“Plateaus in Three Dimensions”

Two dimensions are important for the growth of networks and platforms: scale and value. Scale creates cost advantages—the more customers, regions, entities, partners, etc., that participate, the cheaper the service becomes per transaction. There are fewer additional costs for each subsequent customer on the platform. Growth in distribution (scale) generates revenue. At the same time, customers want added value—the competitive edge gained through innovation in the product, service, or channel. This includes more or better features, customization, service, and so on. Developing these innovations costs money. Growing value costs money.

The dilemma facing many organizations with a network-platform strategy is how to combine growth in scale and value from both an organizational and financial perspective. Creating too much value in a single year costs time and money and makes the organization too expensive. Focusing solely on scale generates revenue but does not build customer loyalty. Striking the right balance between the two builds a sustainable network—a duality. Like two legs that work together to drive progress—sometimes leaning on one, sometimes on the other.

Weighing these dimensions of growth is nothing new. The trade-off between value and scale also comes into play with process innovations and investments. New technology or equipment provides added value for customers or employees. To fund these, in most cases we benefit from having more customers or a higher selling price. Carefully mapping out investments over time is therefore a rewarding “challenge” between the business side and the CFO. We often want more than we can afford. A step-by-step investment S-curve then provides a viable path between overindulgence and a lack of appetite—a balance between risk and opportunity. Starting from a stable situation—also known as a plateau—we work at a steady pace toward the next plateau, or stable situation. In most organizations, we’ve got this “sport” well under control.

And now the world is changing. We are unraveling a third, data-driven dimension. Many AI and DS investments have the advantage of being extremely valuable and scalable at relatively low costs. They deliver immediate value to the business at ever-decreasing additional costs. But on top of that, AI and DS also create value in other dimensions!! Connections with other businesses. Sectors and markets are being linked. Using AI to predict favorite destinations not only enables dynamic pricing for an airline (network), but also opens up opportunities for new services such as a travel agency, vaccination service, home-sharing, or insurance. Platformization transformed the supply chain; your supplier suddenly became your competitor. With today’s new data capabilities, even more boundaries are blurring.

That is why I believe that plateau thinking—which provides a framework and stability for investment decisions—is still very useful. A third dimension—businesses and markets—is added to the trade-offs between scale and value. This does not diminish the need for rhythmic change from stable plateaus that provide a solid foundation for customers, employees, the CFO, regulators, and other stakeholders. If anything, it’s even greater, to counter the danger of chaos that is even more difficult to plan for and manage. Unless, of course, AI will also offer “plateau capabilities” or “chaos control” in the future.