Connected Producers

All connection architectures start with information flowing from customers to firms. These customers might be individuals or businesses. Thus every connection architecture works in both a business-to-consumer (B2C) setting and a business-to-business (B2B) setting.

Connection architectures differ in how the firm connects back to the customer. In the most straightforward connection architecture, it is the firm itself that produces the product or service that fulfills the customer demand. We call this type of business a connected producer. This is summarized in figure 7-1, which captures the key connections or pipes between organizational entities in the value chain.

FIGURE 7-1

Connection architecture for a connected producer

In the financial services sector, for example, traditional banks that create connected customer relationships would be considered connected producers. The key connection is between customers and the bank, with the bank itself creating all the key services. Connected producers can focus on one connected customer experience or offer multiple experiences. For instance, a bank may try to make the loan application and approval process as fast as possible (respond-to-desire), make suggestions to the customer regarding how to invest based on the customer’s income and future needs (curated offering), send the customer reminders to rebalance the portfolio (coach behavior), and automatically transfer funds between the customer’s savings and checking accounts to avoid overdrafts (automatic execution).

Connected producers face competition from other connected producers. But some competitors of big banks do not look like big banks at all. Consider the loan process. Firms such as OnDeck and Earnest have focused on a respond-to-desire user experience. In addition to using traditional credit scores, they draw on over one hundred external data sources to determine creditworthiness, including social data, public records, and transactional data. This results in over two thousand data points per loan application and frequently allows the companies to provide a decision almost instantaneously, beating traditional bank application and approval processes, which are usually lengthy. In this space, OnDeck has focused on small business loans, while Earnest is a provider of personal loans, with a focus on refinancing student loans.

Notice, however, that at the thirty-thousand-foot level, they are operating exactly as big banks. The main connection is between the customer and the firm, in which information flows from the customer to the firm, and products and services flow back from the firm to the customer.

The architecture of connected producers appears old-fashioned. However, two recent connectivity trends are helping connected producers to innovate in how they serve their customers. First, today’s connected producers increase the interaction frequency substantially, transforming big, episodic transactions into many smaller customer experiences. Second, the interaction’s overall richness, in terms of information exchange and product customization, has intensified. For some examples of these developments, let’s look beyond financial services.

Connected producers of transportation now provide user experiences far beyond selling cars. The world’s largest car-sharing service is called car2go. It was created by a traditional producer, Daimler, and offers Daimler vehicles exclusively. Members have access to more than fourteen thousand vehicles in twenty-six cities in eight countries. Many of these vehicles are small, two-passenger Smart Fortwo vehicles (Smart is owned by Daimler). Users pick up cars wherever they are parked in a city, check them out using a smartphone app, do not have to refuel, return the car to any approved parking spot on the streets, and pay based on rental time.

Daimler’s car2go is an example of a connected producer that is operating mainly in the respond-to-desire mode. Customers send their requests to the firm, and the firm responds immediately via an app that helps locate the nearest car that most closely fulfills the customer’s needs. Better connectivity made this possible: GPS devices track a car’s location; mobile apps tell customers where the cars are and eliminate the need for face-to-face payment. This makes using an expensive vehicle more efficient. What sounds like a cool application of the sharing economy corresponds to our definition of a connected producer architecture.

Competitors such as General Motors, Volkswagen, and BMW have followed suit and created their own car-sharing services. As we’ve noted before, just creating connected experiences will not be enough to create a long-term competitive advantage. Others will inevitably copy you, and the question remains whether you are able to drive a bigger wedge between customer willingness-to-pay and cost than your competitors. To achieve larger scale, BMW and Daimler decided to merge their mobility platforms in 2018 to create one car-sharing service.

Similar to the financial services industry, the insurance industry is seeing firms that are creating connected strategies. While there are many new entrants into what has been dubbed insurtech (insurance technology), some of the existing connected producers have been very innovative as well. Consider Progressive, one of the largest American automobile insurance companies. Buying auto insurance has historically been a very episodic customer experience. A driver calls the insurance or goes to an agent; an underwriter analyzes the driver’s risk profile based on age, zip code, vehicle type, and past accidents; and the company then provides a quote for an insurance premium. In contrast, Progressive customers can agree to use an app or plug in a small monitoring device in their vehicle. The app or device monitors the length and time of day of travel, as well as the driving behavior including hard braking, fast acceleration, or aggressive lane changes. Once the data-collection period is complete, Progressive uses the data to deliver a tailored car insurance quote to the driver. But the customer experience doesn’t end there. Progressive is also creating a coach behavior experience by providing customers with feedback about their own (or their children’s) driving behavior. This allows customers to improve their driving, which could further lower their rates. Moreover, this allows Progressive to climb up the hierarchy of needs of its customers: it addresses the deeper need that drivers really have for safety and security, rather than for having car insurance.

Many software companies, such as Salesforce and IBM, also fall into the category of connected producer. Their tighter connection with their clients allows them to customize their offerings and anticipate future needs (e.g., with respect to cybersecurity). Likewise, Google, with its search engine, Gmail, and Google Photos, is a connected producer. The fact that Google does not charge for these products does not detract from its status as a connected producer who has established its own ecosystem of services. (We will return to the revenue model of Google and similar firms in chapter 8.)

Finally, consider the example of Disney’s MagicBand, which we discussed in chapter 1. The band incorporates respond-to-desire elements by enabling easy access to hotel rooms and rides and easy payment for merchandise and food. Through its app, Disney incorporates elements of curated offering with suggestions, and it engages in coach behavior by redirecting visitors to less crowded rides. Not surprisingly, other entertainment firms are developing similar technologies. For instance, Carnival, the largest cruise line operator in the world, has developed a device called an Ocean Medallion that can be carried in a pocket or worn as a pin. This medallion, just the size of a quarter, automatically opens the door of the passenger’s stateroom (no need to tap a sensor), makes it faster and easier to embark and disembark, and facilitates payment for items purchased on board. Linked to an app, it can help family members find one another on expansive ships. The app can be used to order food for delivery wherever the passenger plans to eat. Servers know who ordered the food because the passenger’s photograph appears on their handheld device when they get close to the passenger’s medallion. Passengers can upload their preferences before boarding, which enables Carnival to offer tailored activities. Carnival and Disney are both using a connected producer architecture. The connection is between the customer and the firm; it just has become a very high-bandwidth connection.

Connected Retailers

Connected producers face competition not only from other connected producers but also from firms implementing different connection architectures. For instance, in the realm of investment advice, companies like Wealthfront and Betterment mainly use algorithms to assemble a customized portfolio for each investor that comprises exchange-traded funds or low-cost mutual funds managed by others. We call these firms connected retailers—firms whose main role is to showcase, curate, and deliver products from suppliers to customers. Connected retailers receive information from customers and then create a connection between suppliers and customers. This connection runs through the connected retailer, as the firm is actively involved in moving the product from the supplier to the customer (figure 7-2).

FIGURE 7-2

Connection architecture for a connected retailer

Like connected producers, connected retailers can focus on one connected customer experience or on a range. For instance, Wealthfront and Betterment make creating a customized investment portfolio quick and easy by doing everything online (respond-to-desire); they provide a curated offering by allowing customers to state various investment goals and then customizing a portfolio that aggregates over those goals; and they have an automatic execution experience through services like automated loss harvesting.

Amazon’s practice of shipping out of its own warehouses is perhaps the most well-known example of a connected retailer. Customers interact with the company mainly through a respond-to-desire connection. However, Amazon has clearly increased curated offerings through “customers like you purchased” recommendations and automated offerings, such as subscription programs where customers periodically receive products like toothpaste or detergent.

Many connected retailers create customer value through a curated offering customer experience. While the internet has given customers access to practically every product and service available worldwide, such choice is overwhelming and requires a lot of customer time to make good decisions. Therefore, curation can create a lot of value. Connected retailers offering subscriptions to curated boxes of merchandise have sprung up across hundreds of product categories, from food to cosmetics to pet supplies. Just a sampling of subscription services starting with the letter B is illustrative. From Bad Ass Mom Box (jewelry and beauty products) to BarkBox (dog toys and treats) to Busy Bee Stationery (stationery), all of them have the same user experience and the same connection architecture. Firms purchase items from their suppliers and assemble them as a curated offering tailored to each customer.

We have already mentioned curated meal subscription box retailers such as Blue Apron and HelloFresh. Several other players have emerged in this space as well, trying to differentiate themselves by focusing on particular cuisines or preparation time. Competitors include Purple Carrot (vegan), PeachDish (Southern cuisine), Sun Basket (paleo and gluten-free), Green Chef (certified organic), and Gobble (preparation time of ten minutes using only one pan).

Like some connected producers who coordinate customers to utilize resources more efficiently, several connected retailers have a similar business model. Car-sharing services like Zipcar (now owned by the Avis Budget Group) fall into this category. Unlike car2go, which is operated by the firm that manufactures the shared cars, Zipcar buys or leases cars from various manufacturers, providing broader choice. (For another example from the mobility industry, see the sidebar.)

Rent the Runway has a similar business model for a very different product category: designer dresses. Because these dresses are expensive and often worn only once, they are a great example of underutilized resources. With Rent the Runway, women can rent dresses for four or eight days at a price much lower than that of purchasing them. Each rental arrives in two sizes, ensuring the dress will fit. Customers return them via UPS, and Rent the Runway handles the dry cleaning.

Both Rent the Runway and Zipcar are exploiting an important customer trend. What many customers actually desire is access to a product or service, not necessarily ownership. Especially when needs vary over time (today I’d like to drive a convertible; yesterday, I needed a pickup truck; and tomorrow I need a minivan) and the assets are very expensive, it has been traditionally very difficult for a customer to match needs with solutions (and the outcome is usually a compromise like a family sedan). Connected retailers who rent, rather than sell, products allow customers to achieve a better match between their needs and solutions at an affordable price. One might refer to these cases also as instances of the sharing economy, but from the perspective of a firm that has to build a connected delivery model, we find it more useful to classify them as connected retailers.

It is interesting to note that some firms that started out being connected retailers, such as Netflix, Amazon, and Zalando, have used their customer data to enter into the production of movies and private-label items and have become connected producers as well. Their direct connection to the end customer provided these firms with deeper knowledge about customers than any of their suppliers possessed, allowing the firms to successfully backward integrate. In sum, to create a connected strategy, firms can employ more than one connection architecture.

Connected Market Makers

While Wealthfront and Betterment are actively involved in assembling and managing their clients’ portfolios, other firms have roles primarily in establishing a connection directly between a customer and a supplier. For instance, LendingTree is an online lending exchange that connects customers with multiple lenders that compete for business, allowing the customer to select the best supplier for his or her needs. We call these firms connected market makers—firms that create a direct link between supplier firms and customers but that aren’t involved in handling the product or service. Connected market makers control the connection from the customer to the supplier, but they do not own what flows back from suppliers to customers. Connected market makers thus rely on existing suppliers to fulfill the needs of customers.

This is illustrated in figure 7-3. Note that unlike the connected retailer, who gets directly involved in handling the product, a connected market maker establishes the connection and potentially vets the suppliers but is otherwise hands-off in how the supplier fulfills the need, thereby carrying neither inventory nor financial risk. Also, the number of suppliers that can be connected to customers can be very large, since the connected market maker is not responsible for holding inventory or directly managing the stream of goods and services from the suppliers to the customers.

Wallaby Financial is another example of a connected market maker in financial services. If a customer stores all of her credit and loyalty cards on its platform, Wallaby’s app will recommend the optimal card for each purchase based on the nature of the purchase and the attributes of the cards in her mobile wallet. Thus, the company can manage the customer’s cards to minimize fees paid while maximizing rewards and discounts. Using this data, Wallaby recommends new credit cards for more savings. In this case, Wallaby creates new connections between credit card issuers and customers, earning a referral commission.

FIGURE 7-3

Connection architecture for a connected market maker

The distinction between connected retailer and connected market maker is subtle but important. By focusing entirely on connecting businesses and customers (without purchasing products or capacity), connected market makers are less capital intensive. Consider Amazon again. As a connected retailer, it invests in warehouses and inventory. But with products that are sold through Amazon Marketplace, the company acts as a connected market maker by taking the customer order and redirecting it to the seller, who then takes care of the order.

Expedia and Priceline work similarly. They neither own airplanes nor commit to purchasing seats on flights or rooms in hotels. They simply find customers looking for air travel or accommodations and then connect them to the right airline or hotel. Connected market makers exist both in the B2C world and in the B2B world. For instance, IronPlanet is a connected market maker for used construction, transportation, and agricultural equipment, a market estimated to be worth around $300 billion. IronPlanet connects industrial buyers to industrial sellers of heavy equipment. (For another example of a connected market maker, see the sidebar.)

So, if the market maker is entirely hands-off in the transaction, what value does it create? Wouldn’t it be better if the customer connected with the supplier directly? Market makers can fulfill two functions:

They can provide curated offerings and, free from the need to make any investments in fulfillment, can do so on a bigger scale. For example, OpenTable can connect patrons looking for restaurant tables with pretty much any restaurant in the country, a level of choice and access that is impossible (or really, really inconvenient) for a customer to replicate.

Market makers can ensure that the products and services on their platform are top quality and provided by reputable sellers. While the individual customer interacts with a business only once, the market maker does so repeatedly. The vetting can be done by the market maker itself, as in the case of Sweeten, a market maker that connects reputable contractors to customers with significant renovation projects, or through reputation scoring done by previous customers, as in the case of Angie’s List, a crowdsourced directory that has accumulated millions of reviews for all kinds of local businesses and that connects those businesses to customers.

Given that initial entry costs for a connected market maker are relatively low, we have seen many start-ups using this connection architecture. The downside of low entry costs, of course, is that entry is easy for everyone. As a result, we have seen rampant imitation, leading to ever growing costs of attracting participants on both sides of the market. Market makers have to provide increasingly better incentives to suppliers to convince them to join, while at the same time customer acquisition costs are rapidly increasing. Google and Facebook have become the de facto new “landlords.” Market makers don’t pay the traditional rent for stores or warehouses, but they pay Google and Facebook and others for customer leads. Thus, as some industry observers have noted, customer acquisition costs have become the new rent.

Crowd Orchestrators

What are alternative sources of funding for a project like filming a documentary? For a loan, one option is Prosper. Borrowers request loans between $2,000 and $35,000, and individual investors invest as little as $25 in loans they select. Prosper handles the loan servicing on behalf of the matched borrowers and investors.

Whereas connected market makers create a connection between customers and supplier firms (e.g., banks), Prosper connects customers to individuals who serve as suppliers (of funds in this case). Not only does Prosper rely on individuals to serve as suppliers, but Prosper was essential in creating this funding source—a crowd of individuals—in the first place. Prosper thus orchestrated a crowd: it created a new set of connections among previously unconnected individuals. Consequently, we call this connection architecture crowd orchestrator. Just as with connected market makers, here the firm focuses on creating connections instead of producing or handling products directly. This time, however, the connections are made between individuals and customers, not between existing firms and customers (figure 7-4).

Kickstarter is another crowd orchestrator and fits the profile in figure 7-4. It connects individuals who want to support projects or want to pre-buy products that are still in the creation phase (like the documentary on polar bears). Though each individual contribution might be small, Kickstarter has collected in its first nine years over $4 billion in funds and supported over 154,000 projects, all of which happened without the involvement of a bank or venture capitalist. Kickstarter not only funds individual projects but is also quite often used to fund startups. Banks and other financial institutions now face competition from individuals banding together on these platforms. Where once banks might have counted on people financing creative projects with personal or high-interest credit card loans, some of this market has been taken by crowdfunding.

FIGURE 7-4

Connection architecture for a crowd orchestrator

While both connected market makers and crowd orchestrators are similar in that they directly connect customers to suppliers, there are key differences between these connection architectures. A customer who transacts via a connected market maker would quite likely have made a similar, although possibly less optimal or convenient, transaction without the market maker: the customer still would have made a reservation at a restaurant (without OpenTable), booked a hotel room (without Priceline), or a bought a plane ticket (without Expedia). These transactions would have happened because the suppliers that connected market makers connect already existed. In contrast, a crowd orchestrator creates new supply by allowing individuals who otherwise would not have participated as suppliers to enter the marketplace. By creating connections between these individuals and customers, a crowd orchestrator is essentially creating a new market. Without Prosper, it is very unlikely that a borrower could find individuals who would give him twenty-five dollars each; without Airbnb, it is very unlikely that a traveler would have found an apartment to rent for a single night. (For other examples of crowd orchestrators, see the sidebar.)

One particular design consideration for crowd orchestrators is how much control to give to both customers and suppliers. Can customers choose individual providers? Can suppliers set their own prices? Overall, the more control a crowd orchestrator exerts, the more the customer experiences the work performed by the crowd as one coherent virtual firm. It is not the individual provider of the product or service that matters when using Lyft, Uber, Instacart, or others. In fact, the customer has no way of choosing who will fulfill the request, and it is the crowd orchestrator who sets the prices, not the individual suppliers.

In contrast, with less control, there is more variety in the market. You might not value that variety when it comes to traveling from A to B—for a short ride, a car is a car as long as it is clean and basically safe. The same is not true for a vacation home. In such settings, variety of choice is valued by the customer, and so imposing control (“Your doors have to be white and you need to charge one hundred dollars per night”) would be useful neither to the customer nor to the provider of the home.

As with other connection architectures, we see that over time some firms operate with more than one architecture:

Airbnb started out as a platform where travelers could find a place to stay while traveling by engaging in a short-term rental agreement with the owner. The owner acquired the real estate with the primary motivation to use it for herself and only hosted Airbnb guests to defray costs. That makes Airbnb a crowd orchestrator. But increasingly, rentals listed on Airbnb are owned by commercial real estate companies that rent their properties 365 days a year, using Airbnb as a sales channel. For those customers, Airbnb is also becoming a connected market maker.

The “mother of all platform models” is the auction site eBay. Again, when an individual sells his old lawnmower on eBay, the company is acting as a crowd orchestrator. But when the local hardware store uses eBay as a distribution channel, eBay is a connected market maker. A similar development can be seen at Etsy, which started out as a marketplace where individuals could sell handmade items and now also offers factory-made items.

Peer-to-Peer Network Creators

The other problem Jane had to solve in our little vignette was choosing to pay the bartender for the drinks or to reimburse her friends for the money. Even without a wallet, she could have settled accounts through her smartphone using a service like Venmo. Once a customer has signed up with Venmo, payments can be made by individuals with only a cellphone number or an email address, enabling transfers regardless of an affiliation with a bank and the existing payments infrastructure.

Venmo is a peer-to-peer (P2P) network creator. In contrast to crowd orchestrators, where it is clear that one individual is the supplier and the other is the customer, with P2P network creators, individuals might change roles frequently, as in the Venmo example. Today, we send money via Venmo to you. Next month, the transaction might go in reverse. We are simply part of the same payment network. Venmo, owned by PayPal, now handles billions of dollars.

Yet another P2P network creator in the financial services space is TransferWise, which focuses on international money transfers. Sending money across country borders remains an expensive undertaking. TransferWise realized that if Mario, who lives in country A, wants to send one hundred dollars to Madhav, who lives in country B, and Jamini, in country B, wants to send the equivalent of one hundred dollars to Juanita, in country A, that result can be achieved by transferring one hundred dollars from Mario to Juanita, who both live in country A, while transferring the equivalent of one hundred dollars in local currency from Jamini to Madhav, who both live in country B. That results in two domestic transfers, which are much cheaper to execute than two international transfers. By creating new connections between the various parties, TransferWise substantially reduces costs.

P2P network creators are remarkable organizations, often connecting millions of individuals. Moreover, they can present a threat to existing businesses. Banks used to love domestic and international money transfers because they carried hefty fees. Now, these important revenue streams are being significantly affected because these competitors are utilizing completely different connection architectures.

Foreshadowing the next chapter, on revenue models, we find it helpful to think about three different types of P2P network creators based on how they monetize their connection architecture:

Transaction or membership revenues:  While not as expensive as traditional banks, TransferWise does charge a transaction fee. Venmo, though it does not charge a fee for transactions inside the network, does make interest income on the capital it circulates and charges customers when they use credit cards to make payments. Membership revenue is the source of income for dating portals such as Match.com. Lonely hearts pay Match.com a fee to be connected to each other, which sometimes results in happy couples but is always cash in the bank for the company.

Fees for access to the information that is created in the network:  Wherever there is content and traffic, there is income-generating potential, often from advertising. YouTube started out as a P2P platform for sharing videos. It now makes a fortune with commercials, selling access to finely calibrated audiences on the network (e.g., targeting specific ads to viewers of certain programs). LinkedIn allows people to join the network for free but sells access to the information to potential employers.

Revenues from complementary products:  In addition to acting as a connected producer of running shoes, allowing customers to upload and analyze their running data, Nike acts as a P2P network creator by supporting virtual running clubs. These free clubs create a community of runners who encourage each other to run more. That’s good news for a company selling running shoes.

We illustrate the P2P network creator architecture in figure 7-5. Individuals are connected to each other via the network, with most participants serving as both senders and receivers of whatever the network is designed to facilitate (money, information, etc.) For some network creators, revenues are generated “within the box” of the network. For other network creators, revenues are generated by selling access to information that is created within the network. Finally, some network creators are able to use the network they create to drive up the willingness-to-pay that customers have for other products and services they offer—that is, they use the network as a complementor.

FIGURE 7-5

Connection architecture for a P2P network creator

The Connected Strategy Matrix

In the second part of this book, you learned about creating different connected customer experiences. We introduced four of them: respond-to-desire, curated offering, coach behavior, and automatic execution.

In this chapter, we introduced five different connection architectures: connected producer, connected retailer, connected market maker, crowd orchestrator, and peer-to-peer network creator.

Each connection architecture can be used to create different customer experiences. With four connected customer experiences and five connection architectures, we can create a matrix that has the customer experiences on one axis (the rows) and the connection architectures on the other axis (the columns) (figure 7-6). We call the resulting matrix the connected strategy matrix.

The purpose of the connected strategy matrix is twofold. First, it can serve as a framework to help you understand both your own activities and those of your competitors. Where are your competitors operating in this matrix? Where are new startups popping up? Because firms can create more than one customer experience and can operate with more than one connection architecture, they can play in multiple cells of the connected strategy matrix. The second use of the connected strategy matrix is as an innovation tool. By going through each cell and asking yourself, “If our firm had a strategy in this cell, what would it look like?” you have a very structured way to guide your innovation process. We will guide you through this process in more detail in the workshop in chapter 10.

FIGURE 7-6

Connected strategy matrix

Beyond Platforms: The Five Connection Architectures

Over the last few years, many executives we have talked to have expressed concern about being disrupted, not by their competitors but instead by companies that operate very differently from them. The verb to uberize is making it into dictionaries, and uberization is praised for its utilization of digital technology to dramatically increase the efficiency of an economic system by leveraging platforms and P2P interactions. Beyond Uber and its competitors, this idea is most commonly illustrated with the cases of eBay, Airbnb, Zipcar, Facebook, and many other companies we discuss in this book.

The threat of digital disruption is real, as anybody owning a cab or running a hotel will testify. But before getting too excited about the sharing economy and platforms (see the sidebar in chapter 1), we find it helpful to look at these phenomena a bit more carefully. In our view, details matter, so while Uber, Airbnb, and others all make for great business school case studies, we should not overlook the fact that they operate very differently from each other.

In this chapter, we discussed five connection architectures:

Connected producers:  You don’t have to be a radical new startup or create a two-sided marketplace to have a connected strategy. Traditional producers such as Disney, Nike, and Daimler have created connected strategies within parts of their businesses by changing how they connect to their customers and by moving from episodic interactions to continuous connected customer relationships.

Connected retailers:  Traditional retailers ask customers to come to their store and to buy what they have. Connected retailers make the choice process and the ordering of, payment for, and receipt of the product much more convenient for a customer. From Amazon for books, and Netflix for movies, to meal-kit providers for groceries, connected retailers create a much closer relationship with customers, which allows customization and the reduction of pain points along the entire customer journey.

Connected market makers:  These firms create a market by connecting supplier firms with customers. Examples include Expedia, Priceline, and Amazon Marketplace. Connected market makers are the bazaar operators of the twenty-first century. They neither buy nor sell; they just make sure the right buyer is connected to the right supplier. This approach sounds like the dream of every operations manager: it seems as if this approach requires almost no capital (capacity, inventory) while also being free of any operational risk. However, to succeed with this connection architecture, a firm needs to be able to attract both buyers and sellers (create a two-sided market) and provide them with liquidity and trust.

Crowd orchestrators:  In contrast to connected market makers, the firms can’t rely on existing suppliers. A key task of a crowd orchestrator is to mobilize individuals to serve as suppliers—for example, of driving services (Uber), shopping help (Instacart), accommodations (Airbnb), or financial resources (Kickstarter). The key challenge is to attract customers while the set of suppliers is still small. Once a critical mass is reached, though, two-sided network effects kick in: the more suppliers that are available, the more customers will come; the more customers that come, the higher the incentives for more suppliers to join.

Peer-to-peer network creators:  These firms form and organize communities of users, blurring the lines of consumers and providers. Again, network effects play an important role in the sustainability of firms with this connection architecture. If the value a customer derives from a network increases with the number of participants (e.g., as the number of posted reviews increases), then larger networks will tend to attract more new users, increasing network size even more.

The connected strategy matrix that we introduced in this chapter helps you think through these differences. Moreover, it allows you to integrate your analysis of the connection architectures with the four connected customer relationships we introduced in the second part of the book. In the upcoming workshop in chapter 10, you will put this tool to work.

A final thought (for now) on the growth of platforms and networks. The connection architectures to the right side of the connected strategy matrix are enabled through advances in technology—ride sharing just does not work without mobile computing and geolocation. With technology further advancing, there is no reason to believe that this growth will stop any time soon. But that by no means implies that connected producers and connected retailers are the dinosaurs of connected strategy. For example, our opening vignette about Disney is one of a connected producer that focuses more on the rows of the connected strategy matrix (new connected customer experiences) than the columns. There is no “one size fits all” for connected strategies.