1) The document discusses the shift from a product-based economy to a service-based economy. It argues that most products actually provide services and can be viewed as service delivery platforms. 2) Starbucks is used as an example of a company that successfully provided services beyond just coffee, like social spaces and customized coffee experiences. 3) To remain relevant, companies must understand the services customers desire and adapt to changing landscapes, both physical and abstract. Viewing offerings as services rather than products allows for more flexibility.

1. Chapter 7
Toward a Universal Service
Delivery Platform
Imagine yourself in a lecture about products and services. In front of
you are three glasses, one filled with water, one filled with whiskey,
and one that is empty. Put the two glasses containing liquids aside
for the moment and pick up the empty one. What you have before
you is a finely crafted glass container, probably conical in shape
with the ability to hold a variety of liquids and all sorts of other
objects. Now ask yourself: is this glass a product or a service?
Well obviously it is a product, but I wouldn’t pose the question
if there were not a trick to it. Look at the definition of a product: it is
the result of labor, the outcome of a process, and in the case of the
glass, it is a physical object. A service on the other hand is an
intangible economic good. Traditionally, a service cannot be held or
touched and it benefits the individual who utilizes the service. So
once again, is the glass a product or a service?
Let us assume the glass is a product and ask how we make
money from it. Firstly, we need to be able to process the raw
materials that constitute glass into a useable form, so we gather the
capital to fund a batch house to handle the raw materials. Then we
need to fund the hot-end side of the manufacturing process, which
includes the installation of furnaces, annealing ovens, and forming
machines. Our factory is now equipped to manufacture glass
products, so we need to fund the cold-end side of the production
process, which includes the necessary equipment to check and
inspect the products, package them, and ship them. We use frozen
and old knowledge to establish and set up the production process.
The factory is likely to cost a fair amount, and we have not yet

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added the cost of the labor required to operate the factory; so, we
hire a team of personnel to handle operations. We tell these
individuals exactly what to do and how to do it, in order to produce
our glass. And so the production process begins and we produce
glasses.
Since the factory set up has cost us a healthy sum of money,
and the labor costs add to our existing operating costs, a direct
relationship is born between production costs and retail costs.
Economic value is derived from the number of products we sell,
whose price is then based on all expenses plus what we deem is a
fair profit. To make more money we need to sell more products
through our channels of distribution. Money flows up the chain as
we pay our suppliers and they in turn pay theirs.
This was the old way of viewing economic activity. But look
at the glass in light of a service-delivery platform. Assume the
production process stays the same but the end result changes.
Previously we sold the glass for what it is, a glass. Now, let us sell
the same item for the service it offers. Put down your empty glass
and reach for the two full ones; sell these instead. The consumer
cannot buy our glass; instead, we are going to offer the right to use
our glass at a price. How do we determine this price? Well it
depends on what service it provides: if our consumer wants to use
the glass to drink water, we will sell it for a small amount; but if
the consumer wants to use it to drink whiskey, we will sell it for an
amount that takes into account the new content. Effectively we are
now selling the glass as a service not as a product; therefore, the
relationship between the cost of production and the retail price is
no longer direct. I can charge different prices at different points in
time as consumption and behavior changes. I’m also in contact
with the customer using the product as a service, hence my
understanding increases faster than if I only sold it as a product and
had to do research to determine how my product is used.
We are now pricing for experience, where the relationship
between cost of production and retail price is abstract. This is the
move to a service-delivery platform rather than the acquisition of
products. Take Starbucks as an example: there is no realistic
relationship between the cost of coffee beans and the price of a cup
of coffee. So why do we pay so much for a cup of Starbucks

3. Jay van Zyl 161
coffee? It is because we are not paying for the coffee, we are
paying for the Starbucks experience, the chance to enter a
Starbucks store, watch your coffee ground and brewed before your
eyes, choose from a selection of different flavors, and sit down to
enjoy your coffee content in the knowledge that this is indeed a
real cup of coffee made in a real coffee shop. Apparently what we
drink has meaning; we buy Starbucks coffee to make a statement
about what we drink, or to enjoy it in the Starbucks atmosphere, or
to affirm our status. Whatever the reason for buying Starbucks
coffee, most often it is not for the purpose of needing a cup of
coffee, it is for the purpose of needing a Starbucks cup of coffee.
We pay for experience.
As a business, what do you possess that does not provide a
service and exists purely as a product? Even an ornament provides
the service of aesthetic enjoyment. If everything acts to provide a
service, shouldn’t we sell the access to services rather than
cumbersome products? Let’s take a more analytical view of this
situation.
There has always been a distinction between the services
industry and the product industry, since one produces abstract
commodities and the other produces physical goods. In a world
where we strive to make sense of our experience, we also realize
what it means to be a unique human being, not part of the
automated processes of production, but part of an ecosystem filled
with other unique human beings. With a constant desire to define
ourselves and gain access to the world around us, the age of
products is fast becoming an age of services and access.
Think about a high-end sports automobile. A person’s reason
for buying a sports coupe will vary, but the effect the car has on
people who do not own one are similar. Heads turn at the sound of
a hundred thousand dollar Italian engine roaring down the road,
evoking various emotions. Perceptions of the product (and its
owner) may differ and range from disgust to jealously, depression
to adoration; what we can ascertain, though, is that ownership of
such a product evokes a reaction.
An automobile obviously provides a service—it’s a form of
transportation—but in the case of a sports automobile it may serve
to boost the owner’s reputation, fuel adrenalin, or signify a midlife

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crisis. But the presence of an alternative service provided by an
automobile is not limited to sleek and expensive models. We buy
cars for their functional use, but our choice is often influenced by
the desire to use the shape, style, and feel of our automobile to
represent a portion of our individuality. Think about the iconic
image of a ’70s-inspired spiritually inclined individual driving a
VW Beetle through the streets of a modern city.
People choose their cars for a variety of reasons: economic
situations, environmental concern, fashion and brand loyalty. But
whichever way we choose to look at it, the fundamental purpose of
an automobile is to provide a service, not exist as a product. The
services of a single automobile to the individual that drives it could
be to lower spending on fuel, to get to work, to increase reputation
through looking fashionable, mobility, as a place to sleep, or
purely to provide aesthetic value as it sits polished in the center of
your garage.
Ownership has always signified a certain status level, but as
people begin to realize their need for services, the automobile as a
product is becoming obsolete and leasing is becoming increasingly
fashionable. We have been indoctrinated into a market-orientated
way of thinking, yet that thinking has slowly evolved as the
importance of cultural and social interchange has predominated.
The age of products is shifting to become an age of services and
access. Cultural-economy, socio-cultural economy, service
economy, and network economy are all terms that have begun to
displace traditional conceptions of capitalism, introducing a new
paradigm wherein services and offerings hold precedence.
The Decline of Product
I remember a time not so long ago, when I would spend a great deal
of time in the local electronics chain store. The use of e-mail had
effectively infiltrated my sphere of business operations, so the next
step was to become acquainted with the software that would help me
filter through the hordes of electronic mail. The monotonous drone
of the salesman would echo through my head as my attention was
directed to various brightly colored boxes lined up on the shelves. A
large blue sign sat above these boxes with the word software boldly
displayed. Considering that the software I was planning to buy did

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absolutely nothing for me, aside from providing the means to send
and receive e-mails, the price should have made me walk straight
out the door. But that was then, and the exact nature of the
platform’s functionality was only a minor detail.
Shopping trips such as these would serve to enhance my life
like never before. I gladly forked out large sums of money to buy
e-mail software, operating systems for my e-mail software, and a
hard drive for my operating systems, and finally computers capable
of running all these features. It even took the salesperson all of five
minutes to convince me to buy the latest in answering machines,
which were capable of storing up to an hour of messages.
Skip to the present day. My e-mails are filtered through an
online service that is available free of charge and provides me with
over 7 GB of free storage space. It provides all the functionality of
my expensive previous desktop-bound program, and it filters out
spam far more efficiently. My documents are primarily stored in a
similar way, through utilizing the free services of online storage
facilities that allow me to access them anywhere in the world
without the cumbersome task of dragging my hard drives around
with me. Now I live in the cloud, the digital universe that is the
ecosystem of my virtual existence.
Admittedly I still fork out a few pennies for the latest laptop, but
with all my services running through online programs, the capabilities
of my physical computer are no longer my primary concern. I have
trouble even remembering what my answering machine looked like
since all my answering services are provided free of charge and
accessible through a simple phone call. Looking around my office
there is a notable lack of clocks, calendars, diaries, phonebooks, pens,
radios, and calculators. Each of these products has one thing in
common, they all exist to provide a service, and all these services are
now available on my laptop, or even on my phone. My diary is
online, easily edited and synced to all the other members of my office,
so that negotiating our timetables can be done in a matter of seconds.
It serves as a calendar too. I have a digital phonebook, so adding and
removing contacts is done with ease; and if I am using my mobile
phone to access my address book, I just call. My clock accompanies
me all the time, as does my music, calculator, and notebook, which all
sit comfortably in my pocket in a single device.

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What have previously been viewed as products designed to
simplify our lives are now seen as cumbersome objects whose
purpose is to provide a single service. My laptop is also a product,
but it is something else as well. Instead of a highly capable product
offering multiple services, it is also a service-delivery platform
because access to the Internet provides me with the ability to
utilize services that may never have existed in the designers’ minds
when they conceived the laptop. Think back to the App Store, it is
not a product; it is a platform to access a multitude of services, and
it is a service-delivery platform.
Look at the services that Google provides. At a basic level,
a large number of them are free including e-mail, a calendar, a
diary, roadmaps, world imaging, and search functions. Google
provides another platform that is designed specifically to offer
the utilization of services without buying a product. Their
customers are not product consumers but service users.
Google’s economic model does not rely on the few individuals
who choose to purchase premium versions of Google services,
but relies on the everyday activity of users in general. They
know that people want access to services, and since this activity
is guaranteed merely through the nature of a society eager to
find information and connect to the world, their economic model
could develop differently.
The activity displayed by their users has resulted in Google
using advertising to generate revenue. Through a service-based
approach and systems of clever marketing, they place ads that are
relevant to the activity of the individual instead of bombarding
them with annoying pop-ups. The Google platform has changed
the way we use services as well as revolutionized traditional
concepts of generating wealth.
Leased cars are displacing bought cars; eBooks are displacing
books; iPod’s are displacing CDs; e-mail is displacing letters;
credit cards are displacing physical money, which in turn are being
displaced by online transactions. Entire libraries are being
displaced by collective, online, and free resources such as
Wikipedia. Certain products still exist, such as clothes, furniture,
and structures, but they all serve a purpose too. The question to ask
is: which services are becoming subject to change as the relevant

7. Jay van Zyl 165
technology increases? A virtual home on the Internet will not
suffice as your living quarters in the real world, yet increasingly
our world is becoming digitized.
What we often don’t realize is that the concept of services is
changing just as rapidly as the product is declining. As our lives
become more connected and our access to the world is enhanced,
the services we require are changing too, and organizations that
provide these services are finding it more difficult to dictate what
the desired services are.
What Would You Like?
When Starbucks decided to expand their brand and infiltrate the
American market, they began by setting up central hubs in
different cities around the country. When they found that a
geographic region did not have a high demand for coffee, they did
not begin hunting for a new region, but bombarded that location
instead. Provided an area had a demographic they felt they could
work with, the desire for coffee was not their primary concern.
Where there was a desire they would provide; where there wasn’t a
desire, they would create one. Using their central hubs as points of
coordination, the company began to open hundreds of stores
around the country, creating a market where there previously was
none (or at least not to the scale there is now). Starbucks
successfully implemented several strategies to create a mass
market for their product, and one way was to provide a service.
Unlike other major chain stores, Starbucks bought real estate
with existing structures in place and modified those buildings to
suit their needs. Immediately their stores took on the characteristics
of the city. Having employed a team of architects and designers to
reconstruct each shop according to the specific needs and desires
of its clients, Starbucks set up shops that catered to a target market
based on their specific location. Corner tables and private booths
were set up for clients who might wish to use the coffee shop as an
informal meeting place, and couches and furniture adorned the
shops to create an atmosphere of comfort rather than the fast-paced
environments in most other chain stores.
Another aspect of their client offering was their vast range of
available coffees and coffee styles, which was inspired by their

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foreign counterparts. Through vigorous and in-depth training,
Starbucks employees were taught the intricacies of professional
coffee roasting and grinding, and soon the ritual of ordering coffee
became just that. Customers became addicted to ordering their
personalized coffee beverage every day.
As we have already argued, almost everything we buy is a
service, whether it is traditionally seen as a product or not. A cup
of coffee undoubtedly provides the service of quenching thirst,
keeping you awake, or just delivering a delicious taste. Where
Starbucks differed from their competitors in the market was the
entire process they brought their clients into. A burger also exists
as a service, but when we buy a burger at a fast food chain, we
treat the process much the same as buying a product. The
commodity is exchanged as quickly as possible. But, customers
experience a range of services when they walk into Starbucks
The types of services offered in the Starbucks experience are
as widely spread as those offered by an automobile. The basic
service of the organization is to provide coffee, but they also
provide a space to relax, to meet, and to socialize with friends. For
the coffee connoisseur, the process of buying coffee affords the
opportunity to watch the beans roasted, ground, and turned into a
steaming latte. By integrating themselves into the local
atmosphere, each coffee shop gains popularity through word of
mouth rather than advertising. Their dominant market share also
suggests another valued service is the status that comes with
drinking a cup of Starbucks coffee.
As the Starbucks case suggests, the key to providing services
pertinent to the customer, and turning that customer into a user, is
to remain flexible and aware of the surroundings in which you
operate. The landscape isn’t necessarily physical; it can be abstract
too. By recognizing a product as performing a service, you can
start to build your company with the aim of providing your
customer with a platform to utilize your services. It all begins with
determining what services you provide.
The Evolving Business Model
In what has evolved from economic activity based on sustenance to
the current understanding of the term in a capitalist setting, the

9. Jay van Zyl 167
business model may be seen as the function for making money. To
operate successfully, a business model must contain a holistic set
of descriptions that serve to enhance the economic growth of an
entity. To better understand the evolving business models of our
landscape, we will look at two processes that exist as part of the
business model’s implementation.
The business model encompasses a range of understandings
and capabilities. To drive growth, a business must focus both
externally and internally, looking at the industry as a whole and the
specific targeted markets. Understanding the capabilities of change
and how that change is executed in the context of new growth are
two fundamental aspects that make up a successful business model.
The way we handle change, and the execution of that change,
are two aspects of business activity that I have determined as
fundamental drivers of growth, but they still exist within a sphere
of holistic activity. The drivers are seen as the activity that results
in our capability to reach the sweet-spot of innovative execution.
The first graph illustrates the effect on industry and the second
graph is representational of our effect on markets.
Figure: 7.1. Handling Change in the Face of Discontinuity

10. 168 Built to Thrive
The above figure, directly related to the effect change has on
industry, looks at the drivers of pace and impact. The relationship of
pace and impact on our handling of change and the resultant effect on
the industry requires an understanding of each of the concepts in the
context of business operations. Pace, describing the rate of activity or
movement, is the speed at which an organization accepts and
conceptualizes change. An organization continually devoting its
resources to discovering changes in the industry, landscape, and
ecosystem around it, and not ignoring these changes, is fast-paced.
Impact describes the effect an action has. In the business sense, and in
this context, impact is the effect the recognition of change and
implementation of subsequent actions has on the industry.
Along the x-axis of the diagram, see impact as the result of
either individual focus (the individual, company, or industry) or
systemic focus (relating to ecosystem understanding). A focus on
impact affecting the individual is a failure to acknowledge your
place in a larger ecosystem. Individual focus negates an effective
ability to envisage yourself as part of something bigger, where you
are affected by change elsewhere, and others are affected by you.
Viewing impact systemically is to realize your position in a
landscape of interconnected players. This realization allows you to
see how a change in a different industry may affect your industry,
or how your development may affect others. To realize this is to
acknowledge your dependence on other actors in the ecosystem,
and the way you develop may evolve as a result.
Industries are affected by change as a result of pace and impact.
If our actions encompass a mindset unwilling to change, the pace of
change will occur very slowly, and if that same mindset focuses
primarily on the individual organization’s sphere of activity in
isolation, change (or lack thereof) will create a cognitive trap in which
the organization operates. Operating in spheres of individual focus
may fool an organization into thinking it does not need to change, and
since the pace at which the change that does happen is so slow, the
recognition of the need to change is even harder to come by.
The cognitive trap, an aspect of the situation trap, hampers
growth. If impact is focused in a more systemic manner, with the
organization operating within a known paradigm of interconnected
activity, gradual change will manifest in the development of

11. Jay van Zyl 169
conservative businesses, systemically affecting other businesses in a
like manner and creating a mature industry. If many industries
recognize their interdependency, yet fail to achieve a fast pace of
change, they will build upon the existing knowledge and practices of
each other, gradually developing the industry.
The upper end of the pace scale sees a slightly different
development due to change. With fast-paced change, an individually
focused business will drive change guided by self-interest. By
recognizing a need for change, yet failing to see its impact in a
systemic setting, an organization develops out of self-interest secured
with patents and secrecy. A mindset of this nature may create short-
term success, but in the long run, as we have seen with the mutant
behavior of organizations, others will either catch on or change the
industry.
If our mindsets are both open to fast-paced change and
recognition of this change impacting the landscape systemically, the
result will be growth that creates a discontinuity in the industry or
even the formation of new industries. Recognition of your capacity to
change, in terms of both pace and impact, will see the formation of a
business model with the ability to drive successful growth according
to your capabilities and wants. This brings us to the next set of drivers
affecting the development of the business model.
Figure: 7.2. Finding the Execution Sweet-Spot

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Representing effects on the market, this graph may be seen as
internally oriented since it characterizes the direct focus of an
organization. We have already seen how change needs to be
looked at systemically in the macrocosm, but in the microcosm of
individual activity execution will still be internal. Execution of
change depends on two key actions inspired by the market-oriented
work of Sumatra Ghoshal: energy and focus.
Energy represents activity and the ability of an action to
produce change or transformation in another system. Actions
encompassing high energy levels are those that have a higher effect
on the systems they are trying to change. The more energetic an
action is the higher its impact will be. Focus is the area where your
actions are concentrated. Wide focus will include many areas
where you intend your actions to have effect, while narrow focus is
more specific and closed to other areas. To view anything
systemically is to have a wide focus, while individual thinking is
brought about through narrow focus. Ghoshal’s view of energy and
focus in an increasingly global world, if unpacked further, may
have the following impact on organizations innovating on the
micro-level.
Execution of change, driven by low energy levels and with
narrow market focus, will see the gradual death of the
organization. Low levels of initiative, underdeveloped goals, and a
lack of control within the organization generally characterize this
combination.
Tired energy levels of execution with a wide focus will see the
organization stretch itself beyond its capabilities, and since execution
is not administered properly, a rapid death of the organization will
result. With too many areas of concentration, inadequate commitment
is given to any one particular area of focus and projects burn out
quickly. When the energy levels driving execution are high,
commitment and ability to drive growth also increases.
With execution narrowly focused, high energy levels will see
the domination of a market or even the development of a new
market. In some cases, the narrow focus of execution may result in
overcommitment or drive with no lateral thinking. What is most
important to note is that execution of this type remains focused on
narrow spheres of market activity.

13. Jay van Zyl 171
In the context of driving new innovation and successful
business growth, high levels of energy must coexist with wide
focus in the same sphere of activity. Unlike tired energy levels,
hyperactivity sees a range of different areas of focus adequately
supplemented with implementation of new ideas. Change can be
executed effectively over a spectrum of activity. This type of
activity will see an imminent fragmentation of the market, yet
provided fast-paced systemic change is executed with high levels
of energy, the fragmentation will yield positive growth as the
organization effectively keeps up with the movement of industries
and market shifts. This sees the internal focus of an organization
merge with its external focus, creating a holistic sphere of
integrated activity.
Assess your participation at two levels: handling change and
execution. Can you keep up with the pace of change, and can you
find the execution sweet-spot that is needed to compete in a
particular setting? Pace of change is a relative concept. Your
conception of pace is based on your assessment of the changes
around you and how you understand the adoption of these changes.
With a systemic view of change, your position as a leader or
follower may be determined. The business model of the economic
entity that is built to thrive must encompass a holistic
understanding of the effect actions have on the surrounding
landscape, the capacity of the entity to execute change, the effect
implementation of change will have on the market, and a
willingness to expend energy over a wide area of focus.
In the context of the service-delivery platform, we will see
that business models become embedded in the emergent platform
as an organization moves away from product-based operation
toward operation-built on service-delivery platforms. Through
effective recognition of change and the ability to find the sweet
spot in the execution of change, the business model adapts to
emergent means of operating.
From Breakthrough to Platform
The platforms by which new innovations are driven generally do not
pop into existence overnight; they experience a long lead up before
widespread adoption drives their success. Christensen’s models of

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disruption give some clarity on this phenomenon, but this is another
take. The point when a new technology is discovered, a new idea is
developed, or an invention comes to light, is called the point of
breakthrough. The breakthrough point could provide an entity with
the opportunity to become a prime mover in an industry, utilizing the
new technology or invention to drive their success effectively.
Always though, we find there is a long period of time between the
breakthrough point and its widespread adoption.
The breakthrough of a new technology or means of operating
is generally followed by a period of lag-time. We will return to the
business model later, and instead turn our attention to the processes
behind the adoption of a breakthrough invention to create an
emergent platform from which to innovate and drive growth. The
platform in this context is not necessarily a service delivery
platform, but the platform by which any industry (product or
services) expands its growth.
The emergent platform resulting from a breakthrough point
may not exist in a single industry either, but exist across a
spectrum of industries where it has commercial benefit. Take
digital imaging as an example: it is a platform that has been
enlarged by the mobile phone, camera, computer, and advertising
industries, to name a few. The platform it creates is consistent in
what it does, but it does not belong to a single industry. To
successfully innovate and drive an organization to economic
success, you must recognize the process that an invention
undergoes from its inception at the breakthrough point to its
commercial adoption and success.
Figure: 7.3. Industry Innovation and Adoption of New Platforms

15. Jay van Zyl 173
In the diagram above, there are several key terms. Each one is
dependent on the others in the system for its function, so we will
follow the path from breakthrough to platform while
simultaneously understanding the various terms.
The process is instigated at the breakthrough point, with the
discovery of a new technology or invention. The breakthrough
technology is not immediately adopted and instead it exists for a
period of undefined time before its widespread adoption. Let us
take the breakthrough discovery of MP3 as a basic example to
supplement our understanding. Designed to reduce the amount of
data needed to store an audio recording, MPEG-1 or MPEG-2
Audio Layer 3 (MP3) was designed in the early ’90s by the
Moving Picture Experts Group. However, the pervasiveness of
MP3 technology in our everyday lives today was certainly not as
apparent two decades ago. Instead, the breakthrough technology
experienced a long period of lag time before its social adoption.
But at the breakthrough point, and as the technology awaits
its adoption, two significant processes occur concurrently. The first
is the creation of the platform in its first generation form and based
on the breakthrough technology, and the second is the gradual
establishment of derivatives based on the platform. The
breakthrough technology sees the creation of a new platform. At
the early stages, the platform is often unrecognized or
underestimated in value. In the case of MP3, the platform was the
digital form in which audio could be played back, and for the first
decade or so after the breakthrough point of MP3 the platform was
available but incrementally utilized. It became a dominant design
for industries whose focus was audio distribution.
The derivatives form the entities that use the platform, yet
may or may not experience overwhelming and widespread success
in the early stages of the platform’s existence. If the derivatives
experience major growth and successfully penetrate the market, the
lag time may be short. If their success is not so apparent, the lag
time may persist even with the presence of these derivatives.
Sometimes there are no derivatives to try to use the new
technology, and the lag time exists until such derivatives spring up
and attempt to drive growth by utilizing the new platform. With the
MP3 platform, there were no notable derivatives that attempted to

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expand it until approximately eight years after the platform’s
establishment. In 1998, Winamp became the first successful
derivative to utilize the MP3 platform and provide a means by
which to listen to MP3 audio through your computer. The
computer became the first support environment for the technology.
Support environments are different platforms or technologies
that provide support for the breakthrough technology. Support
environments are generally the result of an increasing interest in
the technology, and if this is not the case (if the support
environments are coincidental in their ability to support the
platform) they may spark up increased interest in the platform.
The breakthrough technology becomes more accessible
through support environments, giving more incentive for
derivatives to establish themselves. The computer became one of
the first support environments for the MP3, and since the platform
was available through different means, accessibility increased
interest in the technology.
Within the context of the computer support environment,
portable MP3 players began to appear, which could be synced with
personal computers, providing easy access to the MP3 platform,
which could then be listened to through headphones. As
derivatives make more of an impact, and support systems
encourage interest in the new product, the derivative that
recognizes the potential of the new platform will become the prime
mover, using the new platform to drive success and instigating its
widespread social adoption.
MP3 players have become widespread socially adopted
phenomena due to Apple’s insight that went further than any
previous derivative of the platform. At the point of social adoption,
the breakthrough technology is no longer seen as breakthrough, but
considered commonplace technology since it is found throughout
society. The other thing that may happen at the point of social
adoption is the transformation from first generation to second
generation of the platform. While the underlying platform persists,
its technology or systems of operation may be upgraded and
stabilized, which encourages effective use of the platform even
further. Let’s take a quick look at the World Wide Web as an
example.

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The Internet originated in the early 1960s when J. C. R.
Licklider began publishing papers describing his vision of
computers being able to connect globally. In the late 1960s UNIX
was developed, which was an operating system set to heavily
influence the way we conceptualize open software such as Linux
today. E-mail was tentatively introduced in the early ’70s and was
soon followed by the introduction of TCP/IP. This set of
communications protocols further developed the groundwork for
the Internet as we have come to know it, and in 1984, domain
name space and domain name servers began providing addresses
for online sites.
The Internet continued to develop with over thirty thousand
online hosts connected in the late ’80s, and in 1989 America
Online (AOL) was established. This was also the year that saw the
proposal of the World Wide Web (WWW), and two years later the
first web page was created. Initially the web provided a platform
for hosting websites and accessing information in this manner; this
was called Web 1.0.
Through a cumulative series of developments, the capabilities
of the web changed, and interaction on the web began to
encompass collaborative behavior and interactive dialogues
between users. As the web increasingly facilitated interactive
systems of behavior, it became known as Web 2.0 after Tim
O’Reilly coined the term (before which the concept of Web 1.0 did
not exist either). The platform that we know as the World Wide
Web stabilized and in its second-generation phase (2.0) became
widely adopted. The shift from first generation phase to second
generation phase may not encompass physical changes, or even a
single tangible change in the way a platform operates, it is rather a
concept of a platform moving from its unstable and initial
existence, into a sphere of higher capability and widespread utility.
The progression from breakthrough point to socially adopted
platform is not only technology specific, but can encompass a
range of new ideas with the potential to change the way in which
commercial activity is driven. An awareness of the processes
behind the progression may be the difference between your
position as a prime mover or fast follower. A derivative of a new
platform may come across as a prime mover, but as in the case of

18. 176 Built to Thrive
Winamp, the true potential of what the MP3 platform could
achieve was only fully conceptualized by Apple, who promptly
took the lead. Growth phases are slow during breakthrough testing,
but once the platform is adopted by large organizations, growth
begins to speed up rapidly.
This provides a technical overview of the basic process from
breakthrough to platform, but in understanding the process in its
behavioral setting we will look at the Internet in further detail.
What we will see is that a breakthrough technology undergoes
processes of change before it becomes stable and widely adopted.
The World Wide Web will be used to illustrate the process, as it
developed, stabilized, and became widely adopted as a result of the
breakthrough technology of the Internet.
Here is another story. Wendy worked in a company. The
company owned several hundred bookstores around the country,
and she was the financial director for her region. Having studied
for several years and been taught a set of skills that relied on an
unchanging economic model that would influence her industry
indefinitely, she felt secure in her position and was well-off in her
own right. Then she caught wind of a new company rumored to be
operating strictly from the Internet and selling books online.
Because the Internet was currently only useful for sending e-mail,
she paid no heed to the rumor, until her financial reports began to
drop. The online phenomenon was gaining momentum and this
began to concern her. So she left her company.
Having acquired a large number of skills in both finances and
book sales, Wendy contacted the online bookstore and was soon
hired as their finance officer. She was pleased with herself, as
other industries were following suit and she had been lucky to
jump on board the hype as quickly as she had. As online industries
flourished so did the company’s sales, and soon she projected that
at their current rate their growth would exceed expectations due to
the rapidly increasing market for online services. The company,
having been advised of their financial growth by Wendy, began
investing heavily in infrastructure so as to increase their
capabilities and online capacity for customer utilization.
The future looked good, and soon industries began appearing
all over the web as people began to leave their jobs and flock to

19. Jay van Zyl 177
online businesses for employment. With projections of future
market penetration suggesting imminent growth becoming evident
to most online companies, everyone began throwing capital at the
development of infrastructure to support the expected mass
utilization of the web by future customers. Then one day Wendy
heard of a prominent company pulling out of its online business
and dissolving because their investors had dropped out.
The company in question, analyzing their market more
realistically, realized their expected market penetration was way
above the mark. Current trends suggested that even though the
existence of online industries was sparking interest in the
marketplace, this interest was not going to create the growth they
had expected for a while. The public was just not ready to dive
headfirst into the new online industry fad. The investors, eyes only
on short-term success, pulled out and the company went under.
Wendy thought nothing of it and continued her blissful existence.
But apparently the future projections of most online companies
had all missed the mark; the market would not reach its expected
position in online activity as was previously forecasted. Panic struck
as investors, eager to salvage any capital they had left, began to pull
out of online industries. Company after company crashed, and the
web experienced a severe economic drop. Wendy’s company was not
exempt, and after five years, the company went bankrupt. Wendy
went back to her old company, who were glad to accept her since
suddenly their sales were beginning to rise again. A year later Wendy
bought her first book from Amazon.com, it was a self-help
publication about how to find a job after thirty-five.
The growth from breakthrough technology to stable platform
is often characterized by an initial peak in income across the
industries involved, followed by an economic crash before its
second rise sees massive success in the organizations that drive
new growth by means of the stabilized platform in its second
growth phase.

20. 178 Built to Thrive
Figure: 7.4. Waves of Change in an Industry
In these graphs we will look at the adoption of a platform (as
seen in terms of economic growth) against the development of the
industry over time. The economic growth and adoption of a new
platform is based on the breakthrough technology.
Figure: 7.5. Emergence of Platforms and Derivatives

21. Jay van Zyl 179
The breakthrough point occurs at the point in the graph where
time is zero. It can only occur at this point since the platform develops
out of the breakthrough technology, which instigates the development
of a new industry based on that platform, which begins the timeline.
With slow initial industry development, the initial rise in adoption of
the new platform is the result of venture capital funding the initial
development of an industry based on that platform. Adoption of the
platform begins to rise as more industries transform themselves and
adapt to the new platform, creating an expansion in the new industry.
The new platform supports the creation of a new industry, and a new
industry can only flourish if organizations operate within it, and since
these entities have to come from somewhere, what we see is the rise
of an industry through participation of organizations previously
existing in a variety of different industries.
We saw this in the case of Wendy’s bookstore. Realizing the
potential offered by the new industry, many other industries began
altering their practices to benefit from the platform offered by the
new breakthrough technology, and thus drove adoption of the new
platform into a period of rapid growth. The organizations that flock
to the new industry may be seen as derivatives of the new
platform. The development of the new industry begins its lifeline.
Figure: 7.6. Pressure Points as Industry Develops over Time

22. 180 Built to Thrive
The period where the platform experiences rapid growth is a
hype curve. The excitement of the new industry, and the
possibilities created by the new platform, attract an increasing
number of organizations, which fuels the growth curve. This
interest is not solely experienced by participating organizations,
but also by the market they intend to focus on. The initial peak in
market interest, driven by the excitement of the new technology,
further excites the participating organizations. As an increasing
number of derivative companies enter the industry, they project the
future of their market, and since they are operating on a hype curve
their projections of their future markets are unrealistically high.
Wendy’s company for example, under the impression that
their online store would overtake the business of all traditional
bookstores, projected their future market as consisting of the entire
market previously owned by traditional book stores. With such
high predictions of future markets dominating the spreadsheets of
every organization operating from the new platform, two distinct
phenomena occur. Investors are met by promises of revenue
income based on these projected figures of the market, and current
spending takes place with these markets in mind. We will put the
relationship between entity and investor to the side for now and
concentrate first on the spending behavior displayed by these
organizations.
Envision the industry position at a point nearing the initial peak
in platform adoption; this point experiences the highest concentration
of incoming organizations, including investors and customers,
fuelling the growth of the industry. As these industries realize their
need to facilitate markets based on their projections of the future
(keeping in mind that these projections rely solely on the current
behavior displayed by the market), they begin strategically spending
their capital. The platform by which the industry operates in its infant
stage is unstable. This platform will contain many platforms over
time. In the case of the Internet, the technology exists to enhance the
capabilities of the platform, but the infrastructure of the Internet itself
is not sufficient to carry the activity that future projections will rely on
for economic growth. Therefore, a large portion of capital expenditure
is dedicated toward the development of infrastructure and upgrading
the capabilities of the platform.

23. Jay van Zyl 181
The first organizations utilizing the Internet as their operating
platform channeled capital into routers, cables, and storage hubs.
Through such activity, the platform begins to evolve and stabilize, but
expenditure on the advancement of technology and infrastructure is
unequally balanced, and less attention is paid to marketing strategies
for example. At this point in the growth cycle, a great reliance is
placed on the disruption caused by the industry to excite the market.
But as the excitement cools and the organizations begin to realize that
their projections of the future market may have been a tad optimistic,
there is a falter in economic growth, which is met by organizations in
two ways: they either go bankrupt or undergo a massive asset
correction to survive.
Without jumping too far ahead, let us focus on the imminent
economic crash of a new industry driven by the emerging platform.
While capital is being pumped into platform infrastructure and
development, organizations often fail to realize that the market,
although displaying promising interest at the onset of the new
industry, are still stuck in their old ways.
Initial projections suggest the market will develop
promisingly, and indeed if the platform is revolutionary and useful
enough it will, but often it will take slightly longer than expected.
Once news of the delay in projected revenue intake reaches
investors’ ears, uncertainty begins to emerge. Suddenly an
investor, unwilling to continue funding an entity whose projections
have become slightly less enticing, pulls out of the industry. The
entity supported by the investor files for bankruptcy, and panic
enters the industry. Investors become more concerned about these
false projections, and as other investors begin pulling out and
companies begin to go under, a mass exit from the industry occurs,
and the adoption of the platform plummets.
The Internet experienced such a crash in what was known as
the “dot-com bubble.” With the economic growth of the Internet
soaring in the late ’90s, market shares peaked in March 2000 (with
the NASDAQ closing at 5048.62) and then began to fall steadily.
The subsequent stock market crash of 2000–2002 saw losses of
five trillion dollars in the market value of companies. What we
have witnessed since is the second period of growth experienced
by the Internet.

24. 182 Built to Thrive
The organizations that pull out either disappear or integrate
back into their previous industries and focus on their old
existing markets, which may have been disrupted by the new
industry but still remain. The decline in the new industry, as
caused by the economic crash, will see a subsequent
strengthening of the old market feeding the previous industries,
and things will go back to how they were before the disruption
of the breakthrough technology. Until a fresh new company
comes along and decides to try its luck operating from the
platform in the new industry, and they succeed spectacularly.
After years of developing the industry, the older
organizations, most of who have pulled out of the industry, are
too tired to attempt to enter the industry again. But their years
developing the new industry have yielded an opportunity for
new companies. The platform created by the breakthrough
technology is no longer unstable and instead, after receiving
large amounts of infrastructure development from previous
organizations, has become a fully functional and stable platform
from which to operate. A new company will enter the industry
and utilize the platform without having to channel major
amounts of capital into infrastructure development, since this
has already been done, and they can instead market their product
effectively.
This sees the industry exist in its second-generation form,
where the growth curve, after experiencing a severe dip, begins
to rise rapidly again.
The first generation focused on infrastructure and platform-
related inventions and the dominant business model was based on
product approaches and generic access methods. With the
infrastructure developed sufficiently, the ways the platform is
utilized can evolve allowing alternative business models to emerge
where money is made outside of the classic products/services
model. An organization that successfully manages to undergo an
asset correction may survive the evolution of the way the platform
is used, and the economic crash that is usually associated with such
development may be avoided.

25. Jay van Zyl 183
Figure: 7.7. Emerging Successful Business Models Are Based on New
Capabilities
Let us look at two different companies that will illustrate the
shift from the World Wide Web in its first generation phase (Web
1.0) to its current second-generation phase (Web 2.0). The
platform of the web remains the same, but the generation in which
it exists is dependent on how it is utilized. After organizations
began filing bankruptcy as the web experienced its major
economic dip, Amazon managed to undergo a successful asset
correction and continued to drive their growth. They realized that
the industry they were in was not merely an online extension of an
industry that existed prior to the Internet; instead, their dominant
idea had to change. They realized that their offering to their market
was not a product, but a service that was revolutionary in terms of
the new platform from which they could operate. They began to
provide a service that could map out customers’ needs and wants,
and make suggestions based on these wants. Selling books as a
product came secondary to their service of determining what a
customer desired.
Google, on the other hand, entered the industry properly after
the crash and, with the entire infrastructure at their fingertips, they
were afforded the luxury of determining how they would utilize
this platform effectively in providing a service that the market

26. 184 Built to Thrive
would need and appreciate. They became a pioneer of Web 2.0 and
rode the wave of success, which began with the organizations that
first attempted to develop the industry while the platform was still
unstable.
As the platforms become stable, entities evolve and structure
themselves to fit in with the opportunities provided by the new
platform. The capacities of the web as a platform were not
understood properly before it became stable. Web 2.0, having
developed structures to effectively link the activities of multiple
individuals or entities using the platform, had become something
entirely new in its stable form. Whereas before it was used as a
supplement for product-based commercial activity, the new
generation of organizations driving the industry recognized the
platform as something else. The new concept of the web platform
saw it as providing the capacity to grow service-based activity in
ways never before possible.
With the dominant idea of service-based industry in mind,
companies such as Google, Facebook, Amazon, and eBay all
began implementing their dominant designs through business
models that were entirely new and implemented new technology to
drive their growth.
The breakthrough technology, instigating the new platform,
sparks interest in other industries. The initial funding provided to
the new industries helps the platform grow and evolve through the
development of infrastructure and capabilities, but when the
industry falters due to a unrealistic perception of growth based on
the initial excitement and hype, it leaves a gap. With infrastructure
already developed, new companies can enter the industry and fill
the gap. They proceed to drive growth of the industry as the
platform has now been stabilized and organizations can therefore
conceptualize the possibilities it may provide more effectively. In
its second period of growth, the perceptions of what a platform
may be capable of providing differ radically from perceptions of
that same platform in its developmental stage. Google saw the web
as able to provide a service; Apple saw MP3 as having the
potential to revolutionize personal media and individuality rather
than merely store audio.

27. Jay van Zyl 185
Adoption of the dominant design across many large investor-
based commercial businesses fuels the deployment of the invention
encapsulated in the platform. Think about personal media players
as an example: as soon as the MP3 platform became the industry
standard for music, invention based on the MP3 platform (such as
media players) was the aim of the dominant designs adopted, the
dominant design being the restructuring of operations to create
media players.
The business model, restructured in correlation to the
enabling technology (emergent platform), will see innovation in a
company manifest differently according to the level of business
model restructuring as well as the level by which new technology
in enabled. Consider the following graph.
Figure: 7.8. The Intersection of Platform Technologies and the Business
Model
In order to drive new innovation and entity growth, the
adoption of a new platform or enabling technology must
correspond with the implementation of new business models to
facilitate the usage of that platform. The use of technology, seen as

28. 186 Built to Thrive
either old or new, presents the technological platforms by which an
organization operates, using these platforms to drive growth.
Canon moved away from old technology and began using digital
technology, and revolutionized the camera industry. Digital
became the new technological platform enabling them to drive new
growth.
The other aspect of the graph depicts the business model in
relation to the enabling technology.
If an entity keeps their existing business model and does not
attempt to implement new technology, they will undergo
incremental restructuring and improvement as a result. Without
tangible changes in either the business model (directing operations)
or the platforms by which they operate, the restructuring or
development an organization undergoes is subject to the
restrictions imposed by old systems of operation.
As new platforms are used, and new technology is introduced
into the spheres of operation, the business will undergo necessary
architectural innovation. This will occur in the restructuring of
operations as they are influenced by the new technology. With a
restructuring of the business model to supplement technological
changes, the innovation will exist in the sphere of physical
operation in isolation.
In order to drive growth, operations must be compelled by the
philosophical and embedded needs of the entity. These form the
underpinning for the emergent business model, developed to
supplement the dominant idea and provide the foundation for the
dominant design. As I have already mentioned, the manner in
which a business model emerges and drives an entity’s growth is
the primary concern of the following chapter, so at this point we
will look at the business model as a facet of change that is integral
in supplementing the use of new technology (or new platforms).
Without concerning ourselves as to the exact intricacies of
what a business model consists of, we can view the concept as a
number of actions by which an organization directs its behavior to
achieve a specific outcome. Without changing these actions to
accord with the use of new technology, we see that an organization
will either experience incremental restructuring and growth (with
old technology) or innovative restructuring in a non-holistic

29. Jay van Zyl 187
manner (with new technology). If the business model is
restructured without the use of new technology, the organization
undergoes disruptive innovation, often resulting in some new
markets. Without the utilization of new technology, a new business
model does not enable an organization to effectively reconfigure
operations. The utilization of new technology in concurrence with
the implementation of a new business model will see radical
innovation take place and new business concepts will emerge.
Radical innovation, by using new technology and platforms, will
see successful economic growth.
Universal Service Delivery Platform
We are learning that access to information should be free or very
cheap. Our desire to make meaning of our lives drives a desire to
access more and more information, and as the Internet increasingly
connects us, our desire to gain access grows stronger. In an age of
interconnectivity and interdependency, we demand that secrets be
made public and our access to knowledge is free. But what is
information? Is information knowledge that is codified in the
written word, or does information in the digital age consist of any
type of accessible data that provides meaning? Is music
information? And if so, should it be free?
As we move into a completely digitally integrated world, our
view of information, and its worth in our lives, is shifting. There
are some things we expect to be free, such as plans and activities
undertaken by entities that may affect our lives. For example, we
would not expect to pay for a change in lay-out adopted by our
current webmail provider. Other things we accept as having price
tag, such as music and many services like GPS maps on our mobile
phones, but the boundaries between what society demands for free
and what they accept as a commercial commodity keep shifting.
How do we keep track of where these boundaries lie, and more
importantly, how will business models adapt to this new thinking?
Often companies invent business models that other industries
adopt and use outside the initial scope of design. For example, many
companies adapted the business models of existing web-based
organizations to fit in with their own industries. This in turn pushes
ideas into new directions, resulting in alternative business approaches.

30. 188 Built to Thrive
The more directions the industry takes, the higher its social
adoption in all spheres of the ecosystem. This “socio spill”
accelerates as the interconnected world leaves no idea unturned
and implementation untested. It is the emergence of
hypercompetitive industries that will be reformed radically as the
interconnectivity grows.
Moving into the third megawave, multi-technology business-
integrated platforms provide capabilities for new business models
in service delivery more than anything else. The Internet provides
the most obvious example; it’s seen as a platform to sell products
more efficiently and as a platform to provide services. Economic
growth evolves accordingly. As platforms emerge and become
stable, entities need to recognize the more dynamic capabilities of
the platform since it exists in a highly connected ecosystem,
encompassing individuals who demand more from their daily
experience of life. As we begin to recognize the emergence of new
platforms, we also need to begin to conceptualize what these
platforms may be able to provide in terms of service-based
activity; slowly we are moving into an era of service delivery
platforms.