Interview with Erich Joachimsthaler
I had the opportunity recently to interview fellow author Erich Joachimsthaler, the Founder and CEO of Vivaldi, one of the largest independent global strategy and business transformation firms, to talk with him about his new book The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers, and Society, to explore the important role that connections play in both business and innovation.
1. What are the key elements of an interaction field?
Interaction field companies or interaction field business models are highly open architectures that facilitate interactions among multiple participants, and distinguish from other digital business models like platforms (Uber, OpenTable, etc.) or digital ecosystem (Airbnb or Apple, etc.) in four ways:
- They solve new problems and intractable challenges (framing)
- They are interactional not transactional. They create collaboration, engagement, and participation across the entire interaction field including the nucleus, ecosystem and market makers (designing)
- They are open, inclusive and comprehensive and deeply integrate in the lives of participants (building)
- They enable sharing of value creation (sharing)
2. Why are interaction fields important?
They are important because they drive innovation in entirely new ways, create real new value for consumers and everyone else, and they can create exponential growth because they leverage the hyperconnectivity of everything today: where everything connects and is available anytime and anywhere.
3. What is broken in the current way of creating shared value for businesses, customers, and society?
What’s broken is that we all believe in it, but we don’t do it. Not because for wanting but because nobody has given us a business model or a framework and process to actually build a company that delivers on stakeholder capitalism. That business model is the interaction field model.
4. Has the importance of velocity of businesses changed? And if so, how?
We live in an age of accelerations. This isn’t a new thesis and wonderfully was explored by Thomas L. Friedman in his book: Thank You For Being Late. He believes that computing power has created the conditions for this change. How has the velocity changed? Three ways:
In the 1990s, when information connected to information over a website, called the internet. Two technologies emerged, ecommerce and search which created two of the most valuable companies today, namely Amazon and Google.
The next phase happened around 2007 and 2009 when people connected to people. Social media or networks became the technology and the smartphone enabled explosive connectivity. This created Facebook and Apple and a host of other companies.
We are now on the verge of the third phase where everything connects, people, information, companies, things, machines, devices and other things, anything, anywhere and anytime. Like in the previous phases, a new set of technologies from AI to quantum computing, converge and mature at the same time which will enable untold and unimaginable value creation, innovation and growth.
This changes everything. Traditional boundaries between industries and markets vanish, or at least blur. The notion of geography in terms of distance is changing, we truly live in a borderless world. Traditional value creation of companies through innovation will change.
5. What is the difference between a platform-driven business model and an interaction field-driven business model?
Platform business models are transitional. They solve simple problems. Uber is an example that matches riders with drivers, OpenTable that matches empty restaurant seats with guests. They focus primarily on transactions, and scale based on the frequency of interaction, often a simple core interaction between two or more participants. OpenTable allows restaurants to list open tables, and guests provide feedback in the form of votes, ratings. Platforms are a good business model if you want to build OpenTable for X, the Airbnb for Y or the Uber or Lyft for Z. Go and organize a design thinking workshop and you pretty much can write a draft business model.
Platforms also often are merely self-serving. They create wealth for the orchestrator or shareholders. Look at Uber, are drivers really better off driving for Uber? Are gig economy workers really better off? Look at Amazon, who really benefits, anyone knows who is the richest man in the world? Who made in the pandemic $13.5 billion in one day? Look at Apple, who faces massive lawsuits from developers.
6. Can traditional companies really act like startups?
They should not, that does not mean they are not trying. But traditional companies make the mistake to believe that the other side of the lawn is greener. It isn’t. Traditional companies need to leverage their fully digitized and optimized supply or value chains and integrate platforms and digital ecosystems, multiple of them, and that will create not just competitive advantage but also collaborative advantage. While startups are good at value creation, traditional companies are good at value capture. One without the other isn’t helpful. Ask yourself, why are there 175 mattress companies like Casper for example? In the end, you need only so many Uber for dog walkers, Uber for doctors, Uber for haircuts. And you need to figure out how to make money. Uber still does not know when it will be profitable.
7. What is gravitational pull in the context of your book?
Gravitational pull explains how to build or scale up an interaction field model, or a platform or digital ecosystem for that matter. Did you know that three recent studies by two leading consulting firms, BCG and McKinsey showed that failure to build a platform or digital ecosystem hovers around 84% or more. Annabelle Gawer and Michael Cusumano and David Yoffie, celebrated academics, found that of more than 250 platforms they studied, 80% failed.
All these digital business models, including interactions fields, grow on the basis of interaction velocity. The more quality and quantity of interactions across many more participants, the higher the velocity. Gravitational pull shows the factors that need to be focused on so that a platform or digital ecosystem doesn’t just remain a pipe dream, a blueprint or draft from a design thinking workshop, and actually come to life in the marketplace.
8. How does a company go about creating an interaction field company?
Four steps in the process: framing, designing, building, and sharing. The book is chock full of examples from Alibaba, LEGO, John Deere, Haier, GoPro, Kloeckner Metals, Flatiron Health, Discover Vitality Insurance, Tesla, Mars Petcare and a handful of others.
In short, framing is about defining the problems (consumer, industry and society) that should be solved. I find it helpful to apply a systems thinking methodology so we can clearly map out the interdependencies that exist. If you move from combustion engine cars to electric, while this reduces the CO2 emissions, how does it affect other parts of the economy or society?
Second is the designing of the system in terms of interactions, architecture and governance structure. I find the work in the book Platform Revolution by Marshall van Alstyne, Geoffrey Parker and Sangeet Paul Choudary helpful.
Third is the building of the interaction field. This is all about branding and creating a branded experience. My best recommendation here is to look at the factors of gravitational pull from my book. I also find the various sources on scaling a business model helpful.
Fourth is the sharing out of value creation. Interaction velocity very much is a function of how value is shared in the interaction field. This requires defining the rules and governance policies to create velocity and most importantly a virtuous cycle.
9. Where might a company go wrong in creating an interaction field?
Most companies fail in building interaction fields, or other digital business models because they don’t focus much on the core, the nucleus of the field. The nucleus is the platform that houses the core interactions typically between consumers and the company, the farmers and John Deere, the pet owners and Mars Petcare, the drivers and Tesla.
Most try to scale up as quickly as possible, they add features in the hope to attract more users fast, they invest insanely into performance marketing or digital advertising to convert users. But the success of really depends on getting the interactions in the nucleus right. Think for example the biggest fintech company which is Ant Financial or Ant Group. At the core is Alipay, which is similar to eBay. It is this core or nucleus that powers services from wealth management , loans to businesses, insurance and many banking services. It is an open system, an interaction field in the truest sense of the book.
10. Can you measure the strength of the interaction field?
There are several ways to measure interaction field. Operationally, the measures of strength are the frequency of interactions and the quality of interactions which I define in terms of meaning, reciprocity and new value creation. Strategically, though, the measurement of what is value creation matters, what makes us as a society live better. The value creation of an economy is often measured by GDP, the Gross Domestic Product. It measures both the economy’s total income and the economy’s total expenditure on goods and services. It is not a perfect measure of well-being.
In the same way, the value of an interaction field can not just be measured by the profits that a company earns, we need to measure it in terms of the value creation for society, industry, and consumers at large.
11. Anything important I didn’t ask?
Yes, what is the next step? The answer is: please buy the book and read it. I spent more than five years on writing it, and while it is not perfect, I would appreciate any thoughts, perspectives, and builds. Thank you.
Thanks for all that Erich! I hope everyone has enjoyed this peek into the mind behind the interesting book The Interaction Field!