Platform Disruption is part of the geopolitical shift diminishing the power of the US in favor of China.
That fact is generally overlooked in discussions of platforms or of platform disruption. Platform disruption is a global trade play, a point I make in Platform Disruption Wave. However, it seems that only one actor knows it is on the stage. China.
May 19th The Economist weighed in with some thoughts on platforms.
They talked about platforms as marketplaces. They complained about the term’s overuse. They highlighted some vagueness in the word.
While all that’s true, it misses the essential point.
Platforms are about to become the major dividing point in global trade policy. Platforms are shifting the balance of global power. China will make sure of it.
Here’s how it’s going to happen.
Platform Disruption of Global Trade
Economically, platforms are quietly going about the business of restructuring global trade, as I explain in Platform Disruption Wave. But, to date, trade negotiations led by the United States have been centered on TPP and TTIP.
These are the new multilateral trade agreements that exclude China.
China is not going to allow this to happen. It is taking a number of steps to use its own spending power to promote platform-based trade as an alternative to traditional trade mechanisms.
This includes a recent $7 billion investment in platform trade capabilities. China is determined to champion platform disruption. All of its tech companies are headed in that direction. And by pivoting trade around platforms, it allows China greater influence in all other trade related services. For example finance.
Policy therefore is the next battlefield. China has the advantage that its economy is geared towards platform disruption. That’s why it wants to embed platform principles in the charter of institutions like the WTO.
Future Platform Champions?
If I was to place money on which companies will become mega platforms with significant control of global trade, it would be these (note 7 of the 20 are Chinese):
Alibaba, rival JD.com, potentially TenCent and Baidu, Rakuten, John Deere, China Construction Bank, Amazon.com, Xiaomi, IngDan, DeutchePostDHL, WalMart, Monsanto, controlling all data on farms, Ericsson, eBay, HDFC, SAP, wildcards like Hitachi, Soracom and Zalando and the possibility of Google making a showing.
All could be in the top category of global platforms for trade in goods or services, although Google, surprisingly, might be the straggler.
Trading on platforms is second nature to Chinese businesses. Estimates of Alibaba’s business reach varies from 8 million to 16 million. Whichever is closest these are huge numbers.
The company recently recommitted to a significant economic development role in rural China. In effect Alibaba is integral to Chinese economic policy. It is helping to build the economic base of the country outside the main urban areas – where of course Alibaba is already deeply embedded.
Like training one million young people in how to start and run a business.
New Platform Policy For Global Trade
The message that this business form matters most to China was brought home to me by Alibaba’s Jack Ma. Ma has a new idea that will make platform disruption into the heart of global policy making.
And, by the way, if you want to grasp how real this is then buy Platform Disruption Wave because it outlines how the disruption process occurs and where it is headed.
I envisage a time, say three to five years from now, when platform businesses like Alibaba will control substantial segments of global trade.
Ma has underlined that by asking for a new global platform disruption body to be set up – World e-Trade Platform (WeTP). This would sit alongside groups like the WTO to help shape trade policy.
Platform disruption will substantially alter the multilateral trade governed and counted by global institutions like the IMF and World Trade Organisation.
It will be direct business to consumer trade. The Alibaba platform will a substantial portion of that trade.
I think within five years the trade total flowing through platforms will exceed $4 trillion. It will approach 25% of the value of today’s imports.
I wrote about it in The Chinese Road to Platform Disruption too. You can download a copy here. The report also looks at how platform disruption is structured.
The China Road to Platform Disruption is a good place to being understanding the platform as a geopolitical tool.
But look at Platform Disruption Wave if you want to understand the historical relevance and economic power of today’s platforms. It tells the story of why platforms disrupt the world and eclipse American power,