Google’s OpenSocial initiative has ignited conversations globally.
Many are discussing its potential impact on Facebook and wondering how the likes of LinkedIn, Ning, Plaxo, hi5, Friendster, Viadeo and Oracle could agree to cooperate and collaborate on a standard set of API’s to feed creative applications across multiple platforms.
The historical model of competitors “collaborating and cooperating for mutual gain” was known as a Keiretsu. The prototypical keiretsu were those which appeared in Japan during the “economic miracle” following World War II. Before Japan’s surrender, Japanese industry was controlled by large conglomerates called zaibatsu. The Allies dismantled the zaibatsu in the late 1940s, but the companies formed from the dismantling of the zaibatsu re-interlinked through share purchases to form horizontally-integrated alliances across many industries. Where possible, keiretsu companies would also supply one another, making the alliances vertically integrated to some extent.
There are two types of keiretsu: vertical and horizontal. Vertical keiretsu illustrates the organization and relationships within a company, while a horizontal keiretsu shows relationships between entities, normally centered around a bank and trading company.
Although the divisions between them have blurred in recent years as has their success, the underlying philosophy has been adopted by many industries globally and still exist today.
The Co-Opetition Model
In a previous post titled “The Co-Opetition Factors” we discussed the rationale for such an effort within the social web. Julie Browser, of IBM writes “The traditional concept of business as a “winner takes all” contest is giving way to a realization that in the networked economy, companies must both co-operate and compete. Termed “co-opetition,” this new perspective requires companies to create business strategies that capitalize on relationships in order to create maximum value in the marketplace.
“Co-opetition”– a model in which a network of stakeholders co-operate and compete to create maximum value — is one of the most important business perspectives of recent years. Internet and mobile technologies have made it even more necessary for companies to both co-operate and compete, by enabling relationships through information sharing as well as integrating and streamlining processes.
The question is whether competitors fighting for traffic can cooperate while maintaining their own identities within both different but converging market segments.
Consider the Business Issues
If Google is successful with their OpenSocial launch and competitors agree on adopting Google’s standard set of API’s would not Google’s OpenSocial become the default portal of the social web? I don’t pretend to understand the technical issues rather my mindset looks at the “systemic issues”.
The social web, as we know it today, is a mesh of platforms attempting to cater to numerous customer segments with different preferences and desires for privileges. Facebook’s platform has basically enabled application developers to launch creative programs offered to 45 million people. The people consume that which appeals to them personally and professionally and the friend referral system spreads news of unique applications like California wildfires.
If I am a smaller platform operator whose traffic is pale compared to the big boys should my strategy be to join the Google Portal or focus on serving my niche by opening up my own API’s to serve consumers hungry for features and functions? If I follow the Keiretsu model then the differentiation of my brand is how well I serve my niche (Quality) and how to I create economy of scale by serving my niche better than anyone.
The Google OpenSocial initiative brings potential “systemic change” to the social web. It will force platform leaders to think through their strategy, both short and long term, and determine how best to serve their shareholders and their customers simultaneously. The challenge is to increase traffic while delivering sustainable value to the end users in a highly competitive industry with no standards. The question is which methods produce the optimal results?
What say you?