Sandwich Economics - The BigTech you never knew
What if the greatest innovation of our times isn't a product or a platform but an entire economic framework
Sometime in 2021, Mark Zuckerberg began rebranding not just Meta, but his own self. You’ve seen this meme before:
Sometime in 2024, the Zuck rebrand went full-unwind and gave us this:
Well, ok… Zuck was at an Indian wedding.
But this was no ordinary Indian wedding. This was the Davos of Indian weddings.
And Zuck was there because back in 2020, Mukesh Ambani - the wedding host and the chairman of Reliance Industries - had sold him something rather interesting.
A sandwich!
The BigTech you never knew
Back in 2020, Silicon Valley's tech giants made a combined investment of more than 10 billion dollars in a seemingly traditional telecom company in India - Reliance Jio.
An asset-intensive industry where incumbents struggle to hold onto profits, so very unlike the bigtechs that thrive on a scalable asset-light business model.
Why then were they still investing in this traditional telecom business?
Most of today’s BigTech started out with a simple product. Facebook began as a social network, Google started with a search engine, Apple’s second coming started as a music player, while Amazon began as an online bookstore. These companies didn’t initially envision the vast, multi-layered ecosystems they would later create. Their playbooks emerged over time.
Reliance Jio did something different.
It started out with a view of creating not just a superior product or service, or even a superior business model.
It started out with the goal of creating a superior economic framework - a framework which clearly called out what the future economic structure would look like, and which companies would win within it and who would lose.
In effect, it changed the rules of competition for everyone else.
I call this the Sandwich.
And Reliance - the BigTech you never knew - is possibly the best example of a company pursuing Sandwich Economics.
What is Sandwich Economics?
Sandwich - the mechanics and metaphor - are both very visual.
I decided to experiment with a new format - video animation.
Here’s a video to illustrate the idea of Sandwich Economics, that I worked on over the Holidays:
There are two ways to think about Jio once you’ve watched this.
One way is to view Jio as a telecom company that offered cheap access to the internet, and gradually diversified into various business categories, much like a traditional conglomerate.
But there’s another view: Jio’s true innovation isn’t a new product, service, or even a fundamentally new business model. It’s the creation of a radically new ‘economic framework’. And its customers are that Silicon Valley giants effectively bought into this economic framework.
This is the essence of Sandwich Economics.
The greatest BigTech innovation
Most companies start out with a simple goal: solve a specific problem for their customers. Over time, they build out an “economic framework” around that solution.
But Reliance Jio took a different path.
From the very start, it had a clear vision of not just the customer problem, but more importantly, the economic framework it wanted to create.
Even as today’s Big Tech firms expand into new industries, they don’t just bring in new products and services - they transplant economic frameworks they have built and oiled in one domain and impose it onto a new one.
Are they solving problems for users? Sure. But that’s largely a means to an end.
Their core focus is importing an economic framework - built using their unique asset configurations, value chain positions, and value-creation logic - and imposing it on a new industry, much like Reliance did.
Over the past couple of decades, the most significant innovation by Big Tech hasn’t merely been the creation of the world’s leading search engine, social network, e-commerce platform, or cloud computing service.
The most significant BigTech innovation is the “Sandwich” they create and impose on entire industries, forcing these industries to re-organize within it.
We see this when Amazon enters healthcare, Google moves into location-based local services, or Apple enters financial services. And we saw this in what Jio offered the US BigTech.
Everyone’s sandwich varies slightly, but the core idea remains the same. Ultimately, you’re either part of the sandwich’s layered structure or you find yourself caught in between.
How is this different from a good ol’ squeeze?
Sandwiching might seem similar to a traditional supply chain squeeze, where a large company extracts profits from smaller suppliers.
However, sandwiching differs not only in scale but also in the mechanics of how it operates - details I will explore in forthcoming posts.
For now, the key factor to note is this.
A traditional squeeze occurs within a company’s direct supply chain, where relationships between players are managed through formal buyer-supplier contracts.
In contrast, sandwiching operates on a much broader and more informal scale. It is an economy-wide phenomenon beyond the straightforward dynamics of buyer-supplier agreements.
Very often, sandwiching plays out not because a big company squeezes a small company but because the victims of the sandwich end up commoditizing each other in response to the choices made by the company that designs the sandwich.
That is the power of competing with an economic framework (sandwiching) vs competing within it (getting sandwiched).
Why is this not just simply business model innovation?
A business model defines the logic by which a company creates and captures value. It is the structure and mechanics a business establishes to generate and retain value within its own operations.
The “sandwich” as an economic framework goes beyond the scope of a single business.
It represents the logic by which all other businesses within a target economy create and capture value, with the rules of this economic framework proactively directed by the strategic choices of a dominant company.
In other words, the business doesn’t just work on making itself more competitive, it also works on changing the rules of competition for the other businesses.
Sandwiching is increasingly important in today’s world of connected ecosystems, which allow select companies to extend their influence far beyond their own operations.
While every business has the potential for business model innovation, only a select few possess the power and strategic leverage to impose an economic framework that shapes the rules of competition for everyone else.
Sandwich-as-a-service
If we view Big Tech’s evolution as a straightforward historical progression, it might seem like a gradual expansion of a product portfolio - starting with, say, search, and then moving into all kinds of adjacencies. You could explain this any way you want - adjacencies, user-side synergies, complementarities, whatever.
But calling this product portfolio expansion is missing the proverbial forest for the trees.
What’s really happening is the creation of an economic framework. And the subsequent leverage of that framework to morph entire industries in the design that they want.
This is most evident when today’s Big Tech enter new industries tells a different story.
They move in with a clear view of the Sandwich.
They sell the Sandwich to prospective partners - and clearly define preferable positions for them within it.
And once they have the relevant players on board, all other players in the industry get sandwiched.
Your market power today doesn’t matter. What matters is the layer of the sandwich at which you play.
If you’re not at the right layer, you’re toast!
That - is the most powerful innovation of our times.
Credit: Video animation created by Verklickern.
Food for thought! The takeaway is there are many layers and dimensions to strategy, and digitization, global supply chains, globalization of finance, etc
makes these sandwich tactics possible. I suspect this thinking is out of reach for most. Most strategy work is reductive because of poor execution.
Very good video!