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How To Create The Next “Shaper” Business Like Facebook, Google & Microsoft (from SXSW)

Boy, I love John Hagel — This guy is a walking web site. I’m amazed his thoughts on “shaping'” have not become more famous!

Afterall, how many of you wouldn’t like to create the next Google, Facebook, Microsoft or Visa type of ecosystem?

He covers “shaping” and other concepts in his book The Power Of Pull.

I got a chance to meet Mr. Hagel when I sat in on his latest “shaping” presentation  at South by Southwest (SXSW) this week.

What follows is a part 2 to the first piece I did on Hagel called How to Shape A Market.


Warning: I do repeat myself a bit here (as compared to my first Hagel article).

Hagel describes shaping as mobilizing tens of thousands to millions of participants to reshape an industry based on positive incentives.

This requires flipping perceptions of risk and reward (we discount the value of reward which leads to paralysis). If you can flip this perception, you can get people to place bigger bets.

The 3 Things You Need To Shape A Market

1) A Shaping View

You need a long-term view of how a space is going to work…a 10 to 20 year vision.

This is about psychology and perception, not current reality, Hagel points out.

An effective shaping view shows that this is not a ‘one player wins all’ — a good shaping view shows that many players can win.

A shaping view is important because it helps mobilize the forces who face risk if they join you.

An example of a shaping view comes from Bill Gates for Microsoft when he said early on that:

“Computing is moving from mainframes to the desktop. If you want to be a leader in computing, you have to be a leader on the desktop. “

Another example of a shaping view: Mark Benioff of saying that software is going to move from the desktop to the cloud.

One guy in the SXSW audience asked:

“What about the competing forces against your shaping view?”

Hagel suggested that one tip is to focus on motivating participants with new interests (they have less to lose) to beat out the interests of participants with old interests (who have lots to lose).

2) A Shaping Platform

The purpose of a shaping platform is to reduce the investment to participate in the platform and accelerate the return on that investment. You’re saying to the participant:

“I have a platform that if you invest in you’re going to benefit in the near-term future.”

For example, Visa figured out the protocols to get 1,000’s of banks to participate in credit cards.

Key to a shaping platform is Speed:

Find where there are a lot of niches (where many participants can play without being run out of business) and create something quickly (and then iterate).

Facebook’s approach to shaping was to go after a specific niche (college students) and then expand it out as you are successful and can reinvest.

The platform can be very cheap in the early stages (e.g. Microsoft’s operating system was licensed from someone else in the beginning).

How do you motivate people to participate on the platform, even though they are competitors?

Microsoft, for example, put on developer conferences early on to help add value to companies that normally saw themselves as competitors.

Incentivizing platform participants is key.

Focus on the participants who will benefit from participating in this platform — who has the incentive to participate in your platform?

A few qualities of an effective shaping platform is that it:

  • Helps people engage in real work
  • Allows participants to create with others
  • Shows visibility in terms of results so participants can learn from what’s working (or not)

Interestingly, Hagel points out that the only affective shaping platforms he knows include participants who are competing which each other.

The biggest challenge with creating a successful shaping platform is reaching critical mass.

“Once you get the critical mass, there is a sense of ‘I’ve gotta get on board with this new platform,’ Hagel says.

3) Shaping Actions

It’s key to show your commitment to shaping through your own action.

For example, Microsoft — at the time a tiny company — got the much larger Intel and IBM to be strategic partners in  shaping the new personal computing market. Those were powerful “actions.”

Another example of an action of conviction was Malcolm McLean’s move to issue a royalty-free release of his valuable patents for shipping containers — the adoption of those shipping designs would help Sea-Land (a company McLean was a major shareholder of) to profit handsomely as those shipping designs became industry standards.

A third example of a shaping action was networking company Novell which sold off its valuable hardware business to focus on its networking software; a move that made it easier for networking hardware companies to join in the new networking market Novell successfully shaped.

It Takes All Three To Successfully Shape

If you can do all three of these things: having a View, Platform and Actions, you get the network effect.

Doing just one or two of them simply will not win the day, Hagel notes.

Why Do Shaping Strategies Fail?

1) If you focus too much on your own interests — so you need to focus on the economics of the different groups and what makes them tick.

2) Spending too much time perfecting the platform.

3) Lack of conviction/actions — Many people attempting to shape something walk away or pivot from something at the first speed bump. If the rest of the participants sense that the shaper is pivoting, the whole shaping platform will weaken.

Future Opportunities of Shaping

Hagel mentioned a few opportunities ripe for shaping:

  • The Cloud — There is no clear leader in the Cloud industry right now (I would say has the best chance).
  • Personal Data Ecosystems — How do we create environments where we can aggregate all of our personal data and to make use of it. He thinks the Healthcare, Financial Services & Media industries are the verticals through which this will happen.
  • Social Networks — There is still an opportunity for people to work together socially to learn and perform better.

Final Thoughts On Shaping

  • Put yourself in the shoes of the other participants and determine what will motivate them to invest in this strategy.
  • It comes down to ‘shape or be shaped.
  • The successful shapers are the ones who can take their long-term view and invite critiques and challenges so you can refine that view; and then learn rapidly from their shaping platform.
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