The Power Of Coordination

The ancient Chinese general Sun Tzu once wrote that “power comes from formation.” Fundamentally the way one creates power is by coordinating the pieces in a strategic formation. This is like a great chess player setting up the first few moves to position her pieces in an optimal pattern.

Birds fly in flock, animals travel in herds, fish swim in schools, all to create power and safety in their formation.

My research shows that this principle of coordination is more important today than it has ever been. Dissect how the CEOs of winning companies speak today and compare them with their less successful peers, and you can actually measure the difference. Winners speak more of coordinating things while losers focus more on controlling them.

Consider mopay, a company launched by some German engineer/entrepreneurs in 2000. They are pursuing a radically simple idea, one that really anyone will get as soon as they hear of it. You have probably thought of it yourself.

Here is the idea. You go online with your mobile phone, you find something you want to buy (some music, Facebook credits, concert tickets, or that round neck pillow I wish I had right now after 8.5 hours on an airplane) then, instead of pulling out your credit card, you click a button to add the price of your purchase to your mobile phone bill. How much simpler could that be? You already have a billing relationship with your phone service, they know you pay on time, you are using your mobile phone to find what you want, so why not just complete the loop? It’s one of those ideas that make so much sense that you wonder why no one had done it before.

Unlike so many secretive entrepreneurs I know, mopay is not worried that you “get” their insight. If your competitive strategy depends on your competitors not knowing your strategy, you are in trouble!

No, mopay’s idea seems so straightforward that you might think that a few VC-funded competitors will be able to eat them up in a year...until you really appreciate the power of coordination. If you also understand how to create advantage by coordinating, you too can frustrate the copycats, lay traps in your trail so that your less inventive competitors will not be able to follow you.

The trick is that people underestimate the effort and value of coordinating things because we think that to coordinate in a way that creates defensible advantage, we need to buy and own things. But the winners today are reconnecting with that old Taoist saying that we see the spokes in the wheel but it is the empty center that lets the wheel move. It’s the empty center that matters, not the spokes.

What does it take to become the empty center? Mopay has spent the last decade building relationships with phone carriers and merchants. When I spoke to mopay’s U.S. managing director, Kolja Reiss, a couple of months ago, mopay had already established relationships with Verizon, Sprint, AT&T, T-Mobile, and about 375 other carriers, in over 80 countries. How long will it take YOU to assemble such a network?

In case you are still interested in trying, consider that mopay has agreements with about 550 merchants. That takes more work to copy them.

Mopay has processed close to $1 billion in transaction value so far, but the mobile shopping wave is just building up, and if mopay plays its hand well it can be in the pole position.

We’ve seen this principle at work before.

  • Hulu and Netflix got big by assembling content relationships.
  • Century 21 became dominant by assembling independent real estate agents.
  • The Corporate Executive Board transformed itself from a stodgy membership club into a fast-growing public services company by applying the same principle to corporate executives.
  • Wikipedia replaced Microsoft and Britannica as the largest encyclopedia by coordinating independent experts.

I could give a hundred more examples, but you get the point.

Power comes from coordination. You no longer have to own things to coordinate them. Do it before your competition does.

How will you use coordination to your advantage? What would enable you to create power if you could find a way to coordinate it?

[Image: Flickr user Amateur_photo_bore]

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