortable letting go it's
difficult when you're getting into a
business that you know i'd never run a
sports business so for me
you know you i wanted to get involved in
lots of different areas because i wanted
to learn yes uh
learning curve right yeah
yeah so i think that's probably that's
probably the main that's probably the
main one and the one we've already
talked about which is kind of really map
out and understand
what your ecosystem is and you should
have a plan for managing it in a crisis
um
and
we didn't have one i've never put one in
place before for any business that i've
run because
these pandemics are are new uh but i
think going forward that would certainly
be um
certainly be part of it disaster
recovery and and those kind of things um
weren't fit for purpose and when you're
dealing with a pandemic that closes a
business and many businesses were shot
pretty much overnight
it's a topic that i've been talking
about with my clients around you know
and they're all network or networked
organizations in complex environments
you know that what have you genuinely
learned and what will you do differently
and
there's a sort of the crisis plan but
sort of what knowledge and practices can
you really stick to because they will
work best for you and it's very easy now
to sort of say okay we're
without being flippant depending on
which country you're going well we're
over it or
over the acute phase
let's just go back or let's move on to
something else there's a huge amount of
learning and it's great that you're at
least humble enough to sort of and i
think the second thing just reflecting
on it is i would have spent more time
with the fans and the grassroots the
customers the people the people that the
people that we're doing it for i would
have spent more time with those it's
hard it's hard to prioritize that when
you're doing
18-hour days um you know trying to keep
the business alive but i think i would
have prioritized more of that actually
great
it's been a great conversation i've
learned a lot i love rugby i'm i'm i'm
local to one of the clubs you mentioned
so i have a vested interest in that it's
been fascinating to learn
perhaps differently from some of the
other conversations a more personal
level how it's felt to lead in an
ecosystem going through a crisis i take
my hats off you had sort of to um
hat and hats off to darren of leaving
such a strong legacy in the sport um
credit to you um
i hope everyone's enjoyed that
conversation there are plenty more
coming up in artificial intelligence
we're talking to the ceo of the guardian
as well um sam's put the um
uh sam's put it on the in the chat box
uh
and
if there's any follow-up do get in touch
with me uh and we'll be sharing the key
points of this session as well as the
recording so look at that look out for
that in your inbox darren thank you ever
so much thank you to rowena and sam and
the obs team for making this happen and
thank you to all of you

---

### The Ultimate Frontier (and why China’s ahead)
URL: https://www.youtube.com/watch?v=RzDhLn6obmk

Idioma: en

ladies and gentlemen uh welcome and it's
a great pleasure to have one of our
sessions in gaining ecosystem advantage
uh to be uh speaking with francois
condolon
francois is uh
the global managing director
of the bcg henderson institute which is
the thought leadership arm of bcg he's
also a managing director and senior
partner and bcg
but he's also a dear friend um and
co-author in
a number of different ventures and
i'm delighted to
continue working with him on all manner
of things and what we'll be doing over
the next um 45 minutes is speaking uh
about something that is probably going
to um explode the buzzer meter as if
ecosystems were not buzzy we took uh ai
and you put them together now there's a
reason that these go together it's not
just that we're trying to uh see whether
we can max out to everything that is hot
now i will start by speaking a little
bit about ai and what ai is because like
with ecosystems this is one of these
things that is um quite often mystical
shrouded in uncertainty and we want to
understand how it is but i will then
move on to something that francois has
worked with and actually i've worked
with francois and some of his colleagues
in the henderson institute in
understanding the ecosystem of ai in the
sense of the groups of firms that take
particular roles and activities and that
collaborate with others and as we will
look at that we're going to be able to
draw on one of francois's other
strengths which is not only a keen
understanding of geopolitics but also a
very deep knowledge of china um and i
remember that up until recently francois
was based in china and he just returned
to europe after a long stint there uh
where he's been involved uh with all
manner of both major players that i
guess people will all know and a good
understanding of what the country does
and this is particularly relevant in the
world of ai because china has been able
to take the advantage and we'll try to
understand how all these things go
together so first of all francois it's
terrific to have you thank you very much
for being thank you so much for inviting
me michael so it's always a pleasure to
see you
uh terrific now can you start by helping
us understand the basics so first of all
when we speak about ai because it's
something which is a fancy term that
gets abused can you break it down and
tell us why companies should bother as
opposed to simply say hey this is one of
these things that is fashionable
so i i think that and without being
let's say technical i think that ai
brings some very specific
capabilities or
foundational has very foundational
capabilities the ability to become ultra
granular
the ability to
process big data
real-time and the ability to scale to
massively scale at
almost negligible
or at least minimal uh marginal cost and
i think that when you think about ai and
without entering into anything which is
technical about the acquisition how to
source data how to acquire integrate
data about
let's say machine learning and so on i
think that you need to think about these
three capabilities and see how it will
change the world and when you think this
way
basically you realize that
it's not a question on how to use the ai
but
where couldn't i use ai
and and i think that you need to reverse
the question because ai can be used and
can be useful everywhere as it was
demonstrated i would say even more
during the uh
crisis
absolutely so when we speak about ai and
i think that people may understand that
ai is well it's a very advanced form of
computational statistics understanding
what patterns are using them to either
predict something or to be able to
customize a very important feature of ai
and people intuitively say well okay
that probably requires some access to
data and some technology now it seems
though that there are significant
differences in terms of the ai adoption
in different countries now before we
enter these the question of the
ecosystem can you give us a sense at a
high level why do we see
different uh ways in which ai gets
deployed in different
blocks geographically and and i think
that this point is very important
because very often we look or we
consider ai as if it were global like it
is a general purpose technology yes or
no we can debate it but but i think that
it's more and more
culturally
different and we can see at least uh
three and maybe four types of countries
we have probably
the us
where
i would say we are facing a massive uh
schumpeterian
creative destruction uh
model
where there is limited adoption by the
traditional companies and they are
overwhelmed by
ai native
ones
you have
europe
where the traditional companies are
trying
to really see um and increase their
adoption and become more let's say
relevant
and try to do it in-house
and you have china where you have um
an ecosystem which is much more
sophisticated
with the government really pushing
ai companies and creating a context that
will push ai companies help traditional
companies get access to ai so there the
objective is really to drive the
adoption
and um we did let's say some
survey jointly with mit and what we
found covering more than uh
5 000 executives across the world and so
on and what we found is that the
adoption of ai by traditional companies
in china was
more than twice as high
as the one in europe and in the us and
when you know that because
ai you have a feedback loop and
therefore adoption creating a creating
data
data training ai models
uh basically this feedback loop can have
an impact on innovation
this is something that might be
extremely important i would like maybe
to use just one sentence or michael
porter
used to say that the competitiveness of
nation was made of
two things the ability to innovate and
the ability to upgrade or let's say to
adopt new um
to adopt innovations then what we see in
china might be extremely important
uh right so let me try to unpack it
because there's a lot of things that you
covered the first thing that is
important is that ai is foundational and
allows innovation to happen let's spark
that because i want to go into that in a
moment the other thing that you
mentioned is that there are these
international differences in terms of
the way that ai works now let me try to
clarify that because this again to me
seems to have two different components
one of the components that i heard you
say is like look uh people in china for
instance may have a very different
attitude in terms of both
they think data
is problematic or not or how you should
use data um and because of the way that
the government and the companies
interact now the first one is
straightforward actually to illustrate
it i'm thinking about the story i think
last time that we met in hong kong it
was coming from shenzhen uh and between
shenzhen and hong kong uh there is this
express train that takes you from one to
the other um and uh they have a ticket
and i have a ticket and you check it
about three four times when you go out i
thought it was done i was accident
towards hong kong and they're like now
you need to surrender the ticket
i said oh i'm sorry i dropped it but you
know you can find me on the system i had
some chinese friends with me who were
accompanying me in the trip from
shenzhen to hong kong and then the lady
said you know the guard said that if you
do it more than a couple of times you
will no longer be able to find seats in
the shenzhen hong kong ticket so there
was an unwritten law and people were
comfortable with the idea that mr
jacobides because he always loses his
tickets does not respect it so he will
find that there is an impact of the
patent that his behavior creates which
then enters the system and for my
chinese friends in mainland china like
yeah that's normal because your behavior
is socially irresponsible so you can't
expect to have the benefit in europe
people would go absolutely ballistic
with the idea that something of that
sort would happen and we see that in how
the chinese may respond to the use of a
technology in order to do things like
social rewards and so forth so there is
one thing which is cultural how do we
think about information is it okay for
other people to make money from it is it
okay for the state to regulate its
affairs this is one thing and i get that
this is very important and there are
some deep
philosophical differences in terms of
how the chinese the europeans and the
americans think about information and
the way to benefit from information but
in addition to that and i saw that you
wanted to also jump in on this you
mentioned that there is another
difference not only on what do we think
as individuals and also relatedly as
business people or as the people who run
the province and who can use information
in order to improve but also
discriminate
an important point and we have
differences in what exactly we want to
do so we're starting with a different
attitude towards this technology so in
addition to this which is a reality you
also said that there is something on how
the government and the companies
interact and i'd like to understand that
but i think that you also wanted to have
another point now i wanted to say
because the example you gave which is a
true one and uh something that you can
that can be really shocking and i was
shocked by two things in in in china the
fact that it was proposed in the fact
that among my chinese friends there was
no reaction at all but i would say that
it can be done in a positive way and um
because um when you consider for
instance health care and giving your
private data to health care system
i think that it is seen much more
positively in china not just because
it's fine to give your private data but
because the the the the benefit this is
a risk is much higher china is a country
where you have the further second and
the third world and when you go to
western china
basically you don't have many good
doctors
and here with ai
by giving your private data you can get
access to a much better diagnostic so i
want to say that we should the the
reason why uh
it is really well it is considered in
china as very important to share that is
because first of all they've been
let's say a custom to give
their data on one side and because the
benefit versus risk is much higher there
as it is a developing country
and they have seen the truth of the
benefit as well and they're like hey
look
ai can make i like it yeah and and and
this is why i think it's something we
need to keep in mind uh moving forward
and as we think about regulation for
instance in europe as well uh about okay
of course we need to be very careful but
we need to be careful not to be too
careful
and to benefit to the to benefit from ai
because after all ai is just a
technology and this is what we do with
it which is important so in a way you're
telling us that china was in a good
state to create not only an acceptance
but benefit from the acceptance of this
new technology absolutely it had a scope
where it could develop and showcase it
was a fertile land where for a comp for
a country that did have a number of
issues that were behind it could
leapfrog and what we're now seeing is
the result of it saying hey it's useful
it works and sure i may have a different
attitude and that helps as well but now
i can be at the forefront of this new
technology which by the way is partly
what is driving uh the technology wars
that we're seeing right now between the
us uh and the eu and china there's
another thing though and the other thing
is uh perhaps even more relevant uh and
it is what you were saying about the
different role of the government and the
different role of firms and the reason
that i'm saying that it's more relevant
is that cultural features are what they
are you're not going to change how
people think individuality in a
confusion country versus you know
me being greek and something that comes
from a much more atomistic perspective
um of the of the world and with the
political history of europe and the way
information was was used it is what it
is uh but there was something on how you
told us that the state
is engaging in the eu in the us and in
china
that further makes the trajectories of
aid we start speaking about the
ecosystem can you help us understand
what exactly the difference is and these
trajectories these different people
whether they're driven by the states or
their others who exactly are they
and how do they make this difference
so i think that if you take china per se
and you focus first on china you have i
would say three
to four different types
of um players
and what we need to understand is that
as china wants to become an advanced
country they realize that ai is a
critical element and therefore the
government is doing all what it can
to make sure that china will be
extremely advanced in terms of ai or
even the leader on ai this is what they
uh aspire to
um because they see as i said all the
benefits and they know it can it can
happen and this is why for instance in
2017
they decided to have a few
giants so alibaba
alibaba tencent baidu
let's say i fly tech and since time
each of them to try to create ecosystems
or make sure that you would see
on each of their
let's say the critical elements of ai
natural language processing
image recognition uh autonomous vehicle
and uh i can't remember the uh the last
one to say okay let's create you create
a consistent and you make sure that you
push for the adoption of ai
and um but in a way that would create
competition
so
they did that in 2017
many companies emerged or let's say
popped up out of it
with and and they are i'm currently
working with uh kai fully on uh on a
paper on this exact topic and on this
type of um
of companies and then the objective is
to make sure that you reduce the
distance or the difficulty for
traditional companies to adopt there
and and i think that this is the
objective of the government to make sure
that in a sense ai is shared
and not just the
owned by a few
tech giants
so this is fascinating and i'll have to
be a bit cheeky here because here we
have you know uh a really proper grand
decoyer uh one of a french who has gone
through the traditional system um very i
love the polytechnic saying that the
attitude that the french industrial
policy wanted to aspire to has worked
but not in france but in china
but but i think this is where it's
different from the way french do it in
france when you do this
let's say policies basically you decide
up front who will be the winner and
doing something
in china it's much more i would say
capitalistic
in a way which is or more darwinian they
say okay we create this environment that
but we want competition and we want the
best to emerge so it's very different in
the way it's done
and and here it's really and and and
this is why you never know who will be
the winner and this is why as we've seen
let's say uh with the emergence of
internet or on each
uh topic that you have
let's say thousands of companies trying
to embrace um an area and they and then
you have a very
strong consolidation that appears 18
months later so i think that it's very
different
so one of the things that and now we're
entering ecosystem property because
essentially what you are saying francois
is that the government is playing a
different role and that in china it is
promoting not having decided alexander
who's going to win but selecting and
coaching and essentially facilitating
the emergence of actors that are going
to
first develop the technology make it
more important and second which is
important ensure that the technology
gets diffused now this is the second
thing that i wanted to
to look at because you know when for
those of us who study ai in terms of the
the more academic side as well uh the
initial things that we're seeing are
somewhat disconcerting they basically
show that there is a huge difference
between those that but first adopt and
second are able to benefit from ai it's
a very skewed distribution a.i
essentially increases the inequality of
efficiency and profitability between
firms and that goes together with a
number of features of essentially saying
that they're going with a few firms that
do it well and the big masses are going
to be
finding themselves in trouble as a
result of ai
some of the issues are scaled because
economies of scale are significantly
bigger some of that is that you need a
digital operating model you need to
understand how are you going to be able
to take advantage of data um and some of
it is that you are then able to be more
competitive which creates more access
which begets more competition which
creates more strength and that's why we
see this polarization
so the thing that you're saying that i'd
like to uh i'd like to understand a
little bit better is what you said about
the difference between the chinese and
the american or the european approach in
terms of not only advancing the
technology but advancing the diffusion
of the technology which again takes us
to the ecosystem takes us to the way
that the companies get organized and
orchestrated and perhaps how the
government facilitates it could he give
us a little bit more detail for instance
and what is happening in china in terms
of the diffusion of ai not just his
production and the way that it can enter
the fabric of
businesses and the day-to-day yes and as
i said i think that what is important
when you want a traditional company to
let's say
embrace ai is to make it easier for her
and and one of the main issues you face
when you do it is about getting access
to ai talents it's almost impossible to
get one ai talent come and join you
where your ai is not really at the core
so
we what we see in china at the moment is
the emergence of what i call and if you
have a better name i take it
ai transformers
which are companies that
basically um master both let's say ai
technologies and they very often take it
from
the uh
the internet giants or the ai giants uh
from a technology perspective but they
they they mix it with a deep
uh vertical industry know-how
and these people then come and work in
partnership
with
local
with traditional companies and they have
three benefits first of all they will
provide
tech algos and so it's easier for them
to create a joint and i'll go that
algorithms that make sense and to
identify the right data
second they give access to ai talents
because as they are ai companies they
gave access to ai plus as they know
the vertical industry they can speak to
the people and they are in a better
position to
upscale
the non-ai talents from the traditional
companies and then they are in a
position as well to help them understand
how to use ai and to bring ai at the
core of the operating model and by doing
this they help this traditional company
embark
into the air journey
and what we see as well in some examples
and i can think of xag what xag does
with
in
in agriculture uh with farmers or i
could think about what we ride does uh
with
with autonomous cars
creating
taxi robots or bus robots
basically you see the emergence
of
vertical
specific ai ecosystems
because these companies are actually
able to gather they don't do it just for
one
traditional company but really for many
traditional companies and there is a
virtuous element because the more you
share data the better you are able to
train and to advance and therefore these
companies are actually working all
together and even a traditional company
like uh bowster
which is one of the leaders in uh in the
steel industry has created
let's say as an ai transformer for the
steel industry and that is now gathering
several
um steel companies and really making it
in a very com i would say competitive
way it doesn't mean that there is no
competition anymore but that there is a
way to share data and to benefit from
the uh from ai for the entire industry
therefore it upskills
an entire industry
okay so a couple of things for us to
consider for here the first thing is
when we're speaking about ai we don't
only mean um the deep research that
creates the mathematical algorithmic uh
principles that are these predictive
models that's what ai really is a bunch
of ways that you are trying to
understand and predict behavior but what
you're saying is that the critical
difference and that's what the research
is increasingly showing even in terms of
the deeper science i.e when you speak
with a computer scientists who are
involved in creating ai the the context
understanding is at least as important
as the generic skills and that the
difference when you go to the level of
applications and you're seeing you speak
to the people who are on the ground
making ai models is that it isn't about
something that you can apply to
predicting both breast cancer and metal
fatigue but it really is being able to
know the vertical and now what you're
saying is ah what the chinese have done
which does not appear to have happened
in the same speed in other countries is
that they have built an ecosystem with
these players who are able to take this
fact i.e that you need this and that
have created this new intermediary
function that allow them a to become
better but be equally important to
ensure that companies can start being
upskilled that though requires that the
companies are also interested in
adopting ai so let me turn to this
question because one of the challenges
when you're looking at the ai ecosystem
is also for those who are going to be
shopping and the number of companies and
i'm sure you speak to more boards than i
do a number of boards say oh yes yes we
need ai and it's important for us to do
so so i've heard a lot of good noises
about ai and i'm sure that most of the
executives that speak to bhi and bcg um
are saying yes yes yes ai is very
important but um do you
see that there is any issue when you
look at different areas around the world
in terms of
the willingness of the companies to
adjust and adapt to ai offerings to
change what they're doing to take
advantage of the new opportunities that
the technology officer
so we we very often say at bcg that the
basically when you think about the
effort to implement ai it's ten percent
is for the algo actually it's not that
difficult to have a decent algo it's 20
percent about what we call the
infrastructure being the uh
the the data platform or getting access
to the right data and 70 about change
management so that that that's for sure
but but i think that we are at a turning
point and um as a former french army
officer i very often use the image of of
tanks before world war ii
uh
before world war ii the french used
tanks and basically the individual tanks
were better than the german ones um and
they put them into the infantry
regiments
and and of course it was good it was
improving the effectiveness of the
infantry regiment but at the same time
the germans were making panzera
regiments and invented the blitzkrieg
and and i think that the same thing that
is happening now and we're at a turning
point in my opinion with ai and instead
of asking yourself how should i
use ai to improve my current processes
the question should be how should i
redesign my processes
to put ai at the core of my operating
model
and uh and to invent the blitz rig in
your industry and and i think that this
is something that we see over time and i
have the feeling based on the
discussions i have that
you have some companies are now at a
level of maturity having done several
use cases and to end and understanding
that they are moving and starting to
move to this let's say i bring ai at the
core of my operating model and i think
it will be very difficult for the
laggards to catch up
and and what you were saying about
companies is true as well for countries
uh so i think that there is a question
there about the competitiveness of as i
said not only of companies but in
competitiveness of countries indeed now
um let me just say that as we think
about what is today's new line maginot
challenge that organizations are facing
trying to defend themselves and perhaps
give a bit of a sprinkle of expense that
says ai to have their conscience clean
um uh if you have questions uh for uh
francois uh shoot them put them in the
chat box and uh will be delighted uh to
respond to them but um now you're
starting to move from the what are the
differences and how does um ai work to
what does it mean for me uh and so for
the people who say okay fine i
understand that now technology allows me
to do more things than i could in the
past i also understand that if i buy uh
one expensive computer science phd who
says i have done data science and you
call him chief ai officer you ain't
gonna go far you need to rethink what
the value add is that you got in the
field now to do so you need to do a
couple of things you need to start
looking at what your
what the playing field is but you also
need to understand when you look about
ai
who are the different actors so you know
this may be drawing on some recent work
shameless flag francois um and i and
stefano buzani from eden had said just
had a paper published hardcore academic
paper i'd say in the evolutionary
dynamics of the ai ecosystem in uh the
journal strategy science um in addition
to francoise uh column and fortune
including some of the stuff that we're
speaking about that was in our common
articles or other things that he's
involved in um where we looked at the
different roles and why they're
important can you give us a bit of a
sense of the people who play in ai
who are they so now i'm looking at it
from a corporate standpoint i'm like you
know give me what it boils down to can
you give us a brief guide into the magic
world of ai if someone wants to engage
in it no but i i think that basically
you need to look at
you have ai enablement ai production and
eye consumption
and for enablement of course there are
many things about the infrastructure
um what you uh you are the hardware
infrastructure you have the the
computing tools and so on and there you
have many companies uh working there
then you have let's say the the the
production and you have many i would say
ai libraries
that will help people
we will see that then develop uh develop
offers
and and algorithm and here for the
production it's really about the
algorithm it's about the visualization
it's about the
ai platforms as we see that and then you
have the ai consumption
and this ai consumption is about the
usage and diffusion of ai and what we
see is the fact that especially in the
west
more and more you have let's say large
tech giants
and here in the west i would call them
tech giants taking let's say a dominant
position on each of them and i think
that this is what you were discussing
and we were discussing earlier on which
is how much is ai split and shared and
diffused in the entire
ecosystem and this is why as i was
mentioning earlier on uh in the u.s what
we see is a lack of diffusion into
traditional companies or and i'm not
judging whether it's good or bad
but it's really the fact that new
companies are pushing the old ones
and then replacing them so it's uh the
the cuckoo nest uh approach
so so that takes us to um uh perhaps uh
the last important topic and again um if
you want any questions please type them
away because you know we can talk for
three hours this week
we'll have more than enough to fill it
oops although a couple of questions just
emerged when we said that uh but there
you go um
what what um two things that you said
that to me are particularly important um
the first one um has to do with the fact
that we are seeing in the world of ai
also a great concentration
and one of the things that we're seeing
is that companies that may say hey i'm
strong by the way if you think about
amazon amazon great strengths is coming
from a combination of the infrastructure
play through aws that is producing the
majority of the profits right now amazon
is not making money off selling you
shoes and books and videos it's making
money from creating massive one to five
billion
dollar worth of infrastructure which
also have its own ai layer so they have
all the um all this interesting offering
that they say hey i'm going to give you
this computing as a service i'm also
going to give you ai ai is going to
create demand for computing as a service
and that's going to grow my ability of
driving everything and you'll gonna take
it from me so there is some concern that
the big players
microsoft amazon google these are the
very same players that are now not only
hyperscalers in terms of providing
computer demand on the go which by the
way is what ai also requires but they
are also the players that are involved
in creating their own libraries in their
own systems and their own ai ecosystems
so now you have and investing now and
sorry to interrupt you and investing now
in different verticals to try to play
the role
of
let's say um
orchestrators of vertical specific ai ai
ecosystem so so i think that they try
even to be more and they they hire
plenty of people in health care in uh
let's say so it's very very interesting
to see this movement as well indeed so
what you're saying is that they are
sensing the market opportunity
of taking the fact that their clients
don't really understand ai and they're
like don't you worry your little mind
because i am going to be playing the
role that in china is being played by
these specialists and i'm going to do
everything which means that their power
is going to be even more consolidated
and clearly they're going to be doing
all the interesting stuff which of
course is a short-term benefit but
there's an interesting question of what
happens in the medium term which takes
me to the last set of issues that i
would like us to consider which has to
do with regulation because clearly we
have
a couple of different concerns one of
the regulatory concerns is that we have
this inequality and the provision of the
very few firms the other concern and
that we had a question on that uh there
were there's the concern of what policy
allows us to do especially in western
societies that are particularly
sensitive on what data you use and how
do you use them i mean that's inherent
to ai what do you expect out of
regulation and how will regulation shape
the evolution of ai and the relative
life of different firms so i don't know
if i will be very positive about what's
happening at the moment and please don't
hesitate to elaborate because you're a
true specialist of this uh but i would
say two things first of all we can
expect regulations
with an s
in a sense that um
as i said countries are now trying to
get access
and to leverage uh the um
let's say the power they can get off out
of ai and
i i was a part of panel
let's say last week
in the un and the uh my russian
counterparts used to said something that
i think is very deep he said we used to
think that um
ai was a gpt
and general purpose technology and
therefore that there would be one
regulation explaining to everyone uh
what can happen and to to to make sure
that we'll have responsible ai
no bias transparency and so on
actually we should think about ai much
more as nuclear weapons
back to the cold war and what when the
west was against the soviet union
but he said but actually ai is much more
dangerous
than nuclear weapons because
nuclear weapons were just thanks to the
situation of course uh the destruction
uh theory because nuclear weapons were
just spending a large amount of money to
have let's say uh nuclear rockets uh
stored somewhere but basically the
impact was limited
with ai you can have impact on uh
elections on let's say fake news on so
many things
that it can affect and really change the
world you could have impact in terms of
hacking and autonomous vehicles and
therefore creating accidents you can
have and and i don't know if you've seen
that the um the the head of the software
uh at the pentagon
resigned a couple of weeks ago
and
is he right or wrong i don't care but
what it shows is that ai is now becoming
something extremely serious in a sense
that all regulations in my opinion will
have impact to create
um or at least in the usa and in china
europe being a different uh animal
to leverage ai to make it let's say to
make these countries more powerful
indeed
indeed i think that we are probably
heading to a number of different
regulations and i think that it is
useful to separate between them one of
the things that you mentioned is
security and security there is paramount
because ai could essentially uh create
loopholes that would
allow
destabilization to happen at a massive
level both in terms of products and in
terms of the way society operates and
this is very important both because ai
is going to be integrated in products
and because the micro targeting of
individuals can change the way that
individuals respond
which changes the way that society ends
up behaving the second thing is privacy
privacy is different from security and
it is something that i wanted to raise
because we have also a question from
fabian uh who's saying that privacy uh
was recognized in one of the human
rights um and then is a trade-off and
how should we think about it in the
context of ai and that may relate to the
differences between uh china and europe
so let's let's let's sort of hold on
that but in addition to that you also
have a.i and the question of dominance
of the competitive dominance access or
not access all the issues that we're
speaking now in terms of the uh the big
tech giants and finally which is more
where the policy is going it's
plausibility what i see having spoken
with a couple of the people that are
looking at ai regulation in europe is
that there is also a desire to have a
simple storyline which shows how ai is
going to be more digestible more
plausible and it's all this thing about
the black boxing and so on and so forth
often associated with the discrimination
concerns that go with them but tell us
since we had this question about privacy
and now i'm shifting to the questions
that we have been asked in the few
minutes that we have tell us a little
bit about your concerns or your thoughts
about how we can manage this privacy
conundrum and whether there is just the
chinese way in our way or whether there
can be
some progress that allows you to
leverage the opportunities that
information creates while still
preserving privacy what's your sense
about this trade-off so you have uh
certainly and it's true that privacy has
been what has has been the focus of
regulation i would say of the last three
let's say last generation of regulations
at the moment
regulators are talking much more about
our thinking much more about how
data are used and the biases that you
can have and transparency as you
mentioned even if if i may um
explainability actually reduces accuracy
so you have a trade-off there because
these black boxes are actually better
uh than
the more explainable the less accurate
so you have a trade-off there that is
not easy to uh
to to solve but coming back to privacy
so you have many ways now to do it you
can generate synthetic data
uh out of things you have obfuscation uh
that helps you make sure that you don't
give um you don't give your data but of
the individual but it is aggregated in a
way that is extremely relevant but
but
and i think that but what we need and
this is why i believe that you need what
i call a social license
uh to operate ai and to create trust
what you need is trust
with ai and and i think that for to
create trust with ai you need not only
the responsible ai the things about
fairness transparency but you need to
articulate as i was saying earlier on
the uh the benefit risk tradeoff
extremely clearly and it needs to be
extremely positive if you want to be
able to create and then the the
companies or the countries that will use
your data and so on need to be seen as
trustworthy
needs to be to appear as being
let's say accountable
uh for what they do and and this is only
when you have these elements and this is
not just about regulation
it's about really making sure that
people are okay
to adopt ai and and and i think that's
something which is very important
because ai can help us a lot
and therefore my fear is because of lack
of
knowledge about
of what ai is about we might come to
other regulation
and that would be a real issue because
we would then under leverage
what ai is about and under knowledge the
the
the the the potential of ai and it's
very important for us to unlock it as it
can help us in most of the key issues we
face at the moment so speaking about the
regulation let's think about any other
levers that regulators have and part of
this is this lingering concern um that
is uh that we have the uh the losing
race especially for people in
the eu and the us um
being concerned that they're being
they're losing another important and
actually possibly defining industrial
battle being sort of left behind uh in
terms of uh
what a.i could possibly do for them so
if you think about that we're going back
to the fact that you said that the
ecosystem the nature of roles the nature
of the way uh with which firms engage
with each other how they monetize and
how they support each other or engage
with each other to ensure that ai is
leveraged differs in china and in the eu
and in the u.s the government tends to
be much more
of a heavy-handed government but one
that does not really get into these
industrial structures these ecosystem
structures in the us and the eu and it
does in china do you think that we could
if you think about it from uh someone
who has left uh his abode in china and
returned back to europe do you think
that the eu and the u.s could
potentially
learn from the way that china has
structured its own ecosystem as the ai
ecosystem appears to make itself i i
believe it should and this is why
because at the moment you have let's say
every you are the the china bashing
which is uh
use everything what is done in china is
bad so uh but uh even on regulation what
happened to the uh internet giant there
in terms of regulation to create and or
on
let's say the gaming uh and so on would
it have been done in the us would have
said oh that's wonderful and and it's
true that in china there are some other
things that are not not good so i'm not
saying that china is good but i think
that there are lessons to learn
and maybe one which is even deeper is
china was profoundly shocked
by missing the industrial revolution in
the middle of the 19th century as in the
middle of 19th century there were it was
china was renting 30 of the gdp
40 years later because they missed this
industrial revolution
they were out and it was a poor country
and it took them let's say uh 150 years
to uh to come back
they are really on they understand that
ai is a new critical industrial
revolution and and therefore they don't
want to meet this one so i think that
especially in europe because the us is
not missing it but especially in europe
i believe it is important for us not to
uh replicate uh what china did in the
middle of the 19th century
terrific look um this is one of these
things that if we had more time we would
happily be engaging in more conversation
but i'm afraid that we have run out of
time so there you have it um ai is one
of these technologies that is
transforming the world um one of the
things that is driving its ability to do
so
the extent to which the latent
opportunities are turned into reality uh
is related to how the ecosystems are
structured the structure of the
ecosystem is a result not only of
corporate action but also the way that
the state and uh the companies are
enmeshed interact and engage and we
should not
take
the differences between
what happens in china the us and the eu
as indications that we need to go with
one camp or another there's a heck of a
lot that we can learn from the way that
china has structured and much as we
benefited hugely with uh forgetting that
japan versus the us was not a cultural
difference in the 1970s and 80s and we
learned lean production and kaizen and
all manner of other things that
transformed organization then it may be
useful for us to see what we can learn
from these differences in different
countries and the impact of ecosystem
structures for promoting ai
certainly something we'll have more
discussion to have but thank you so much
for being with us francois it's been
huge fun as always uh speaking with you
about these hot topics and ladies and
gentlemen um uh please um keep uh uh
with us every third week we're gonna
have one of the big tech gurus
with 150 000 followers in his um
weekly um
notification benedict evans who's going
to be speaking about big tech and
ecosystems and where technology is
heading um in three weeks uh so join us
again then
uh and in the meanwhile have a grand
time oh sorry benedict evans i managed
to mix that up we have jonathan larson
the chief innovation officer of bengam
one of the most well known um
uh well the most valuable insurance
company of the world that created one of
the most well-known ecosystems benedict
evans is our christmas cracker he will
be ending our session on the very final
uh time in december so thank you again
francois thanks everyone and thank you
for inviting me in in in our next one
thanks vonswell cheers
you

---

### Building an insurance ecosystem: Lessons from the PingAn Story
URL: https://www.youtube.com/watch?v=xjLJwd-PZjI

Idioma: en

welcome to the london business school
and to the seventh session in this
series gaining ecosystem advantage seven
can you believe it with two to go after
this one my name is david lansfield and
welcome to new guests welcome to those
who return great to be with you again
and thanks for all your suggestions
you've shared in advance of this session
that we've done our best to incorporate
today we're going to be talking
naturally about ecosystems in particular
learning the lessons from the fantastic
story of pingang established in 1990 19
1988 i should say by peter marr it is
transformed from being a financial
conglomerate to in its own words a
technology-powered
resale financial services groups
straddling lots of industry verticals
auto health
smart cities financial services and at
scale
more than 200 million
retail customers and close to 600
million internet users i'm happy as
always to be alongside my learning
friend and colleague professor michael
jacobides of the london business school
of course
a guru and a world-renowned authority on
ecosystems published in all the best
journals including strategic management
journal harvard business review welcome
michael great to be with you again
and today with us is jonathan larson the
chief innovation officer of the ping ang
group and the chairman and ceo of the
global voyager fund which i think says
something about its ambitions and scope
i would argue based in hong kong coming
in from hong kong today and jonathan is
a former senior executive at citigroup
and a consultant at booz allen welcome
jonathan thanks for making the time
today
thank you david thank you michael
and
go ahead
yeah so we're going to talk about the
growth story the evolution thing and
obviously the role that ecosystems have
played
uh how it's made it work when many
others have failed um today is about
giving you wherever you are in the world
whatever role you play and
corporates consultancies academia some
tips some lessons some insights on on
how you can build evolve change your
participation in ecosystems so and get
ready please to ask some questions in
the chat box where michael and i will
pick them out as as well as we can
what typically happens in these sessions
is we we have
nothing until the last sort of 10
minutes and then a flurry which is
fantastic by the way but we don't want
to leave you frustrated so be bold ask
questions right from the off and we
would love this to be a proper debate
rather than just a three-way
conversation
i think that's a bit of a enough for now
in terms of the introduction of what
we're trying to do michael why don't you
ask ask ask away in terms of the
questions and set more of the scene well
i think that the first thing that i'd
like i'd love to ask jonathan to do for
us is uh
not everyone here is based in asia so
pinghan may be an exotic name that they
have heard of um i think that there's a
couple of different components in ping
and
impressive evolution one of them is use
both technology aggressively and
effectively and think as a nimble
entrepreneurial firm as opposed to
a firm that
only sticks to the confines of what
traditional financial service firms and
insurers do in particular the other
which is uh of uh relevance today is
that bundled with this is the
experimentation with growing beyond the
traditional confines and moving beyond
um and uh
developing uh such importance uh uh
important new areas as uh pingan's good
doctor uh eventually sort of further
spun off so jonathan can you give us a
sense of how the ecosystem of bingham
has evolved and also tell us now because
you know after a spectacular growth
story uh you are now preparing for uh
yet uh another step in the evolution can
you give us a sense of how the ecosystem
of bingham has evolved
yeah well thank you michael and i think
that it's probably helpful just to give
a quick schematic of how bingo itself
has evolved
um and
as david mentioned the company was
founded in 1988 and the first
10 to 15 years you can think of as kind
of a platform built out in financial
services uh
peter mar is not alone in having had the
vision to be able to create an
integrated financial services group
with multiple platforms that ultimately
could be centered around customers
and the first
decade and a half really was building
those platforms getting the insurance
licenses
making a start in banking asset
management leasing etc so today pinghan
has
the widest range of financial services
license of any other company company in
china
as an example
scroll forward to about early 2000s the
company decided to start pivoting
towards the customer access of that
vision having built out a range of
platforms across financial services and
was one of the certainly the first
company in china to move to a kind of an
nps vision to start centering kpis
around the customer
uh secondly to integrate all of its call
centers and other customer communication
capabilities
in a single organizational unit called
ping on financial services which still
exists to this day and manages all
collections all telephone sales all
inbound calls on an integrated basis for
the entire group
um and then the third thing was to build
databases that started matching
customers across the whole group
and using those three things as sort of
levers for driving uh
firstly cross-sell but secondly uh
multi-product relationship development
centered around customer needs then
there's a third phase of the company uh
so you've gone from a kind of a product
phase to a customer centered phase and
then there's a kind of a
what we now what
the first step was to move to make a
decision in about 1988 to become a
technology focused company um and at
that time very importantly the world was
enduring the uh global financial crisis
china was relatively
uh relatively unaffected and compensated
you know through massive internal
stimulus as some of you might recall at
you know in 2008 2009 2010
um and and so domestic the domestic
market was largely unaffected by the
global crisis what was happening was the
mobile revolution was taking full effect
in china at a pace that we had seen
nowhere else in the world and you saw in
particular the rise of the tech giants
in china on a new scale um really
touching almost every single chinese
consumer ali tencent
baidu
meitwan and many many other names remain
extremely important in the
digital economy in china and peter
looked at this and said well you know
this is a
not only the is the analog for financial
services obvious which is that
everything we do in financial services
is virtual and therefore it ultimately
will be replaced by some kind of digital
delivery
but equally there's a new model emerging
here which is that the
the distribution channels that used to
define
individual businesses have now
migrated to a mobile platform and so
what actually defines the difference
between a cd shop and a bookshop and a
video rental store
those distinctions just blur
uh equally the distinctions between
those businesses and the financial
services that power them blur
and you can extend that thinking to many
many sectors of the consumer economy and
indeed the economy in totality and i
think this gave peter an entirely new
impetus for how to think about strategic
opportunity
um pingan had always been driven by
adjacency and the desire to you know
create solutions around clients uh using
multiple platforms so you could you
could argue that the company was always
an ecosystem play
but the technology focus that
um
sort of was the result of the kind of
experience of learning from the mobile
and tech revolution in china in the late
late 2000s uh really really has has
created an entirely different level of
impetus so pinghan applied that in a
couple of ways one was to really apply
technology deeply to its own business to
show that it could be done
as part of that we converted the whole
company to cloud i think to this day we
are the only large-scale financial
institution in the world
uh that is entirely cloud-based wherever
it is physically possible for us to be
um and then secondly deeply
re-engineering and retooling fundamental
capabilities we're the largest car
insurer in the world if you have an
external accident in our business in
china you can take out your mobile phone
use our good driver app
you can
scan the damage we have an ai engine
that will automatically calculate the
uh the cost of fixing that damage either
replacing the part or repairing it labor
and parts cost depending where you are
in the country and for up to a certain
um
dollar or rmb limit we can settle with
you on the spot into your cash wallet
with us or with one of the other cash
wallet providers as an example or for
the agency force we have one of the
largest a probably the largest agency
force in the world we're actually
consolidating that and really refocusing
it on productivity rather than
numbers of agents as we speak but within
that agency force we try to automate
everything in the agent's life that is
not productive and is not value added to
the customer uh if you look at any sales
force you'll find you know somewhere
between 40 and 70 of people's times is
spent doing administration and process
and all the rest of it i think for for
anyone that's been in that side of you
know a traditional financial business or
probably any other sales business that
would be very familiar the question for
us was how do you
automate and platformize as much of that
as possible so that was sort of one
vector we had another was to start
building new businesses that didn't
naturally fit within the existing
structure that we had a good example
michael mentioned good doctor which we
can get onto but the idea this is going
now back eight years and was saying
we're the largest health insurer in the
country but private health insurance is
a pretty small part of the overall
health wallet at the time it was four to
five percent today it's about seven
percent it's growing at 30 to 40 percent
a year it's going to be an enormous
opportunity but it's still relatively
small in the big scheme of things so
peter's question was how can i reach
beyond that business and redefine my
addressable market and in theory create
a platform that can address every single
consumer
and
the idea of creating a telemedicine
platform was born from that thought
process and today we have the largest
such platform in the world with i think
it's 375 million registered users and
just to give let me just kind of tie
this back to the kind of ecosystem
concept um
obviously when you have a client base
today of 200 uh 224 million financial
services customers
that itself is an enormous source of
customers that can be referred into a
new platform-based business like good
doctor so to actually catalyze the
business we were able to really tightly
weave it into the life insurance health
insurance value proposition and then
more laterally the bank
proposition and other sort of large
client bases within the group
and they fueled the growth of the
company now we're finding it actually
works the other way now that that's a
standalone entity we track rigorously
the percentage of customers that come
from the broader ecosystem and i think
david you mentioned we have over 600
million internet users it's actually 634
million as of the 30th of september this
year against
225 million i should have said uh
financial services clients within the
group this is at the customer level and
we're now finding that 39 of all
customers that we acquire actually come
from the broader internet ecosystem that
is acquired within the financial
services business as an example let me
stop there but i hope that gives a bit
of a flavor of the evolution of the
company and how the thinking has worked
couple of very quick quick things um
before delving into some of the how
questions um
one of the things that that i hear you
say which is really interesting in a
contrast um
just working with a large financial
services company uh before we started
this call
that says well okay i will start by
broadening out my scope i think that
what is fascinating in uh the story of
uh penang is that it's almost bottom up
so you're starting by fixing the
underlying technology the scalability
the potential information about
cross-selling and the other
opportunities and then you take
advantage of the opportunities of the
unexpected perhaps homogenization and
reduction of boundaries between um
different
sectors as you enter in but i think that
it's it's interesting that you guys
start by
looking at the product if i understand
it right fixing the product fixing the
infrastructure and ensuring that once
you have that you can see how you can
leverage it and i'm contrasting that
with some of the
more late movers that say i'm going to
make an acquisition i will as such cover
a broad range and i will call this an
ecosystem which especially for financial
services companies is always a
significant risk um what i heard you say
as you were explaining this you know
sort of almost bottom-up evolution of
the company as it is you know moving to
solidify its technology um having done
sort of the uh the the footwork before
and then broadening it up is that he
said that uh
about 10 years ago
the
similarity between sectors started
changing and the distinctions the
boundaries between sectors that perhaps
used to be more heterogeneous started
going down
now there can be a couple of reasons why
this happens first technology and
information becomes a little bit more
fungible and is the same across
different segments the second that
regulatory barriers may be removed the
third is that customers are more open to
have needs covered by
companies that existed in different
verticals and now we are more open to
entertain the possibility of this need
is being covered and you know perhaps a
fourth thing is that we're now seeing
what you know i'm recently dubbing a
free-form competition i be um a more uh
explicit focus on creating packages
which make sense as a package
what played the role as you
decided that you want to move beyond
this solid foundation and onto these
markets that you were saying was it that
you know i.t made it easier and it was
sort of more funchable between segments
was it the technological boundaries were
going down was it a customer willingness
to entertain it
or was it all of the above what is it
that drove it and then i'm sure that
david is going to start us off in
thinking about how what did you do to
make that happen
yeah well i think first of all
it starts with being an entrepreneur
founded company a founder-led company
and i think that the
um
the the the starting point that you know
as a as a company
part of our our mission and our um our
mandate is to continuously create new
businesses to be always creating and
always transforming that mindset is is
at the beginning another mindset that's
very important is that you know
wherever we are we're just at the
at the cusp of our opportunity and
there's there's always a bigger play
ahead of us
so that's another mindset i think is
very interesting in this company
and it's quite different from other
companies one might think keep yourself
hungry
um indeed um and then you know i think
the um the idea that uh i think the
technology kind of insights that emerged
with you know the advent of the iphone
and and the look-alike products the
android products etc and with the um the
unprecedented
um rise of of mobile in china
and the
the rise of the internet giants on
mobile the rise of mobile payments of
course is a unique thing in china which
have completely displaced cash as anyone
who knows the china market would be
aware already
and did so very very quickly much faster
than we've seen anywhere else in the
world i think those conditions um sort
of i think created a a a a new impetus
i think the the transformation
initiatives for the existing businesses
were you know in some ways
a desire to exploit the possibilities
but were also very much driven with a
competitive mindset
to kind of strengthen our consumer value
proposition uh and also to become
fundamentally more competitive as an
organization in the use of technology
and viewing technology as a fundamental
enabler for everything we do
uh and then i think uh it really was
i don't think there's a in the new
businesses that penguin has created it
wasn't really
a fundamental shift because pinghan has
always created new businesses and we
have 37 companies at the for businesses
at the first level in the company all
but two of them have been entirely
created internally and organically i
would describe the strategy yeah bottom
up is one way i would describe it as an
organic strategy and very much an
adjacency strategy and think of
adjacencies as customer adjacencies
product adjacencies and capability
adjacencies
and uh all three are critically
important
that's pretty rare i mean that there's
so many things that are breathtakingly
impressive i have to say in terms of the
ambition the scale dynamism
the organic story is relatively rare in
my experience
um point one secondly if i had a pound
or dollar or every any other currency
for the
for every time that somebody said we
want to you know create an opportunity
to deliver against our customer needs
customer centricity and so forth we want
to build an end technology engine to
support it and so forth all the themes
that you sort of talk about
i mean everyone's trying to do it
but
then you get to actually okay we've
actually we've got the right mindset we
think we have the right mindset which
most corporates don't um that
entrepreneurial let's keep moving that
momentum
you you referred to
but then there's a leap there's a gap
between intent
right and ambition and then the
execution of it
and if you plot the chart and i've
looked i've done my homework you know
you plot the chart of the evolution of
ping and in terms of timings and the
scale at this scale i mean it's quick
right and you're a very dynamic
organization to build on michael's point
how
what are the steps within the
organization to grow organically and at
pace and successfully
yeah well i mean part of it is being in
a in a growth market um so in some ways
um the businesses that ping and has
succeeded in you know represent the
growth of china itself over the last 33
years
you can be the you know the largest auto
insurer in the world today you know in
1988 there were barely any private cars
on the roads in china so the opportunity
to be that simply didn't exist at that
time and and i think pingham was pretty
good at stepping in and
quickly adapting and quickly
becoming a market leader it's very
interesting the competitive landscape in
china is ruthlessly competitive in the
financial industry we're up against um
entirely state-owned companies because
ping art is the only
non-state-owned large regulated
financial institution i guess you could
argue and financial is a is a is a
non-state-owned institution as well
maybe it's increasingly state influenced
uh that it's certainly a non-state-owned
institution
but it's of a very different character
um it's also quite a successful company
but
for the for the overwhelming part we are
competing against state-owned
enterprises whose management changes
every five years with the planning cycle
in china um and who are by no means
stupid companies uh they're very capable
companies uh but they tend to be much
more market share and volume focused
much less focused around uh customer
needs customer service uh client
segmentation value proposition and much
less focused on profitability so pingan
focuses on all of those things
against a bunch of competitors that are
just ruthlessly focused on share and
volume it's not the easiest game to play
but king and has been pretty successful
let me try to drill down on that a
little bit though because i think that
david's question remains um i totally
see the benefit of being much more
valuable position adjacency you know
value to the customer but the question
is how do you do it in the sense that i
hear many financial service companies
that absolutely have got the rhetoric
right and they've got the consultants
that tell them that this is the rhetoric
to keep and that we need to be you know
both creative and strategic when it
comes to consumers and of course you
look at the delivery and it's a very
different business all together um and
um as you are thinking about uh ventures
in adjacencies
what most companies do is that they have
a bit of a sandbox there's a few million
here and there and they fund some people
to do their fancy stuff and the fancy
stuff goes in glossy um annual reports
and everyone's happy that it's an
innovative company and we have paid our
lip service views to the gods of
innovation and would like a higher
multiple thank you very much and i think
this is a slightly different uh picture
with the one that david mentioned which
is
experiment and then grow at scale now
this
does not happen by itself so can we go
into what you think uh part of the
secret source of not only talking the
right to talk but walking it is in your
uh experience
yeah well i can give some examples of
you know i think interesting ways ping
ad has thought about
building out businesses that might be
you know i think are quite different
from what i've seen elsewhere so i i
mentioned in our auto insurance business
we have an app called good driver
and we have as part of that an automated
claim solution that we built in-house
and you know the the core of that
automated claims solution as one example
is a capability adjacency so
we got into building our own facial
recognition about six or seven years ago
we hired a bunch of cmu carnegie mellon
data scientists
and got them to actually build
uh financial institution grade facial
recognition before apple had it by the
way using as reference images the
government id database which you can
access by api in china and many other
countries by the way um and we got the
same guys to then once they've done that
to start looking at other use cases and
we got them to build this auto
um
damage
and loss assessment
uh recognition platform so we built that
in then then we decided well we want to
have another platform which actually
measures driver risk it gives you a
driver risk score so we got the same ai
guys to work on that in conjunction with
a bunch of other developers within the
within the firm so now you've got a loss
assessment a claims management platform
or claims assessment platform you've got
a a driver risk platform that uses your
mobile phone to assess how risky you are
as a driver it turns out that the
accelerometer and gyroscope and gps in
your mobile phone are unbelievably
sensitive and we know when when you're
getting out of the car because we can
see the rotation of your phone we know
when you're accelerating too fast
braking too hard we know when you're
across the line we know when you're on a
dirt road or a hard road you opt into
this program by the way we're not
imposing it upon anybody but and then we
put that put those two
big apps
within a much much bigger let's call it
ecosystem of other driver related
services whether it's
driver clubs whether it is
auto repair
discounts whether it is petrol discounts
you can imagine the kind of thing it's a
very rich platform and then we said well
let's give this to our uh motor
insurance customers um of course we have
a
co-brand credit card with our bank
for our driver population as well and
turns out that our auto customers are
amongst the lowest risk and most loyal
and profitable of the customers we have
there
but we then said well hang on now we've
got this platform
why are we limiting that to our own
customers why don't we make flip it
around and direct it to the outside
market
and so now 60 of the customers of that
platform aren't even our customers
but they're a very very important source
of customers so if michael were to sign
up uh to our driver risk program we can
now assess you uh for your driver's
score we know exactly how risky you are
we know exactly what car you drive we
can become very very competitive to give
you an offer and bring you into the fold
and that turns out to be a whole
strategy by itself uh so it's it's a
very you know that's i think that's a
very interesting example as to how
pinghan thought about it
did that all just come up in one
did all of that arise from one brain
spark absolutely not it's very
evolutionary piece by piece even each of
these capabilities i described had
hundreds of iterations
where the senior managers involved
including our chairman peter ma
for some of them he was personally
involved in it would actually be
involved in maybe 60 80 iterations of
micro details in these applications to
get them right to get them to work
so another one is recognizing that
innovation is very rarely about just a
big idea it's far more about being able
to execute that idea to iterate it to
sort of work it into something that can
finally find its its product market fit
and then having the patience and the
endurance the the um the stamina to be
able to see that through i'm sure we've
seen in some companies and maybe maybe
part of the problem both of you guys are
describing the senior management get
bored with this pretty quickly
you know with the finished product well
it turns out if you if you do that if
you do it that way the chance of that
finished product actually really fitting
the market and really being competitive
and and uh productive is
pretty low
i think that's a remarkable story i know
that sort of they may look to leap
if you like too big and place one big
bet um rare some of the top team
actually get immersed in the detail that
you referred to and i guess being a
founder entrepreneur is different in
mindset to some perhaps corporate
executives i'm not anti-corporate
executives by the way but those are some
of the some of the features we have some
great questions so jonathan so i suggest
we're gonna do a bit of a quick fire
round given timing and we wanna make
sure our guests are are suitably um
stated in terms of their questions
in terms of the portfolio a very large
portfolio that you're you're leading
there the two questions i just want to
draw one from aaron right at the
beginning was around how do you manage
not only the bundling you talked about
and everything else but also the
cannibal potential cannibalization
so within the portfolio that's one
question and then as you're building i'm
looping these together not a beautiful
link but i'm trying to link them
together the second one would be as
you're evolving the portfolio you've
been talking about china of course
um how how much do you see the
possibilities and how far you see the
possibilities outside china and some of
the challenges that come with that
expansion so first is sort of
cannibalization within the portfolio the
second one is how far can you go and how
far do you want to go geographically
yeah well look i think that the first
thing is um
at one level you you have to be willing
to compete with yourself from time to
time i think if you if you're stuck with
the idea that undermining your own core
is is just it's just a no-go zone
uh it's very unlikely you're going to
create breakthrough solutions or
platforms
and i guess the the the important thing
is to have decision logic that
prioritizes you know when and how you
should do that and to me the question is
you know i can give up half my margin
uh for a group of my customers but if
i'm if i'm going after something that's
10 or 50 times the size of the
addressable opportunity that i have
today
then that makes perfect sense
so it better be 10 or 50 times the size
of the addressable opportunity and you
better go and deliver that
um and that's the kind of trade-off that
we consciously think about
all the time
so you know having the eye on a bigger
prize
and you know of course if that's if
that's not going to be the case and
we're better off keeping the model we
have then the question is how do you
um how do you strengthen that and and
make it defensible against possible
competitors that might do the same thing
you're considering those trade-offs all
the time you're making hard decisions
and you're willing to leave things
behind as you're looking to scale or
stick with them if they're doing really
well and and sometimes at the early
stage peter is the master of having
multiple teams working on the same
problem with different axes
and he'll he'll he's not sure exactly
you know what's the right path and
you'll see which one it looks like it's
going to succeed and then you'll find
the organization changes over a weekend
and teams will be slammed together or
one will be discontinued totally and we
the the team will regroup onto something
else uh and um and a new form will
emerge that that is the next iteration
so that's a very normal thing at the end
um on the international uh look you know
we are a
i think our firstly we have um
enormous continuing opportunity in china
i mean the company generates a an roe of
about 20
um and look you know covert has not been
an easy period for us and you know we
grew profit at nine percent last over
the last 12 months
um the company historically has grown at
about 25 compound for the last 32 years
so you know this is a slower period for
sure for us a lot of different factors
that we probably don't have time to get
into here but you know i think the
company is sort of um extremely well
placed but there's still just enormous
opportunity in china and to compete with
that 20 percent roe
it's you know
whatever we do internationally has to be
a pretty high return opportunity our
thinking is that it's better to be
capitalized internationally it's better
to use our technology um and it's better
to be able to
um
you know support other financial
institutions
and to create platforms that can be
successful internationally one example
is our oneconnect platform which we've
uh started uh marketing in southeast
asia we've got an excellent ceo who's
actually building quite a nice business
across the region in providing
financial services platform
infrastructure for financial
institutions across the region
leveraging what the whole premise of
oneconnect is we built all these
platforms and tools to solve problems
for our clients and then we decided to
platformize them and make them available
to typically smaller banks within china
of which there are hundreds and we're
now doing the same thing in southeast
asia another example might be we have an
investment in one of our portfolio
companies in the us called snapsheet
they're the la they're the largest new
generation
claims management provider for the auto
insurance and pnc insurance industry
generally i think they have seven of the
top ten insurers in the states and as
their clients uh we are in the process
of helping them incorporate our
um auto claims platform into their
workflow it will be the first time that
that has been done in the united states
and immediately gives us access to the
top seven of the top ten players in the
states uh that will be that will be
hosted on amazon um uh you know
completely separate from ping on uh and
will be a platform that obviously will
be somewhat customized for snapshots use
so there are a couple of examples of
some of the initiatives we have underway
internationally
great so let me turn to a different
question and i'll tag on uh one of my
own here so uh dimitri is saying
excluding distribution are there any
initiatives that particularly stand out
and contributed to bing ads success eg
operating platforms infrastructure
products organizational structural
culture and to that let me just add
because again i think that an important
part and
perhaps i'm drawing on our earlier
conversations uh on on that jonathan is
the tying the
uh ambition especially as we move into
new markets and build these ecosystems
to have things that are concrete and
measurable as something that drives
success because sometimes again you see
organizations that you know say well if
that's new and lofty how would i do
anything other than saying experiment i
think that the approach as i understand
it being is a little different so first
this question and i suspect that it'll
be a natural lead on to uh some of the
way that things are organized seen
measured and assessed even as we look at
innovation and things that may appear
very experimental
yeah so well i think probably like a lot
of chinese companies pingan is you know
ultra kpi driven
um and i think that's been a pretty good
discipline i think if you if you look at
our our um
uh cfo jason yabba um he spends the
majority of his operating time you know
doing kpi discussions and reviews with
the operating businesses that you know
very very granular detailed it's you
know it's kind of a say do type of uh
analysis and
you know we want to understand whether
you know if businesses are promising to
do something are they actually doing it
um so you know i think that really gives
rise to a rigorous execution culture um
and uh you know of course metrics is one
one side of the equation you actually
have to deliver
and deliver well under that and
inevitably in any big organization
you'll have some people who are just
very good at managing the metrics uh as
opposed to the substance so you know
that that they probably don't last that
long in ping and i suspect um but but
you know you always have to be guarding
against that so that's one another one
is you know you mentioned you know our
innovation um sort of metrics and goals
well we leave those pretty open-ended
the businesses have to put up goals they
have to be meaningful goals they don't
have to hit them all not everything has
to work uh you know part of innovating
is that you're going to have a lot of
things that don't end up working but you
know it had to be worth working for and
once you once you've realized it's not
going to work you have to pivot and
shift
um and you know but but you know of if
you have three four or five initiatives
we do expect a few of them to work and
we expect them to move the needle so i
think that's very much part of the
culture in the place um of course it
depends on the strategic position of the
business and whether the ground is
shifting and you know a new new model is
demanded by the marketplace anyway and
lastly i would say that you know i think
pinghan has a very interesting new
business creation model which is
very much to
start up new enterprises as as startup
companies with entrepreneurial
management with a you know a a startup
culture in startup looking premises uh
startup dress code uh you know
no one would ever fly business class
um you know pennies are pinched
deliberately uh and the idea is to
really create an entrepreneurial mindset
and to give the founders meaningful
equity and typically to bring in outside
shareholders pretty early
on the basis that they created entirely
different accountability
um and and as the company raises capital
from of course bingham and from other
shareholders that those um financings
represent kind of valuation benchmarks
for enterprises that would otherwise
just get lost in the noise in a big
company like ours
on the on the on the point of um i guess
the
culture and the structure of the
organization i'm curious as to sort of
get a clear even clearer picture of the
relationship between the center if you
like the top team
and whether it's the operating units the
startups you just referred to because
there obviously is a shift in many
high-performing organizations towards
more distributed responsibility which
sometimes loosely people forget that
comes with the accountability you just
referred to and it sounds like a high
performing if ruthless culture um at
pingang which i guess is a necessity for
growth how would you describe the
center's role if you like in in the
evolution of pinghanga and the future
and the relationship with
the the entities if you like within
within the group
you know i don't think it's a ruthless i
think it's a demanding culture and a
disciplined culture um and you know look
if if if it's not going to work then
you're going to have to go and get
another job somewhere
and i think that's a good thing yeah
it's it's no you and i have worked in
consulting in our lives and all
consulting firms are up or out otherwise
they wouldn't exist for for very long
and it's just clearly understood you're
either performing or you move on it's as
simple as that and i think it's exactly
the same at pian um so i i don't think
it's a it's kind of a ruthless culture i
think it's it's just a disciplined
culture and it's a performance culture
i'm sorry what was the second part and
it's just more about the um yes i agree
with you i use the wrong term but i
agree with you wholeheartedly um and
we've both been in the same culture the
second question was more about the the
relationship between if you like the
center the top team the people you
referred to
and so on and then you know the degree
of empowerment the degree of
accountability between the two because
there are different models right very
hands-on very directive
i think we have very different models as
well there are some businesses where
we've got you know
you know a good model in place
we've got management that are able to
drive the next
couple of iterations of the business
we've got strong capabilities embedded
within the business
and
central management really don't need to
get that involved at all the last thing
they want to do is have to get involved
uh there are other businesses where
there's a big strategic challenge
and
the answer is not totally clear we know
the business has to shift and you know
we might have made some management
changes we might have brought in new
capabilities and there's going to be a
fair bit of interaction between central
management and the business management
to to to really iterate and figure out
how it's all going to work before that
business is then set again on its path
to be very autonomous and then there'll
be other development projects where
peter himself will be personally
involved and extremely interested
and
you know will be involved in those you
know 600 iterations to get something to
you know minimum viable product and get
it out into the marketplace and get it
to work commercially
so again there's not one model at all
it's a very wide range and wide-ranging
and it's kind of matched in our
technology organization you know when we
did the cloud conversion there was a lot
of centralization but we realized
equally that you know in in many cases
it's much better for the business to be
wholly autonomous for their tech and
indeed even within the organizations to
move to a devops model where the
managers have their own tech resources
and are able to sort of release code um
you know on a continuous basis very much
like an internet company um but you know
in other cases there are um central
capabilities uh that all the businesses
can draw unlike um advanced like visual
ai or natural language ai it doesn't
make sense to have those in 20 places
across the company
let me try to to to push a little bit
more on on this one and i'm going to
contrast what you're saying with my
experience a couple of years ago with
one of the largest insurers in
switzerland and they have set up the
regular system they're very sort of
proud of that and you know bought
some other businesses then saying look
you know we bought the biggest uh
mortgage broker and i think i remember
speaking after after speaking of the
board speaking with the people in
the senior management team and the chief
technology officer said look you know i
i deploy about you know two to two three
hundred million every four years to
update upgrade my systems but we've got
a super tanker and a speedboat these
people doing the ecosystem for doing the
speedboat stuff i need to make sure that
i've got the tanker going on a safe
course so um it is
sometimes one of the challenges
especially when you think about these
new businesses
is that there is a fair amount of
inertia in the core of the organization
even as there is experimentation
on the sites now my concern with that
was that you're not going to see any
benefit if you don't think
about the integration and part of the
answer that you might give is well our
technology is sort of more flexible and
one of the reasons of putting uh having
a more agile cloud-based model is that
it makes it more interoperable with all
the other things that we're doing but
how do you avoid
the lack of cohesion of these more
entrepreneurial activities that may
happen in the periphery and part of what
is inevitably a scale-based business
with a massive presence because you are
a giant you know the most valuable
insurance firm that means that you also
need to be thinking about the operation
at scale and at a reasonable cost how do
you manage the tension between this
experimentation and the connection that
sometimes big companies don't get
so um right and you seem to be managing
more effectively
yeah i'm not sure that we would accept
the premise that you have to have one
single culture across the place
i think probably at one level there's a
set of shared principles and values and
expectations that you have to create
that are genuinely group wide but i
think if you're in a kind of in a new
business that's really bootstrapping
itself versus in a business like life or
pnc obviously you're going to have very
different challenges
and that's going to require different
skills resources management models and
part of the culture for sure
so the key is you know do you not have
how do you avoid dissonant culture or
just unproductive cultural conflict
that's one thing another point you make
i mean of course you have you know if
you have one of these very large very
profitable businesses peeing out is
generating basically 20 roe you don't do
that you know just by by
sitting around playing tiddlywinks
together you do it because you've got
these massive scale businesses that are
driving just a huge earnings base and
have extremely efficient capital
utilization of course you have to be
managing that
and you have to be sustaining that
and that means you have to be you know
relentlessly focused on cost efficiency
on
cross-selling to clients uh and and you
know maximizing the opportunity uh to
fulfill client needs but it also means
um it doesn't you know it doesn't in any
way stand in the way of you know
constantly asking the question are we
differentiated in our value proposition
our client experience are we segmenting
what we offer to make sure we're
addressing uh you know multiple and
distinctive needs groups within our
client populations
and ultimately are we competitive
in less than a minute i'm just repeating
the question what what is ping and the
most biggest threat risk challenge um uh
and or your concern about the attention
and scrutiny in fintech from uh that is
now becoming a concern
uh look i look i think there's been a
lot of discussion about the kind of
regulatory changes in china and various
policy initiatives that have been
announced
in financial services they're mostly
pretty positive which is you know
protecting customer privacy uh which is
extremely rigorous within regulated
financial institutions number one um i
think
trying to create a level playing field
between the new generation of internet
providers and traditional regulated
financial institutions i think that's
generally a very positive thing i think
more broadly within the economy the
focus on
competition law and trying to pair back
uh monopolistic or dominant providers in
certain sectors probably will pay
dividends to china over the longer term
in terms of
economic productivity for the country
for us
we still have a huge growth path in
financial services
something we haven't spent a lot of time
talking about that's very interesting
for paying out is health
china spends today 700 per capita on
health you would know that the us spends
about 11 12 000 most developed countries
are not quite quite up with the us
they're spending um 3 500 to 5 000
whichever way you think about it china
is is looking at five to seven x over
time
uh simply to get to parity with the
developed countries of the world in its
health system
it can't do that the way the western
health system's developed it's going to
have to use technology in a smart way to
get there faster and sooner and we see
that as an enormous opportunity in fact
in the eyes of our chairman peter ma
uh the health opportunity uh maybe even
greater than the financial services
opportunity over the longer term so that
i think i would leave you with as our
sort of single biggest future
opportunity
i love the optimism i love the the
framing around opportunity it's been an
enriching stimulating conversation we've
covered a huge amount of ground what i
particularly like is the getting a
window into how things really work
within the organization which i
particularly value how decisions are
made how you experiment how you scale
how you move things on how the culture
works um we've probably still scratched
the surface but from a personal level
jonathan i'm very very grateful for your
time michael i think it's been a
wonderful conversation don't you
absolutely and jonathan there's more
questions uh anywhere from how do you
create stickiness uh to what how do you
set your future plans that will have to
leave for for another day but thank you
so much uh terrific discussion
and thank you michael thank you david
pleasure so we this recording will be
available as sam's put on the comment
comment box um
you uh you there are two more sessions
to go in this series so do sign up share
your ideas your feedback and i'm very
grateful for everyone's attention
interest and questions today have a
great morning evening afternoon night
wherever you are in the world thank you
you

---

### Repositioning the news media ecosystem: putting readers in charge
URL: https://www.youtube.com/watch?v=JM4Z6_mN3bI

Idioma: en

welcome everyone welcome to the london
business school and our eighth session
in the series gaining ecosystem
advantage welcome to everyone who's new
welcome to anyone who's returning i'm
here with my esteemed colleague
professor michael jacobides who is a
world authority on the topic of
ecosystems publishing in all the best
places including strategic management
journal harvard business review and
elsewhere and recently
has been awarded uh by thinkers50 one of
the world's top management thinkers so
congratulations for that and everything
you do michael and it's been an absolute
pleasure working with you on this series
and other things so congratulations and
welcome
thank you very much thank you very much
and it's a great pleasure to be with you
and to uh be with keith but uh david we
want to introduce uh keith before we
take it away indeed yes so keith is the
interim ceo of the guardian
and the former ceo of channel 4 and
previous roles in other media places
including sky and discovery
keith you are most welcome today
thank you very much good to be here
great so we are going to talk about the
media funnily enough the guardian
let's just give it paint the picture
before we dive into questions as
remember this is get ready because we
are looking forward to your comments
questions we want to make this as
interactive as possible so the guardian
was formed 200 years ago and it's
clearly evolved from being a very
successful national newspaper to a
multi-platform multi-country
multi-format
high quality journalism that makes money
too um it has recently announced a new
strategic plan to grow reader engagement
and reader revenues and has had a
cracking time
during the pandemic i think if you look
whether you're a reader or not there's
no shortage of news stories and there's
no shortage of reader engagement
so today we are going to talk about how
to nurture and manage ecosystems in the
world of news both within the
organization and indeed outside
my own background is one of a
practitioner media is one of my soft
spots if i may say so keith and i have
known each other for a few years even
though our youthful looks would say
otherwise i worked on partnerships jv's
in tv radio music news and elsewhere and
i've absolutely loved it so i'm
particularly if i may say so looking
forward to this discussion so
perhaps michael i can ask you to sort of
set the scene in terms of the bigger
picture before we dive into the uh the
guardian indeed and i think that the
bigger picture here and i'm uh taking uh
a bit of my more recent interest having
shifted from someone who works primarily
to help organizations think through
their own strategies to someone who
spent a bit of time thinking about
regulating platforms and ecosystems
partly because of the power that a few
of the strong
and important players have and this is
something that gets as serious as
anything does for our society in our
collective future
the reason is the following we are rely
in most uh of uh the societies in the
world today rely in some form of
democracy and one of the things that
democracy needs in order to operate is a
recent understanding of the news that
affects the views of voters that affects
the actions of politicians
now we used to have that with its own
potential issues and pathologies and um
everyone will have read their own
stories about fleet street and
about how different um editors and
different newspapers played a big role
but all of that started changing a few
years ago
and the reason is that what we have seen
as a result of the growth of the big uh
platform firms is that there was a
massive displacement the displacement
was not only in terms of what we do and
where we spend our time we spend our
times are buried in facebook or linkedin
and instagram and twitter as opposed to
reading newspapers and magazines but
also
this is where
advertising revenue goes
in the uk the competition market
authorities had last year a thorough
investigation of digital advertising
and what we saw in terms of digital
advertising is that um a couple of
companies google and facebook in
particular had more than two-thirds in
the eu
of what digital advertising spend is
leaving the traditional media with
something like five percent of the total
pipe now that's important because the
ads that used to exist was the financial
lifeblood that allowed the newspapers to
take um revenue and to turn it into uh
coverage of events perhaps sometimes
biased but it was what it was wasn't
this is what kept um people working uh
in news organizations
so right now we are in a new landscape
and of course anyone who's
seen the results of the last five years
understands that one of the side effects
of social media is that unlike
newspapers it's much more polarizing
because it creates echo chambers if you
don't even know when you read the song
you read the times you read the
financial times you kind of know where
each one stands
the guardian has had a very
long-standing view of things and we kind
of know that the guardian will have a
view which is consistent with his
history and you go on facebook you don't
know that what you're looking at is an
echo chamber of people who seem to act
like you and you think that this is
reality so here we're going to these
interesting innovations that are
altering both the information we receive
and our understanding of the bias or the
lack of bias or as some people may be
loved into believing of the stuff that
we see
and that is a big challenge so let me
start with that keith you've been living
in an industry that has been transformed
before we go in the guardian and before
we see how one individual organization
was able to overcome this and try to
work with technology rather than
thinking that technology is only the
vote can you give us a sense of what are
the changes that have happened in the
media landscape and in news
organizations like yours but not
focusing only on guardian as a result of
the big platforms
and ecosystems that they have created
yeah of course and and i guess what
we're talking about here is the big big
challenges and the themes and the shifts
in the market that many companies are
dealing with at the moment and those are
ones of digitalization and globalization
and with that really that need to
provide content in multiple formats and
multiple platforms which i'll come back
to i mean gone as you rightly described
michael gone are the days in which
high distribution costs create a barrier
to otherwise localized markets in which
consumption is limited to one or two
platforms
so i guess the guardian but just more
generally businesses are now dealing
with a complex
corporate digital transformation
in
an increasingly global market with low
barriers to entry where that competition
for attention or eyeballs is higher than
it has been forever before and you
rightly make the point that
most of those eyeballs or many of those
eyeballs are on these dominant digital
platforms which you know if we're being
frank
fail to account for their responsibility
as content publishers but actually also
have a very strong commercial incentive
to promote content which actually as you
use the word polarize you is polarizes i
think public debate um so look it's
clear we face a number of challenges and
i think like many other businesses in a
nutshell our response to that is we're
focusing on providing a high quality
product
in our case journalism
developing a strong and brand and a
trusted set of digital products through
which our consumers can really establish
a deep trusted and profitable
relationship with us so i think there
are really you know many reasons to be
optimistic and specifically so at the
guardian
i mean i i think as you say there are
profound
challenges but no business has a
guaranteed right to survive everyone has
to evolve and innovate in order to
sustain a market position and if i if i
take our business
we have a a really great product a great
brand an engaged and loyal audience and
the financial firepower to invest in
growth and i think that's a great hand
to play even in a really challenging
market i think we've just got to play it
well
it's great to hear some optimism and
confidence about your own organization
that's fantastic and uh as a reader i
wholeheartedly agree just going back up
a level just for a moment about the
industry um and some of the ecosystems
what um although there are
challenges you talked about both of you
talked about polarization um as a topic
around some of the platforms but what
positive impact have some of the
platforms had on more traditional news
organizations
well there's i mean there's no question
i think if you were to
summarize our relationship status with
the platforms i'd probably put down
complex
um i mean clearly that you know there's
a there's a positive impact on the
platforms of
driving reach bringing new audiences to
our platforms
giving us that distribution and also
in many respects you know major
platforms also help us with the
monetization so on that one hand we have
a hugely respectful set of commercial
relationships
and in recent um
in recent months david you'll be well
aware of the fact that in to some extent
prompted by regulatory pressure but
uh the guardian and other news
organizations have also started to
conclude licensing deals which start
emphasis on start we start to recognize
the value that journalism brings to
their platforms in terms of that
authority um and also the engagement
layer that we provide as well so we've
got a real multifaceted relationship
with the platforms commercially which is
a massive massive benefit um
however obviously they do present
challenges commercially as well michael
talked about the fact that you know
they've got a very very dominant
position in advertising and they also
really do i think strive to commoditize
a lot of inventory where that that
context that brand safety environment i
think in in really doesn't kind of get
the premium it warrants at the moment so
there's a slight commoditization there
that i think represents a danger to
quality quality inventory and quality
sites but as i say we've got a a
relatively complex
relationship we will always argue
through the editorial that those those
platforms given that they hold such
massive economic and societal power
that governments do have a duty to
encourage transparency to set a level
playing field and just generally to hold
those powerful platforms to account
whilst at the same time we can continue
to evolve the model and continue to have
constructed commercial relationships i
think that's absolutely right within a
complex ecosystem that you can argue
both sides
let me just ask you on on this one one
final question before we start looking
at what the guardian does um positively
in order to see how it can add value
given the landscape whatever the
landscape is now um first of all
it is quite fun and facebook terms you
know relationship it's complicated i
guess that what we would put in the in
the little box but um in the it's
complicated i wanted to think um about
what the potential role of uh regulation
is
we've seen in recent discussions in
australia
and in france that there have been a
number of efforts to try to redress that
right and try to see whether we can come
to some um
understanding of uh supporting uh
journalism and clearly it has been the
most uh respected organizations that
have been more progressive and
able to defend themselves and the
guardian is certainly one of them how
far do you think that
appropriate regulatory or governmental
um sort of push can um go to redress
part of this balance and what will it
consist of i mean is it going to be
something that is going to be uh rules
of the game that need to be global there
has been a lot of discussion and
initially at least you know the big tech
players were quite skeptical when uh
particular um countries said decided to
change in especially you know the the
rate the the terms through which um they
post uh news that come from news
organizations how do you think um that
uh efforts that we as a society are
going to take are going to
affect
the relative balance of power between
the big tech ecosystem and the media
ecosystem and then we'll turn the media
ecosystem next
well
in terms of the um the value equation as
i say i mean we have we have had for
quite some time a series of really
really constructive healthy commercial
relationships with various different
platforms i think there is a sense
though that you know with given the
imbalance of power between those
platforms and organizations like
ourselves and also smaller organizations
there was a need for regulatory
intervention to reflect the value that
journalism brings to those platforms as
i say to build its authority and to
build the engagement which it ultimately
relies upon to build an ad business and
i think some of that regulation is
likely to come in very local forms i
mean you've got the a triple c
intervention in australia
in terms of the news bargaining code i
think was absolutely pivotal in striving
forward some commercial deals which have
then started actually quite a
groundswell and led to some other deals
in other territories where now
again news organizations are starting to
get a funding agreement and a licensing
agreement in place whereby those funds
can be reinvested in journalism and
support the broader ecosystem i think
that's a good start and i'm optimistic
about what the what can be achieved as
well as the digital market unit starts
to get established in the uk and starts
to gain scale and impact so i think
we'll see various different initiatives
come forward at various different
territories as they gain pace um i think
at some point they'll need to be a
global coordination layer but i think
it's more much more likely to be
territory by territory at this at this
early stage of development and i think
we're making good progress but these
things take a long long time and i think
you know there's a lot to be learned
from the australian case study that we
saw only a few months ago
sorry for pressing on this one because
it's it's a fascinating um detail though
um so you are saying if i understand it
right that some of uh the individual
countries
create templates that may essentially de
facto affect things well outside their
territories so that the australian
market which is quite small market if
you look at the total readership and the
money involved may end up having a much
greater impact in as much as it unlocks
things that are modeled around it and in
that regard we may be optimistic in as
much as this sets implicit standards
even if they're not sort of universally
policed and part of a globally accepted
code of conduct in terms of the way the
media
connects to
the social media and the posting that
happens there if i get it right yeah
what i guess my point is is that
different regulatory authorities in
different markets um have the
opportunity to observe how developments
are actually taking place in alternative
territories and see how companies are
responding to those so my observation is
is that in australia
where as i say i think they took a
particularly progressive approach with
the news bargaining code
pushed forward by the a triple c which
had a profound effect in the
relationships between news organizations
and the dominant platforms in that
territory i think there are a lot of
regulatory authorities outside of
australia who have looked at the impact
of that legislation have looked at the
learnings and looked at how platforms
and indeed the news providers responded
to it and i think that will then serve
to shape their own regulatory
interventions as they look to apply
those within their own territories so i
think it's i think it's a case of
learning from other markets like we do
in business i imagine the regulatory
authorities do the same
yeah it's interesting that that point
that if you look at other media markets
and you look at other issues that have
come up in competition regulation
policies such as
sports rights deals going back
the role and funding of public service
broadcasting the relationship with
independent producers all the topics
that you and i keith have known and
loved they've started typically with a
single action by a government or an
authority and others have then either
caught it learnt or coordinated but it
does it does take time and that's the
challenge that you know the markets move
very quickly and often the authorities
and this is a topic we talked about in a
previous session take a long time to to
learn and but you know the dynamics that
michael eloquently described are not
exactly going to wait for an authority
so there is something about pace of
learning both news organizations and the
authorities coordinating at speed um
which is why i think you have a you have
one has a dual approach there i mean one
has a obviously there's a lobbying and a
regulatory strategy but again one needs
to foster very very strong very
productive commercial relationships as
well that can underpin that as well
which is why again it's a complex
relationship i agree
so romans asked a good question he says
what's your view on new subscription
platforms like sub stack and how will
they influence the media landscape is
that something that's come across your
bowel
uh yeah of course i mean this really
looks at the um the disintermediation i
guess of journalism provides alternative
means for journalists to actually
monetize their proposition and say for
us though really the the guardian is
really focused on optimizing those key
strengths that i actually said it had
which is a you know fantastic a
fantastic brand itself um excellent
journalists um and are really loyal and
engaged readers with the money to invest
so i think substance and others like it
other direct models actually have a role
to play in the news ecosystem yeah but
as i actually reflect on the kind of
core strength and the capabilities that
we can then bring and leverage within
the market i actually think the
opportunities are really really strong i
mean two things david i would just say
that really surprised me when i joined
the business from channel 4 are
really the extent to which it
it is a global business i think you
touched on that at your beginning
and also that that real success of the
contributions model
and so if i just think about the the um
sort of the international nature of the
business as well you alluded to it but
30 of total revenue and 50 of digital
revenues are now from outside of the uk
and you know i truly believe there is
big big scope to grow those figures as
you look at the opportunity within our
current base
of the us and australia and then some of
the other markets where we've got a very
substantial presence that don't actually
have a physical presence
the other area is that ability to grow
contributions and that talks to our
switch into this more reader
reader-centric model
we do think that really by investing in
the journalism
by investing in the products by
investing in our core data capabilities
we can create that virtuous cycle that
means that we can invest again more in
the journalism and start to augment that
relationship so
i look you look at you look at what
thing platforms like substance are doing
and new entrants into the market what
they are doing is showing that consumers
are increasingly willing to pay
for high quality news
and i think when you align that they are
particularly willing to
pay
if i think they believe that there's a
purpose and a cause behind that
journalism which they can align to so um
yeah look i think reasons to be
optimistic therefore are
consumers are increasingly willing to
pay one
advertisers are increasingly looking for
brand safe um
trusted environment with businesses with
strong values with which they can align
and as we discussed earlier i think
nudged on by regulation i think
platforms are also willing to make
contributions increasing contributions
in recognition of the value that
journalism applies to their businesses
both in terms of engagement but also in
terms of that authority
so i mean michael rightly identified a
series of very profound challenges for
the business but i think when you look
at those trends that are emerging
willingness to pay from consumers
advertisers and platforms
again that's a hand that i think
now it's just a case of playing that
hand well and we can create a real
engaging profitable virtuous model for
the news industry
so if i may try to play back some of the
things that i heard keith um my
understanding is the following um though
used to be an old license to operate
which was based on the fact that you had
to take news well you would only choose
um between the news providers that you
would help with and if the guardian was
better than its peers well that was kind
of that then that got challenged uh
because people said well we don't even
need newspapers and i think that now
what we're saying is well people need to
find a way of aggregating news with some
shape or form or another so the very
reason that newspapers emerge in the
first place is now being rediscovered
surprise surprise and people say that
we're going to find some digital ways of
putting it together and you're like well
in this new landscape which away it's
just the re-rendering of what existed
there and was at the base of uh their
emergence of the first place we may be
able to
add value the thing is that we need to
compete with many more players and we
need to find a way of making sure that
the client
gets the benefit now there's two issues
that i would like to explore one of them
is who exactly is the client because the
problem uh and anyone who's been
watching for instance the most recent
facebook um uh revelation uh has seen is
that if the client is the individual
user and the amount of time that they
spend there whether that ends up
leading them to commit suicide because
their body image isn't quite what it
should be um or be depressed um
or because they get excited because
they've got overstimulated in an
addictive way or that is providing good
quality content
you know is in the eyes of the beholder
so
is the customer uh only the uh what
drives stickiness to one individual site
so this is sort of part one this big
challenge that you have as a news
organization of seeing well yes i
clearly want to
do something that is going to work for
my customer but at the same time i need
to find some way of ensuring that i
maintain some standards and the second
thing is to say well at least on the
good news is that i need to provide
something that people will identify the
value add off and then i'll see how i
can cut across
different channels i can
find the different tidbits and customize
it to what individuals will want so i
would like to
ask you to think about either of the two
whether it is you want to start with
this big challenge that the news
organization has which is to be
customer-centric but not exclusively
focusing on what creates extra time on
the platform as it were and the second
thing is and how can you
be the you know newspaper 2.0 or news
organization 2.0
that starts
integrating into the offering the kind
of stuff that add value i think we'll
want to cover both so you know let's
start with one and i'm sure david will
uh uh continue with uh whatever has um
has been left untouched
yeah i mean let me let me just come to
that i guess the the premise of the
question i guess michael the only thing
i might just challenge i guess is that
that that
potentially a false choice you've just
presented there between going after the
reader and also sort of producing the
sort of the high quality journalism or
um
because i i would say for us our model
there is
we are obviously a
sort of journalistic first organization
we want to produce we want to create an
environment where the best journalists
can come here and produce their best
work and we want to create the
underlying business capabilities within
those non-editorial teams to make sure
that we can distribute and monetize that
content to reinvest into the journalism
now of course that that high quality
impactful informative
journalism that enables us you know
society to have a well-informed debate
that appeals to our readers and so and
it also reinforces our brand
which encourages our readers to support
us and creates a set of values with
which advertisers want to be associated
so i i'm always slightly wary when um
when people make
the decision of you know do you drive
for mass engagement to sort of the click
base argument because again that would
be a very
short-termist approach because of course
what we would then serve to do is
undermine our brand and i think brand
and values are really important in the
type of market
michael as you as you described which is
overwhelming choice of
news or articles of different quality
and i think in that paradox of choice as
is well researched people tend towards
what is familiar or what is trusted and
i think in that environment it's key
that brands do create a
very trusted brand environment for
readers to come to and i think that's
what the guardian is doing we we make
short-term
sacrifices i think in in return for
long-term value of our brand and also
long-term long-term value in relation to
our values just a couple of examples of
that are we have a
i mean we have a
reader first
data privacy policy
where obviously that means we leave some
advertising money on the table we have a
a general ad policy where we don't
accept money from fossil fuel
advertisers which of course leaves value
on the table but we do that because we
think that's right that's in line and
strategically coherent which is that
coherences i know is a subject that
david
has some significant expertise on but
that coherence is really important when
you need to stay
true to your brand you need to stay true
to your values and i think just as
importantly in a purpose-led
organization you need to demonstrate
internally to those who come and work
for you because of those values that you
are making decisions that are very very
coherent and strategically aligned so
i think yeah that's how i would that's
how i would respond to that question
i mean the big shift that you've both
been talking about is that shift to
reader first which sounds easy to say
but it's hard to to execute and if you
look if you go back over this series one
of the big themes that we've been
talking about is ecosystem orchestrators
um have focused on consumers in this
case readers first
their needs expectations and so on and
then work back
to what they do but i guess one of the
differences is and we've heard from you
know one of our previous guests uh
jonathan larson from ping-ang they have
extended quite substantially in their
from their space in financial services
to others
um growing i guess what you're saying
keith is you have to be given the
position of the guardian the trust you
have you have to make quite difficult
and conscious choices about how far to
extend either by product
well and to a degree geography because
you know the question is the depth of
journalism
that you can actually offer so if you're
going to a global readership they will
want the brand to stand for not frankly
just a uk perspective on what's going on
elsewhere so it's a pretty difficult
strategic and
i guess also operational choices about
how far you extend
yeah i guess let me let me just touch on
the point though that you made about the
reader-centric model because i guess
that is and certainly i use it quite a
lot within the guardian it's probably
quite important just to emphasize
what i mean by that
fundamentally that is about
believing that impactful high quality
journalism
can be the basis of a profitable
business model i think that's
that's the essence of what i mean by the
the reader switch i'll just bring that
to life a second i mean we as i said we
want to create that virtuous cycle where
high quality journalism is consumed on
must have
products
which are then formed deep deep
relationships with our readers
who are then motivated to support us
financially and then creates the funds
for investment in that journalism and
that is a shift i mean that is a shift
in the business model because
it was the view
some years back that journalism was
necessarily loss-making and that it
needed to be subsidised by ancillary
investments that would come back and
fund the news organization and so what i
really mean is now in this
reader-centric model we are
de-prioritizing the sort of if you like
that ancillary corporate development
activity
we are focusing in on
the core business the core business of
journalism and we are then becoming
certainly across the non-editorial
elements of the business much more
reader-centric to make sure that we
understand our readers better that we
are able to create products that
surprise and delight that we're able to
use sophisticated data analytics
in order to then
continue to develop that deep and
trusted relationship with those
audiences such that we can then do the
classic things of monetizing
readers in a more sophisticated way much
much better
conversion rates a better focus on
retention and offering them a product
which does actually fulfill more of
their needs and that's that's what i
mean by a reader centric model it's much
more about
believing that the journalism can be
profitable therefore working
on packaging that journalism in a way
that can drive a profitable business
model going forward and i think as you
said look we are starting to see the
success of that um last year we had
record readership um the the two billion
uniques that you mentioned record
digital revenues um and obviously
significantly improved cash flow and i
would i would dare to suggest that we
will actually have an even better
financial performance this year so
really within the business it's that
common goal of
protecting guardian journalism into
perpetuity and i think that is that
mission that binds everyone in the
business it just means that we are now
really focused
certainly across the non-editorial teams
on making sure that we're in a position
to create that virtuous cycle and that's
where we're focusing it's not assuming
that news is loss-making and we need to
invest elsewhere
terrific so essentially what what we're
saying here is that the solution to this
conundrum of do we um find some way of
not having a potential conflict between
the high quality journalism um and um
the provision of what people want is
that we are offering a seriously curated
um um set of material on the basis of
the creation of both a better product
and an identity that is consistent with
values and principles that takes me to
the observation uh or question that viju
parameshwar had in
has in our chat so v2 says with global
online readership high quality and
trustworthy papers like new york times
washington post and the guardian could
should dominate the business while
either local papers die off as their ad
revenues
drop off now there's both a descriptive
do you agree um and a prescriptive
is this the way that we should be
heading and the creation of a few
important nodes
which will have both the scope and the
wherewithal in terms of the resources
needed to provide such um
services in terms of journalism uh while
inescapably displacing some others what
do you think about that
um
well i think this is in many respects
has parallels with my experience in the
in the tv market actually which is in an
embark market environment where
distribution
is obviously not the scarce resource it
was and therefore the barriers to entry
are lower obviously you've got bigger
players who are looking at international
markets as a means of expanding their
businesses so as you rightly say we've
got big u.s players at the moment
looking at the uk or more generally
europe as a means to expand
in the same way that disney netflix
looks across the globe as a means to
expand their content of their very
strong content offering as well what i
would what i would just say about that
though is i think with the right
tailored proposition with the right
understanding of your audience
there is room for those big global
providers
to um to co-exist with local players who
have got that real understanding of
their audience who have got that
emphasis on local stories or in the case
of tv local programs and so i think both
parties can exist i think what what it
drives everyone to do is to really focus
on what their competitive advantage is
and what their strengths are and to
really understand their audiences and
find their place in the market
i think it really does cause a problem
for those in the middle ground but as
you say i think at the moment the way
the market is is developing
digitalization globalization low
barriers to entry that means yes big
players including the guardian are
looking to expand internationally but i
also think
local propositions can really serve
their audiences very very well and you
know you've only got a look at the share
price bounce back of reach plc and how
their results are going at the moment to
notice the success they're having in
local markets that's a great that's a
great example i agree in terms of the
but it has to be high quality
differentiated and it has to be on
platforms because people search costs
are reduced people can find it and or
and if they don't like it the tension
spans are quick and they'll switch
switching costs are reduced i mean
and i think you've got that you've got
the sorry to interrupt you david i think
you've got absolute parallels um there
in i mean i alluded to it very very
briefly but in the tv market i mean
people
i would say my old employer channel 4
people have been talking about the
profound challenges faced by that
business because of um
you know the the introduction into the
markets of very very well-funded global
streaming services and there's no doubt
that presents a challenge but you also
look at the sophistication within which
the business is being run and that it
does have a very good understanding of
its audience base it knows its position
in the market and it's able to put out a
range of excellent programs that really
do appeal to people that i think
therefore gives it uh you know
sustainability for a very very long time
to come as a result of that local market
positioning um and a really distinctive
content offer
i agree so everyone we've got just under
10 minutes to go and i'm now expecting i
think we're all expecting a flurry of
incisive uh questions but as you're
warming yourselves up um
one i guess i want to just shift now to
the internal dynamics of of the guardian
and uh the internal ecosystem because
if going back to your examples there
the netflix of the world and the other
streamers have effectively used um cons
viewer
insight and fed it back into the
commissioning process and the their
editorial process in different shapes
and form
um that's a big shift for a news
organization where the journalists were
the if you like the dominant players
their opinions counts and of course they
want to represent the lives and the the
dynamics of their readers but how has
that shifted keith in terms of you have
a reader-centric view that you've
articulated very clearly but that's a
big shift in the dynamics with the
journalists who now have readers wanting
to i guess express more opinions feeding
stories themselves how has that internal
picture changed in the in in in the
dynamics you've just described
um
i mean there's obviously within the um
as you know dave within the guardian my
role is not um to shake the editorial
the editorial teams obviously work um
very very separate from the commercial
influence and they are there to write
um excellent stories about the news
agenda of the day and to shape that
public debate which i think they do
excellently
in terms of
you know in terms of how that shapes out
at the moment we in a reader-centric
organization we are effectively more
united within the business in terms of
wanting to augment and grow that
journalism because it is it is
ultimately the product of the business
all parts of the business want to
promote the creation of outstanding
journalism journalism which motivates
readers to contribute and support and
which also motive uh sorry promotes a
set of values with which advertisers
want to associate their brand
so again back to that slight conflict
which mike alluded to earlier we
we don't want to be putting out content
of course that is clickbait because
ultimately we get long-term sustainable
value from adhering to a set of brand
values and appeal into a set of readers
that would expect more from a news
organization like the guardian
and therefore this for me the senior
editorial team is just as interested in
having a sustainable model supported by
readers
as i am in having more opportunity to
fund and augment the great journalism
that we already produce so i i think to
be honest this is about creating a
culture where
both sides of the organization can come
in and do their very very best work and
deliver to that promise
so let me just take that because um you
know we have heard about the um the uh
redefers
and the focus on providing something
that really works for them um in what
ways is this promise being delivered
because as a principle it sounds great
but what is it is it just predictive
analytics in terms of what pieces people
will want is it assessing what attracts
people's attention and then deciding
that you're going to do more of that
what is it that it it really consists of
and
is it
focused primarily on the prediction and
the customization and the second bit is
how does that affect
what it is that you do the content that
the guardian um either provides or the
way that it polishes it
and shares it more broadly
yeah i would answer that from the
perspective of obviously the
non-editorial because as i say that's
where the shift is that's where really
the emphasis on reader centric comes
due to this fundamental belief that news
can be profitable so where i'm
reader-centric as opposed to being
focused on ancillary investments is
really around making sure that
we are investing in
products that are reader centric which
house our news in a way that is engaging
in a way that drives stickiness with our
product and in a way that basically
gives people the value such that they're
motivated to support instill an open
model which obviously many people within
the industry didn't think would work and
is now generating you know
almost 70 million pounds for the
business so that's the type of thing
that i mean by a a reader-centric model
it's it's creating it's looking at the
product that we have
which is you know fantastic world-class
journalism across a broad range of
genres and it's then about thinking how
do we package that such that it
maximizes engagement how do we create
and augment that
with fantastic underlying business
capabilities a data platform to make
sure we can really understand and have
meaningful communications in a deep and
trusted relationship with our audience
such that then we can effectively
convert and retain those who want to pay
for that journalism and then reinvest it
back in the business that from a
non-editorial stance is focused on the
reader
and i think that is a seismic change
within the business the journalists
obviously they are they they have more
than enough tools to know who is um who
is reading their uh reading the
journalism but i think within an
organization such as the guardian
um we want the journalists to be able to
follow the stories develop the stories
and set the news agenda and i think that
i i wouldn't want to suggest for any one
opinion that is effectively uh
journalism by numbers that's absolutely
not
what i'm referring to really is the
shift in the non-editorial model yeah
but even so that you know the fact that
they are
bought into and coherent with that
overall reader-centric view will mean
that they'll have more of an eye to what
you described and they'll use the tools
as they want and it's not they're not
they're not walking
algorithms if you like um i mean one
thing that as we as we draw to a close
one thing that obviously many
organizations are grappling with in in a
world of ecosystems is how to deliver
profit and a greater sense of purpose
obviously you're doing that so for
people watching listening to this
you know this discussion keith what what
sort of last piece of advice would you
give to people as they try and if you
like marry deliver on both in a world
that going back to our earlier
conversation is
more complex in its relationships with
stronger platforms but
you said you can do both so what would
be your one or two nuggets of wisdom on
on how to do that if you're somebody
else listening into this conversation
good challenge david very good challenge
um
well i i think this is about making sure
that the
strategy is aligned and
importantly coherent with the values of
the business
this this point that i made earlier
which is in a world of increasing
competition consumers will gravitate to
those trusted brands with which they
have a a shared set of values i think i
think that's that's true and therefore
businesses have to be very careful
they have to be careful to ensure that
they
and i think to michael's earlier point
the partners within which they use
within the ecosystems behave in a manner
which are consistent with those values
because that's just as we all know right
it's hard won but it's very easily lost
so
as i think about one of our revenue
streams in advertising there's there's
no point having a a privacy first
approach to data
on your own if you then go and uh
syndicate your platforms
uh syndicate your content rather to
platforms that don't or if you use a
programmatic ad partner that has no such
concern for uh for consumer data so i
would just say the expectations on
purpose-driven organizations such as
ourselves such as channel 4 are high
both externally and internally
and it does mean you need to therefore
work very very hard on that element of
coherence
and i think communication
communication with your staff as well so
you can really articulate why certain
decisions are made how that fits with
the certain values of the organization
and you can demonstrate
that you know those are important
because that's why the best talent is
coming to work for purpose-driven
organizations
which basically tells us tells us that
uh when it comes to digital disruption
um and a platform uh based digital
disruption strategy and uh communication
of this strategy both internally and
externally is a big part of the answer
both for
having an individual organization that
succeeds but also delivering on the
mission
that is important and the mission here
has huge societal impacts as well so
thank you very much for a really rich
conversation um uh keith and for
everyone else um we look forward to
seeing you in three weeks when we'll be
speaking with benedict evans the iconic
tech analyst uh when we'll be trying to
figure out whether uh big tech will be
uh potentially curtailed by current
regulation or whether that will have to
wait for the true uh part of web 3.0 but
with that keith it's been a fascinating
discussion thank you thank you everyone
for joining in your question thank you
very much
have a wonderful day everyone morning
evening afternoon wherever you are in
the world
thank you

---

### Will regulation reshape the structure of the tech ecosystem in 2022?
URL: https://www.youtube.com/watch?v=4php_Nyqqfo

Idioma: en

welcome to the london business school
and to our ninth and final session in
the series gaining ecosystem advantage
my name is david lansfield
and when michael jacobides and i started
this session with the help of rowena sam
and others in the team the great team in
lbs we we wanted to create a space for
executive entrepreneurs and consultants
to share their stories learn their
lessons and share their tips on how to
succeed in a world of ecosystems we've
had
representatives from philips majid futen
mastercard the guardian pingang
premiership rugby bcg charles rivers
associates and we've moved from health
to sport to financial services to retail
to media
and from europe to the middle east to
asia it's been a privilege to work with
professor michael jacobinis one of the
world's leading authorities on
ecosystems his body of work published in
all the great journals has pioneered
research and practice
on strategy and regulation of ecosystems
so we wanted to close the series with a
bang positive bang if you if you can
have one so who better than one of the
world's leading technology and benedict
evidence welcome benedict
you have one of the most
yes you um you have and i would say one
of the most incisive minds on all things
technology as readers of your newsletter
publish both free and premium and will
attest and somebody i've admired
personally from afar
and respected and listened to over many
many years
as an independent now you are a venture
partner entrepreneur first and mosaic
ventures i'm previously a partner at
andre drivers and horowitz in san
francisco and then before that a coach
of organizations from enders to channel
four to orange and and a cell side yeah
we missed out a few yeah anyway you're
very welcome we're going to start uh
today's session on a very simple
question and a topic of regulation and
ecosystems what is it
does it matter
and where where should it go as we close
the year and i'm going to invite my
esteemed colleague michael to sort of
set the scene and then encourage a good
debate and i know
given our characters and our between the
three of us we will provoke quite a lot
of thought and discussion please do put
your questions in the chat we'd love
this to be more than a three-way
discussion and um over to michael
thank you very much and it's a pleasure
to be uh with you and to join you
virtually david and also benedict um uh
in speaking about i guess two
interrelated questions one as david
mentioned this uh big discussion uh
about regulation and ecosystems and the
reason that we're looking at that is
that it may but only may affect the
future of ecosystems so as it's the last
session for uh 2021 we're also going to
try a bit of a crystal ball and we're
going to ask ourselves what is in store
for 2022 and beyond 2019 was the year
that regulators realized that the king
had no clothes that the existing
regulatory apparatus was ill equipped to
deal with that and reports in the u.s
the stickler center in the uk the
firmament report and in the eu uh of the
khmer and report said we have an issue
digital competition is different and as
a result requires different tools why
well because the nature of dominance is
different the lock-in effects the
network effects everyone who will be in
this session will be well familiar with
that
now the other challenge of course is
that we had a focus on looking narrowly
at individual markets and most of the
action did not happen within markets but
outside it is how for instance in the
growth of digital advertising took uh
cut the oxygen from
sectors which are not only economically
important like journalism but also could
be fundamental for the quality and the
working of the economy as we saw with
the sea of guardian in our previous
session
now of course regulators started
discussing in 2020 uh there was a state
of different regulatory initiatives
there was uh there were some um
proposals the eu came up with the
digital service and digital markets acts
and 2021 was a year where both uh in the
us as a result of the appointment of uh
lina khan for instance in the ftc and in
other authorities partly driven by the
concern that uh the ecosystem firms are
becoming too powerful action happened
perhaps unsurprisingly china led the way
because if they decide to do something i
think that um
action is fairly swift and we saw
already significant changes whether to
ant group
or to a number of other technology firms
that have already started feeling the
brunt of changes in regulation
but the question is will that matter
perhaps in china it does but the system
there is quite different from the one
that we have in the us and the eu and
perhaps even technologies are different
so let me start by asking benedict what
he thinks is the prospect of
entering 2022 as a result of the
regulations that are being discussed and
voted in different geographies that will
change the balance of powers will change
how ecosystems work and will change uh
the dominance which if anything has
increased markedly over the last few
years part covered part of the
exploitation of all of these wonderful
effects that the number of us speak
about shut up read the new special issue
of industrial and corporate change which
was the result of the meeting that
benedict was also in uh with the world
economic forum a long time ago uh but um
we'll send the link but benedict what's
your sense what is it that is going to
change if anything uh as a result of not
regulation of technology
so that's a long introduction and a long
question um i mean i think you know in
generality i think i i often compare
technology regulation to
regulating cars
in in that well there's a sort of a
general point that you know the sort of
general religious everyone is subject to
general legislation so you know
you know you're not subject to the
university police you're just subject to
criminal law and accounting law and so
on
um
but then there are specific industries
that are big and complicated and
important and so you get specific
legislation so aircraft have specific
regulation shipping and oil refining and
fishing and food and medicine and indeed
banking have sort of specific regulatory
environments because they're big and
important and complicated and so you
need kind of specific sets of rules and
so it's fairly straightforward to say
well you know technology has become this
very large and very important part of
modern society and so it will get its
sort of own specific set of regulation
um
and that's you know we're clearly kind
of at that point the sort of statistic i
often use here is that when netscape
kicked off the consumer internet back in
1994 there were probably 75 to 100
million pcs on earth and most of them
were in america and most of them were in
big companies so there were maybe like
20 million consumer pcs on the planet
and now there are five billion people
with a smartphone um so and that's
happened very quickly and we're kind of
scrambling to catch up with this sort of
change in importance and to understand
that however
um
you know if one says we regulate cars
well think about that for a moment well
no we don't that's 20 different things
and so there are rules on safety and
emissions
and then there are rules on how you
treat your dealer network and your
supply network and then there is urban
planning and light rail and tax
incentives around parking spaces and new
residential developments and what
happens when teenage boys get drunk and
drive too fast and the dutch deciding to
take their cities away from cars and
give them to bicycles and those are all
different questions involving different
regulators many of them are kind of
complicated and involve trade-offs right
there's not just kind of an obvious
answer you kind of have to choose what
you want um many of them most of them
incidentally are not anti-trust
questions um there's some other kind of
question their tax policy or criminal
law or urban planning or something and
we had 75 years to work it out
it did take sort of 70 or 80 years to
decide we were going to put seat belts
in cars and the car companies didn't
want to do it because they thought the
consumers wouldn't like it and then when
the seat belts were there but we all
refused to wear them
um and so you know this stuff is kind of
long and complicated and takes a long
time and and when technology people kind
of talk about this is a sort of a
tendency to say oh this is special
pleading and this is just a techie
saying you don't get it and sometimes
that's true
and sometimes the regulatory request is
a little bit like telling general motors
to make gasoline that doesn't burn and
the engineers say well actually you're
an idiot we can't do that um but more
often the the request is to say no
technology policy is just as complicated
as transport policy or education policy
and actually you can't make flying cars
and you are going to have to choose
whether you want house building to
houses to be a generational wealth
building tool or you want house price
houses to be cheaper you kind of have to
make a choice there you can't have both
um and i think that's sort of where we
are in technology today that there's a
lot of different questions um and so is
that as a sort of a framing to go into
your your sort of specific question um
i think most policy problems in
technology are not intended to produce a
radical change in the market structure
in the nature of the product
you know when you say that you want an
uber driver to have a right of appeal if
you kick uber off the platform you're
not actually trying to change the market
structure of on-demand right you're just
trying to give the uber driver a right
of appeal
um and i think you know you say you
could kind of say that most kind of
technology policy questions are sort of
like that in that you're not trying to
change whole market structure in the
balance of power you're just trying to
solve some sort of specific set of
questions and so most of the policy
interventions in those areas are likely
to end up with added cost reduced
flexibility may be barriers to entry to
competitors um
maybe you preclude some markets so you
know for example we see delivery leaving
spain
um because of changes in labor laws
now they might or might not be that
might or might not be real but you know
in principle if you say that everybody
who works for an on-demand company has
to be employee you can see how that
might mean well then we're just not
going to have on-demand food in some
places in some circumstances um that
might be a desired outcome it might not
but that's just kind of a trade-off that
you make um
then you have kind of a much smaller
field where you actually want to change
the structure of the market in some
material way like there are people who
think that we shouldn't have app stores
or that apple you know or you want to
change the in-app payment model on
smartphones
or you want to change um
you know how instagram um interacts with
other companies and you actually kind of
want to change the mechanic of the
market in a sort of a fairly basic way
um
but even within that and even if you
look at kind of really dramatic
interventions like um well let's make
instagram a separate company let's make
youtube a set for company
it i think a lot of these these these
companies are actually all these markets
kind of look a lot like natural
monopolies i kind of think a social
network is sort of a natural monopoly
and so if you make instagram a separate
company that doesn't make it easier to
compete with instagram if you make
youtube a separate company it doesn't
make it easier to compete with youtube
now at this point you do you sometimes
have people kind of coming along and
saying oh yes but then you'd solve all
the privacy problems and you'd solve all
the harmful content problems which to me
i think is sort of a form of
displacement i'm kind of baffled at the
idea that if instagram was a separate
company it would become less aggressive
any
and that if you gave advertisers more
leverage over instagram instagram would
be more protective of your privacy well
i'm not sure that's how like that's
where the incentive structures would go
and anyway you can't just assume that
you actually have to do the analysis and
say well why
would you solve this sort of market
externality if you inserted more
competition you might not you might make
that ex you might make that problem
worse if you made the market more
competitive um you certainly see that
with android in china for example which
is one of the reasons there's been a
crack chinese government has sort of
cracked down is because the market was
so much less centralized and there was
so much more competition in many ways
there is that much more current consumer
hostile you have 10 different apps on
your phone all trying to steal your data
and fighting each other um and so i
think one has to sort of
sort of unpick that that that kind of
question
and then maybe win this sort of the sort
of a final section would be to think
well
you know if you actually do think that
you're going to
insert more competition into the online
ad business or try and create more
competition um
within the app store market or change
how apple and google run the iphone well
you kind of have to go and do a lot of
really detailed work to think about how
that would work
um i mean i started my career as a
telecoms analyst and there's a sort of
an interesting comparison here with
local loop unbundling you know you
couldn't just you couldn't break up
british telecom to create competition in
broadband that's not how it works
instead you have a lot of really really
detailed conduct contact
um conduct regulation
um but then that sort of presumes the
market isn't changing very much
and i think the kind of the great
constant in in in tech you know kind of
a great driving force in tech is that
sort of every 10 or 15 years whole
paradigm changes and when the paradigm
changes you get new dominant companies
and generally the old dominant company
is sort of still around or still around
for a long time um but the new dominant
company doesn't win by doing what the
old dominant company was doing so you
know ibm was dominant in the 70s then
microsoft and intel in the 80s and early
90s then the web becomes a dominant
paradigm you know ibm's still around now
um mainframes are still around now but
microsoft and intel didn't make
mainframes and google and facebook and
amazon didn't make a pc operating system
um and so what tends to happen is like
the market becomes much bigger with this
new paradigm and there are new dominant
companies in that paradigm and maybe the
old dominant company is sort of still
around
um but it's not dominant anymore
now obviously this is something that
happens in every industry like shipping
companies aren't dominant in the airline
business but i was like are they going
to be shipping companies got like 100
year run
whereas you know microsoft got thought
of 15 years or 10 arguably even only 10
years before the web basically started
chiseling away the basis of their
dominance
and so we have this sort of puzzle now
we've had smartphones for 10 years maybe
15 years um now what
and will the now what be dominated by
google and apple or will it be dominated
by some other thing and you know to a
regulatory conversation to regulate you
know regulators are all very painfully
conscious that they can't take five to
ten years to work this stuff out like
that's okay and the steel business is
not okay in the internet business but by
the time you've worked out your attitude
to smartphone ecosystems will anyone
care anymore
i mean by the time regulators worked out
their attitude to microsoft windows
bundling a web browser
a nobody really cared anymore and b the
stuff they did didn't work anyway
so that wasn't a great outcome for
anybody
well i mean if we go back to i'll have
to just defend um some of the historical
knowledge if you go back to telco
actually the uh decision uh
certainly in terms of the
long um distance uh and uh local loop uh
unbundling that happened uh as a result
of regulatory uh push back to the att
was critical in the development of the
velcro infrastructure in in the us but
you have raised a ton of things as usual
let me try to unpick a couple because um
some of them i think are really
interesting tricky questions now
if the question is whether technology is
just a vertical and of course you know
in any area uh even special vertical uh
regulation does not resolve all issues
criminal issues privacy issues um uh
fraud issues all of these
run in you know
throughout the gamut of any organized
economic activity and we're not
expecting anything different it's just
new manifestations of existing problems
which require us adjusting the way that
we look at them uh but beyond that i
think that um if you look at the
problems that we have is that technology
or big technology companies are creating
ecosystems that cut across different
verticals and the nature of power i.e
the nature of power of those who can
orchestrate these ecosystems and then
set the terms for those that depend on
them and i think the apple example is
really good because the question there
is should you now that you have this new
thing we didn't have in the past this
ecosystem who says i'm going to set up
the rules of the game and it may be that
i have exclusive access to uh customers
and even if you have networks analogies
your tinder and you know you want to see
that say that you're big enough and you
don't really care about apple well you
know if you don't care about apple and
about the fact that they're going to
charge you 30 and not allow you to do uh
in app um advertising then you can say
i'm out and i'm only going to allow
android nobody wants to date people that
exclude those on iphones there's many
attractive people on the iphone and it's
not it's not an appropriate and
appropriate network so i think that the
issues that we have
do
raise questions that are kind of new and
these questions are that there is a
nature of power which cannot be captured
only in the verticals and by the way
this may be more tech related or not
decorated it probably has to do with the
power of those that orchestrate
ecosystems and i will agree with you
that the efforts to deal with it may be
clumsy right now i.e that we have not
found a good set of metrics to explain
what the abuse of power is as
technologies change the nature of power
the nature of the abusers and what
society does to protect it changes now i
think that the problem exists and you
know the problem is qualitatively
different which is what the last few
years have shown and it isn't just the
vertical it is the nature of
relationships which so happens
to be primarily driven by
companies that are benefiting using
their adjacency as well as organizing
the relationships in ways that make them
particularly unbalanced now the question
that i have for you is not about the
existence of the problem or perhaps the
nature of the problem because you know
there's many many ways that we can
analyze it whether it's vertical or not
and i think that would be a fascinating
discussion but i really want to get your
vantage point more on what you think is
going to happen so if we think more on
the implications uh it seems that the
current regulation discussed may not
really have the possibility of
either
making what you call natural monopolies
and i agree though a number of these new
sectors that create
network externalities
and the ability of exploiting them or
most importantly the possibility of some
firms to become very dominant because he
said before there's new firms
in technology we have not seen as much
volatility over the last few years as we
had seen say 15 20 years ago so what do
you think will happen do you still think
that there are these forces that are
going to lead to the creation of new
winners or
is it the case that because of the
benefits of the adjacency to the locked
in user base the visibility with regards
to the customers these new opportunities
will still be captured by the same few
ecosystem firms and we'll be stuck
saying hey are we dealing with them uh
sensibly or not what do you think the
direction is and do you really think
that this new wave is going to create
competition or will it be the same terms
as it has been over the last at least uh
seven or eight years
so i think um
so several ways to answer this question
one of them is is a sort of a market
definition challenge
so and even kind of a market scope
challenge
so
um
i wrote a piece earlier this year
looking at the ftc's analysis of
acquisitions by google apple facebook
amazon and microsoft um and you know you
know i'm sure you've heard you're all
familiar with the talking point that
these companies make hundreds of
acquisitions and it turns out the number
is they did about 400 acquisitions in
the u.s for those five companies did 400
acquisitions in the us from 2010 to
2019.
okay that sounds like a big number
hundreds hundreds and hundreds well i'm
an analyst i kind of want to know
hundreds as a percentage of what okay
in the same period there were 3 600
venture exits in which an exit a value
was disclosed which means like some you
know the ones that went bust you
probably you'd expect and 9 600 in total
you presume those would all be tiny ones
where it was just a shutdown or
something um if you look at the
threshold over 50 and and so the reason
i'm getting that at this is i'm not sure
people understand how many tech
companies there are
um so from 2010 to 2019 y combinated
back 1500 u.s companies
um and there was something over 30 000
tech companies that did their first
round
and so
when we talk about hundreds of companies
again i don't think people understand
this is a really small percentage of the
ecosystem the broader tech startup
ecosystem not a really big percentage of
the tech ecosystem and they're saying to
the same point so we've got these five
trillion dollar companies google apple
facebook amazon microsoft okay um
why is it that venture capital vcs back
two or three thousand companies every
year in the valley and what are they all
doing
um you know there's a huge world of
technology creation outside of those
very narrow those particular companies
um you know you know you go back to
market definition supposing we're
looking at the car comp at the car
industry well
the the big the detroit big three was
sort of 25 percent of fortune 100
earning funds in the 50s huge companies
okay what if you were to say mechanical
engineering
what market share do they have then
what if you were to say
you know highway what if you were to say
if what if you were to include retail in
that
if you were to think about all of the
retailing that was enabled by the fact
that everybody had a car what if you
were to include walmart in that
calculation by the 60s and 70s and so
this is sort of well what is your
definition here of a tech company
um
and you know is netflix a tech company i
would say no it's you know all the
important questions for netflix a tv
industry questions it exists because
everybody's online
so this market definition problem is
important and you know obviously the
company being sued says we compete with
the whole world and the people suing
them saying no you know ferrari only
competes with people who make
rear-engined italian sports cars with
horse logos um you know that's always
the argument
but
you know do you think that
well
who is amazon's biggest competitor well
shopify did 160 billion dollars of gmv
in the last 12 months it's 45 percent of
the size of amazon marketplace but it's
not a consumer-facing brand if you go to
shopify.com you can't buy anything so be
relatively straightforward to do a
market definition that doesn't include
shopify yet what does jeff bezos worry
about every day
i mean i quite often have conversations
like this where people describe facebook
as apple's competitor
facebook doesn't compete with apple why
not in any sense
and yet apple makes decisions that are a
huge problem for facebook
um
is tick tock an instagram competitor or
youtube competitor well
that might not be a useful question it's
kind of both
and so i think part of the challenge in
looking you know mark you could spend we
could spend all day talking about market
definition here um
but you know well what exactly is the
competitive issue here
you certainly wouldn't want to try and
start a new search engine
but facebook isn't a search engine
amazon isn't a search engine and amazon
sold probably 25 billion dollars of
search advertising last year
but it's not a search engine
so
we have all sorts of kind of puzzles
around
you know
how much of the what is the competitive
question here you know when apple does
these things on with att and and and and
idfa and with app store rules
it's very very hard to put facebook
inside you know you get these weird
contortions where you say oh well apple
has apple arcade so it competes with
epic making fortnite those are not
competitors you know apple has imessage
who competes with instagram well no it
doesn't
you know and what you've actually got is
people that are kind of i think a more
useful way to think about this is that
you have these companies that are
building the product they want to build
with the proposition that they think
will succeed in the marketplace
and around that you've got a whole bunch
of rent seeking yes of course apple does
a whole bunch of rent seeking in the app
store but the reason that apple makes
those decisions in the app store is only
sorted peripherally to optimize its
revenue it's mostly to optimize its
vision of what the product should be
and the problem is its vision of what
apple wants to sell
is sort of a problem for other people
because other people want to need to
sell on that platform i mean there's a
very sort of vague strained analogy here
with like
um
you know car companies and highways and
railways
and you know the car cut the reserve the
fact that everybody has a car means that
the federal government builds all these
highways and now that's an existential
problem for the railway companies
but does that mean that the car
companies are unfair competition to the
railway companies
well no but the fact that they're
selling all these trucks
means that the railway companies have an
existential problem
and so you need this sort of holistic
view of what is the market
as opposed to
who competes with whom which i suppose
there's a way of sort of agreeing with
you i mean one i'll make one one final
point then and then then let you answer
um but
i think the doj case over toc is really
interesting so doj has sued google
because google is paying web browsers to
be the default search engine something
over 10 billion dollars they pay to be
the default search engine
um
and so the doj theory is this is
google's abusing its market power
because it's got all this money and it's
buying all this stuff
two problems but problem problem one the
competition is microsoft microsoft has
even more money than google
problem two
all of this money is supporting
um mosaic which is the only competitive
third-party web browser so if google
isn't allowed to do this anymore the
competing web browser disappears
problem three google is giving apple 10
billion a year because apple has a
dominant
smartphone platform in in america so is
this google exploiting its market power
or apple exploiting its market power
outsourcing its power because it's
easier for google to do the dirty work
rather than itself doing the dirty work
we can say but i think i don't take
advantage of your data yes you do the
point i'm getting at is like there's not
you need like a kind of holistic view of
what's actually going on in the market
as opposed to trying to peel off
an anti-trust case which saw might make
sense but on its own right i mean i
actually don't think the tac case makes
any kind of sense
but presuming it does what's the outcome
here well mozilla goes out of business
okay was that the desired outcome
so can i michael i'll just jump in with
a question on that which is given that
holistic view benedict and the
complexity you've described the dynamism
of the developments you've described if
you're a if you are talking with the ceo
of a antitrust
authority pick pick one in 2022
and you call out all the issues you just
described eloquently
but you still there is still
significant evidence of harm whether
it's consumers suppliers being squeezed
or the typical heart where do you go
because sort of doing
doing nothing probably won't be
what won't be the right answer just
letting it go or just fast following
there'll be political pressure as well
depending on the country you're in so
where would you go if you had a blank
sheet of paper and you said right we we
now need to understand the markets
better we need to understand the
different dimensions of competition and
so on given as you said cases take a
long time many of these people don't
understand the dynamics of the market
well enough et cetera et cetera they
write hugely long reports which take a
year or so to come out sometimes where
would you go if you were to start afresh
advising the ceo of antitrust regulator
on how to do this
so i think two components one of them is
try and work out what the conflicts are
so
very very basic conflict between
competition and privacy
i think i was actually at i think
michael's event at the beginning of last
year when a competition regulator said
look i go to a big tech company and tell
them to do x and they go walk across the
road to the privacy regulator who says
you're not under any circumstances
allowed to do x
you know it's very i mean i had a um a
years ago when i was a stockbroker i had
a colleague who if he was dealing with a
difficult client who wouldn't do the
trade that he was trying to pitch he
would say look do you want to buy or do
you want to sell i'm a broker i can do
either
and you know if you sort of think about
people at instagram or youtube like do
you want me to make it easier to get
data out or harder to get data out
because we're engineers we can do either
but we can't do both you're going to
need to choose
um and i think that's one strand is to
just sort of think about well what are
those tensions
um what is it that you actually want
them to build
stop saying you need to make the car
safer
and talk about well what is and what
would success look like
i think the second issue is
you know what's the right level of
abstraction here
do you want to go and argue about the 30
take rate
or do you want to do as a cma release
yesterday to say okay how do apple and
google
manage the fact that they are now the de
facto gatekeepers for 70 or 80 of our
time online
and so let's talk about
in-app billing
the what's allowed in the store what
apis are open on the phone how the
browser and the browser engine works um
and what the kind of the choices around
those might be and what's the right
level of abstraction
to go in and start saying you have to do
this you can't do that um and where is
that sometimes that may and i think we
would all sort of understand like break
up apples to get more competition in
smartphones is just kind of you know
everybody in the room became dumb at the
moment you say that um
but you know what are the kind of the
conduct regulations that you might want
to see here um
and what are the kind of convert
problems and the questions around that
and you can have that question
then you can have a content moderate a
harmful content question and and so both
of those sort of intersect with privacy
and then you can have a market power in
online advertising conversation and so
you kind of need to work out well what
are the kind of the broad categories
um
and then within those what are the
issues and what are the potential
remedies and you kind of have to go and
do the work and unless it's not like any
you know this is an rfp go higher pwc to
do the work for you obviously or
mckinsey or whoever um but you kind of
have to work out what what's the right
level of breaking the problem apart
um
and
you know in some ways like don't let
facebook buy giphy is easy
um the challenge and again i kind of
wrote about this as well like the the do
you let facebook buy instagram is
actually a really interesting one
because at the time facebook wasn't that
big instagram was a pre-revenue
13-person company most of the commentary
at the time was this is an amazingly
dumb deal why on earth would anybody buy
that company this is stupid
in hindsight it looks very obvious oh
that was anti-competitive and you should
have let it done
but how do you back test that
and i think that's the other side is if
you're going to make some sort of
primary intervention like that how do
you back test how if you're going to set
a new set of principles
can you kind of run it backwards and say
well what would we have done in this
situation
okay so this is this is fascinating and
in a way it could be the optimistic
version because much of this is underway
and i mentioned earlier on about this uh
special issue that's about to be out for
industrial corporate change which is you
know people writing about it as a paper
on exactly all these conflicts and how
do you manage the privacy versus um uh
versus regulation issues um there's a
discussion by the chair of the
competition commission of the oecd of an
equivalent challenge of how do you think
um about the whatsapp um merger which
wasn't an issue the fdc fought in the
beginning and now says oh my god if it's
a such a horrible issue and we should
have thought about it then how do you
think about it prospectively so i think
that in terms of you know those of us
who write in this area there's been some
advantage and some of the things you're
describing certainly by uh places like
the competition market authority i think
is broadly consistent with what you're
saying so the good news is we're kind of
getting there at least in terms of the
general advice and the right of that is
and we're absolutely not going to avoid
these trade-offs so you know when i
think if you think about um
anyone who's involved in government you
know that environmental protection is
inconsistent with maximizing investments
but unfortunately we have regulations
that if you are investors gonna say but
it's crazy you want me to invest and at
the same time you asking me to go
through all these hoops yes that's part
and parcel of the way things work so i
don't think we will ever neither should
we ever expect to find something that is
fully consistent we have many different
objectives there's going to be
inevitably some things that are not
going to be well in sync we can try to
improve coordination and i think we're
kind of working uh in this direction
which is the optimistic side let me
focus somewhere else because what you
were saying earlier on is something that
you know i fully agree essentially you
were you were saying that um the
competition is shifting from within
markets to creating things that um break
the traditional boundaries of markets
and i would argue that this is becoming
more systematic and the fungibility of
both the relationship and the data is
greater now than it was at the time of
neatly delineated sectors so we see what
i'm calling this free form competition
and
organizations trying to move the
environment around
the interesting question which returns
back to dominance is is this going to
happen by new firms or existing firms so
let me return to this question right
because i'd love to get your response to
it let us agree
that a big part of the problem or big
part of the excitement is that you find
new ways of creating a bundle that you
offer to customers and clearly if bundle
revolves around dominance tech firms
will take both bundle and dominance i'm
not saying they're necessarily only
thinking about dominance in a old style
way but they're happy to do it
especially if it helps them
be successful this question though about
this new
new technology that you see and you're
very close to the scene right now
relates to whether you think that these
new bundles are really driven by new
companies that may potentially unseat
those that are dominant or ultimately uh
you see the new stuff coming from the
current tech giants so let's agree with
a number of things that you said so far
the question is pragmatic
will dominance change and if regulation
cannot change it what would so let's
start moving all right okay
so so there's a sort of a basic
you know feature of each sort of new
generate new every new thing
the incumbents in the old thing try and
make it a feature of their existing
product
and um
visits and and so and and and and
and sometimes that works and sometimes
it doesn't i mean this is kind of the
clay christians and sustaining
innovation versus disruptive innovation
sustaining innovation means like yes it
just kind of gets absorbed by the
incumbents and disruptive innovation is
this is some radically new thing that
the incumbents just can't do and their
basis of power doesn't work
um this is the argument about cars at
the moment for example
is electric is an electric power train
sustaining that gets absorbed by the
incumbents or is it disruptive and they
just can't adapt to it and it opens up
completely new wave of car manufacturers
and you know we'll find out that there's
people have opinions about this
apparently um
especially if they own tesla stock um
and
so if one looks at um
you know the sort of those kind of break
points in the last sort of 30 or 40
years um ibm in fact created the ibm pc
and yet
that wasn't really the point
um that ibm completely lost dominance as
a result of the shift to the pc um it
remained a big company but its dominance
just evaporated
itself and foot really
no it was just a completely different
industry none of the assets that they
had had any relevance or would help them
in any way
um then the web comes along sort of 15
years later
um i mean from the early 90s
and the interesting thing here
is that um it completely removed the
basis of on one sense it removed the
basis of microsoft's power in that
people stopped writing applications for
windows
people stopped writing pc applications
or from sort of the early 2000s all the
application investment moved to making
web applications however you need a
computer to get onto the internet and
what are you going to buy and so pc
sales grow massively which means window
sales grow massively except that
everyone's buying them to do web stuff
not microsoft stuff so this is a kind of
really interesting nuance in what
happened
um
the next generation is at this point
things start diverging because then
there's a web and there's devices and so
we get these generational shifts on the
web and so there's companies like aol
and yahoo and so on and those are
completely swept away by google and
facebook
um meanwhile on the device side it
continues to be the pc until about 2010
and then we have these new models um
based on the multi-touch smartphone
pioneered by apple then copied by google
um
nokia is completely unable to cope
microsoft is completely unable to cope
even though microsoft has been doing
mobile stuff since the late 90s um
blackberry and palm as well incidentally
and it's always i always like to remind
people like a lot of people kind of
forget like there was no anti-trust case
against nokia
people always look at that transition
and say oh well antitrust is the reason
why microsoft missed mobile and
microsoft did miss mobile microsoft was
pouring investment into mobile and nokia
didn't have an anti-trust case and
neither did blackberry and yet guess
what the same thing happened which is a
classic case of disruption they just
were not able to make the jump to this
completely new thing
and yet microsoft is still around today
and people still have a billion windows
pcs so there's always these sort of
multi multiple layers to what's going on
as you go through these generational
ships and what generally happens is that
it's not that the old thing goes away it
just becomes less important
so google is obviously still with us and
everybody said oh well google will just
win social
you forget this now google will
obviously win social because they've got
all the data
guess what that didn't happen
and then well facebook will obviously
crash snapchat and obviously crosstic
chat well no that kind of didn't happen
either
um
microsoft will obviously cross the web
because they've got the end point yeah
no like and so what what actually tends
to happen is the market expands with
each new thing and the old thing stops
being the central dominant paradigm
where all the power is
um but like actually sit and make a list
of how many new things google has owned
since about 2005.
take as long as you like because it's a
really short list
same thing with facebook it's a really
really short list
um and what actually happened is they
just carried on making more google but
all this other stuff happened as well
um i mean i mentioned shopify earlier
shopify is now doing did 170 billion
dollars of gmv in the last 12 months
tell me again how it's impossible to
compete with amazon
and really
what happened is that but that's a new
thing that's a completely new space i
think what we're seeing now and i'll
kind of go back to my car analogy is um
it may well be
the
gm and ford and chrysler carry on
dominating the car industry but
meanwhile you've got walmart
you've got all the stuff that happened
because everybody had a car and so the
sort of general point here would be like
the first 50 years of the car industry
is what's a car what's a car company the
second 50 years is well what happens
when everyone has a car
and that's kind of where we are now it's
like the first 50 years of the tech
industry is well what's a computer
who's gonna have one how does it work
okay now everyone on earth has got a
computer there's five billion people
with a smartphone so the next 50 years
is okay well what happens when everyone
has a smartphone
and so i think sheen is really
interesting in this context yeah is
basically a chinese smartphone only fast
fashion company
it is now bigger in fast fashion in the
usa than h m and zara combined
don't think anybody had like mozar and h
m on their antitrust list but this is
now broken completely through all of the
market dynamics of that space and it's
become the biggest fast fashion company
in the usa in the space of sort of two
years
are they worried about what do they
spend any time at all thinking about
amazon like absolutely zero time
worrying about amazon
they worry about what apple and google
what apple and facebook will do with
their platforms of that maybe they worry
about
even and guess what apple isn't going to
get into the fast fashion business but
apple might do stuff that's a problem
for xin so again it's not a com is that
competition well that's not any kind of
conventional market definition apple
certainly you can argue apple's in the
games business you cannot argue that
apple is going to get into fast fashion
and yet
does she worry about apple's privacy
policies on the iphone quite possibly
yes
and so
where and is she in a tech company
i mean this is my kind of you know my
analogy is walmart a car company is she
in a tech company is netflix a tech
company
and it might be that you end up in a
world in 1970 well yeah well yeah gm
still dominates the car industry and
then some other happens and japanese
come in and completely obliterate them
but meanwhile like where was all the
money being made
anytime at all worrying about what
detroit was doing like no
how many companies do i see as a vc that
are worried about what google's going to
do
really
right
if i can just come in i'm conscious
we've got a couple of minutes left this
is brilliant but um annabelle has been
waiting patiently with some questions
which you can see on your on your chat
this might be if i may mic would just uh
encourage a quick fire thank you
annabelle for being patient um a quick
fire round three questions can you see
them rather me reading them out i'm sure
you can see them um on your chat people
can unmute herself um uh to make it even
quicker
sure thank you
thank you for a fantastic session always
very insightful ben
thanks michael and david organizing yeah
three quick question uh one is um
how worried are according to you
guy fam really about the new regulatory
uh landscape the changes do they think
we can deal with that
or do they think it's a really big deal
the second one is
what do you think they are going to do
in response to this changing regulatory
landscape and the third one is what do
you think they should
so the first question i think i mean if
anyone here hasn't looked at the whole
ab5 fiasco in california i'd encourage
you to go have a look california decided
though to pass a law that would say that
uber drivers were full-time employees
reasonable people will have opinions
about this unfortunately the way they
actually do it to draw up the law they
banned freelance work like literally
they banned freelance work it was not
possible to work freelance because if
you took any kind of freelance job you
automatically became a full-time
employee
um and i'm not exaggerating it was an
absolute catastrophe fiasco um and so i
think the one of the dominant things
that they worry about is unintended
consequences they worry about a law that
doesn't do what the lawmakers think it's
going to do
um and i think that's a big big
conversation you worry about a law i
mean we i've mentioned instagram a few
times we worry about a law that says
that you own your own data and you can't
move it out of the eu okay
i live in america and i like and you
live in france and i like your instagram
post where does that light get stored
now to any engineer that's a meaningless
question and who owns the like do you
own it or do i own i send you a message
on instagram is that my content or your
content these are meaningless questions
until i've got a law that gives a 10
fine of global turnover that says i have
to store it in europe and as an engineer
you're looking at this and saying but i
literally have no idea what you're
asking me to do i don't know what it
means to say
that a european's data has to be stored
in europe is that a european data i
don't know
um and i think that so that's a big
class of question is like you literally
have no idea what that law is supposed
to be saying
and if you're in brussels you think it's
really clear and it's not really clear
so that's one category i think a second
category would be stuff like the the
labor law stuff that that resulted in
delivery pulling out of spain so there
are some relatively narrow categories
where you could just decide to ban a
category if you understand you've done
that fine
um but you know there are sort of some
areas where there's there where there
are laws that would actually just make
certain kinds of business impossible
um and there were sort of nuances to
this like you know a lot of people would
look at some of the proposals around the
app store and say but that would be
terrible because you'd basically be
allowing any random developer to do
whatever they want on my phone and
that's actually not a good idea um yes
it would be great for competition but
actually that would be a catastrophe um
and so there are those sorts of places
where people mostly i think worry about
unintended consequences more than
anything else i think you know the
implication of your question otherwise
is like yeah if we all have to hire 10
000 regulator 10 000 compliance people
that's great if you're a giant company
because we can afford it
facebook has 40 000 people working on
human moderation so i mean i don't
probably don't need to tell anyone this
call that regulation tends to be good
for incumbents and so i think that would
tend to be the default i think the
concern would be you know
almost not you've tried to us
but you crippled us without even
realizing or understanding that was what
you were doing
well we we could be speaking i'm sorry
if you've got whatever they do they will
go and argue
the we the risk is that they can they
don't make a clear distinction between
we don't want to do that because it
costs us money and no it's physically
impossible to do that that they don't
always make a good distinction between
you're asking us to put seat belts in
our cars and we don't want to and you're
asking us to make gasoline that doesn't
burn and actually we don't know how to
do that
i think there's always a challenge
that's really really interesting so what
about what do you think uh the big tech
platforms should do and what do you
think they will do
well they will and clearly are hiring
enormous numbers of lobbyists and hiring
enormous numbers of competition lawyers
and trying to work out how they can
thread these parts i think there is
always a sort of a big i mean it's a
separate conversation there's always a
sort of cultural gap between the us
where the argument is basically did you
break the sherman anti-trust act which
is written by you know guys in wigs in
the 17th century or something versus the
eu which is you only find out you're in
trouble when it's far too late
um and so just understanding the
processes is always kind of an
interesting journey for american
companies
this is the first time that we have
actually run over time uh but with
benedict evans i think that this is not
strange because there's so much content
that it is impossible to keep within the
narrow boundaries
sincerest
of uh compliments benedict and i'm going
to push my luck and ask one of the
questions in the chat uh do you think
that new movements like web 3.0 um um
nfts daffy gaia very heterogeneous list
actually have the power uh to build up
decentralized ecosystems i would
probably put some of the ar vr
developments um perhaps ahead of
certainly gaia x uh and some of them but
your final thought what do you think
forget forget a regulation because i i
also agree that i it is not likely to be
as structurally impactful whether that's
a good thing or a bad thing we're going
to pay what about the other stuff give
us your crystal ball
okay so so short answer on gaia x this
is a joke it's a boondoggle it's a new
cuero it's just a laughingstock to the
extent anyone's heard about it they
start laughing when you've got half
through halfway through explaining what
it is um
okay so web 3 is essentially saying that
crypto networks are distributed
computing systems
um with incentives and governance built
in
and so you could build spotify or
shopify or twitter on a web3 network
or something similar or something
adjacent or something new
and so this is a way of building rather
like open sources is a completely new
way of building not so much companies as
products and applications
that would inherently not be run by a
company
my default position is that this will
probably evolve something like open
source in that it will be hugely
important enabling factor but not
probably not visible to consumers
um and probably be used to power new
companies and be embedded within new
kinds of products but it's very very
early it's like talking about the
internet in the early 90s what's this
going to be how's it going to work
yes this is big it's very unclear quite
what the structure that would look like
but yes everybody working on that says
but this is going to make facebook
irrelevant you know this is all this is
going to be the next wave of the
internet this is why they call it web 3.
web3
metaverse much rather more tangible in
one sense in that it's ar and vr but
what would happen if you were wearing ar
glasses all day
how much does that blend with pop
culture how does that blend with fashion
and self expression and self and
identity if you were to buy in 10 years
time everyone's wearing nft glasses i
walk into a bar and you've got a cool
pop culture thing hovering over your
head that is powered by an nft and that
is shown to me by my ar glasses that's
not really tech anymore any more than
influencers or youtube is really tech
it's pop culture um who owns those who
control says who runs that ecosystem he
builds that devices obviously facebook
wants to build it because they've spent
10 years worrying about what apple will
do to them on the iphone and have just
discovered what apple will do to them on
the iphone um is facebook the company
best situated to build that i'm not sure
by default i would tend to say apple is
the best company to build it with all
the hardware software integration and
google is the best company to power it
because the real use case is i put on a
pair of glasses and i look at stuff and
it tells me things and that's a google
kind of a problem not a facebook kind of
a problem um again it's sort of like you
know another historical analogy it's
like talking about the mobile internet
in 2000
you know nothing happened for 10 years
you know european mobile operators spent
110 billion euros buying spectrum in
2000 and basically nothing happened
until about 2010. and that and imagine
trying to predict that it was going to
be apple and google in 2000 like what
you'd be out of your mind so these are
very very early um very very interesting
the final thought i put on this is like
tech is not
over yet and this is a point i keep
coming back to like this stuff keeps
changing and the smartphone is not the
end point web search is not the end not
is not the final point final is not the
end of history you're going to continue
to have these generational changes
that sweep aside some of the old
incumbents and not some of the other
incumbents
what a terrific way and what a terrific
final firecracker to end this year to
end this series um benedict it's been as
ever a real pleasure fun to be to
discuss and uh lightly spar with you uh
these interesting topics i'm sure that
he would have much more to say if we had
a bit more time we've already run over
um fascinating thanks again david it's
been a pleasure working with you this
year entertaining ecosystem advantage
and again sam rohana and team and
everyone um in this um uh webinar and
those who i know are going to be listing
it um post fact um again thanks to
everyone uh lots of really fascinating
stuff ahead for 2022 benedict would much
appreciate the time thank you thank you
you

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