platform revolution - ch 01 intro: how platforms are changing commerce
TRANSCRIPT
Geoffrey ParkerDartmouth College
@g2parker
Marshall Van AlstyneBoston University
@InfoEcon
Chapter 1
Introduction: Welcome to Platform WorldPlatform Revolution: Making Networked Markets Work for You
Questrom School of Business
2016 Parker & Van Alstyne with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 Int’l (CC BY-SA 4.0).
with Sangeet ChoudaryPlatform Thinking Labs
@sanguit
1. Introduction: Welcome to Platform World2. Network Effects: The Power of the Platform3. Architecture: Basic Principles for Designing Successful Platforms4. Disruption: How Platforms Conquer &Transform Traditional Industries5. Launch: Chicken or Egg? 8 Ways To Launch Successful Platforms6. Monetization: Capturing the Value Created by Network Effects7. Openness: Defining What Platform Users/Partners Can &Cannot Do8. Governance: Policies That Increase Value and Enhance Growth9. Metrics: How Platform Managers Can Measure What Really Matters10. Strategy: How Platforms Change Competition11. Policy: How Platforms Should (and Should Not) Be Regulated12. Future: Industries Facing Imminent Change
Platform Revolution: Chapter 1 - Introduction
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@InfoEcon
SOMETHING HAS CHANGEDFIRM YEAR EMPLOYEES MKT CAP
BMW 1916 116,000 $53B
UBER 2009 7,000 $60B
MARRIOT 1927 200,000 $17B
AIRBNB 2008 5,000 $21B
WALT DISNEY 1923 185,000 $165B
FACEBOOK 2004 12,691 $315B
KODAK 1888 145,000 $30B (heyday)
INSTAGRAM 2010 13 $1B (acquisition)
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THESE ARE THE MOST FAMOUS GLOBAL BRANDS
Source: Interbrand 2015 % is growth relative to prior year, $ is value of brand equity
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13 OF THESE ARE PLATFORMS
Based on presence of a developer or buyer/seller ecosystem.
@InfoEcon
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Source: International Monetary Fund
North America Europe Africa, Latin America, ROW
Asia
2015 Nominal GDP US$ Total: 73.1 T
THE GLOBAL ECONOMY IS RELATIVELY BALANCED
v10.7 T23.5 T19.5 T 19.5 T
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Source: P. Evans, CGE; CB Insights, Capital IQ, CrunchBase, 2015
North America Europe Africa & Latin America
Asia
North America has the most $1B+ platform firms, as measured by market cap. China, with a large homogeneous market, is growing fast. Europe, with a more fragmented market, has less than ¼ the value of North America
Private
Public
THE PLATFORM ECONOMY IS UNBALANCED
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DIGITAL ECONOMY IS DOMINATED BY PLATFORMS
Source: The Internet Map 2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
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PLATFORMS ARE OVERTAKING ENERGY AND BANKING
Source: Visualcapitalist.com, Bloomberg 2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
10Source: CGE Platform Database with Quid visualization, 2015
Over $3 trillion in firm market cap
The New Multinationals
EXPLOSION OF PLATFORM COMPANIES
Selected Platform Companies Emerging platform clusters
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INDUSTRY EXAMPLESAgriculture John Deere, Intuit Fasal
Communication and Networking LinkedIn, Facebook, Twitter, Tinder, Instagram, Snapchat, WeChat
Consumer Goods Nike, Philips, McCormick Foods FlavorPrint
Education Udemy, Skillshare, Coursera, edX, Duolingo
Energy and Heavy Industry Nest, Tesla PowerWall, General Electric, Enernoc
Finance Bitcoin, Lending Club, Kickstarter
Healthcare Cohealo, SimplyInsured, Kaiser Permanante
Gaming Xbox, Nintendo, PlayStation
Labor and Professional Services Upwork, Fiverr, 99designs, Sittercity, LegalZoom
Local Services Yelp, Foursquare, Groupon, Angie’s List
Logistics and Delivery Munchery, Foodpanda, Haier Group
Media Medium, Viki, YouTube, Wikipedia, Huffington Post, Kindle Publishing
Operating Systems iOS, Android, MacOS, Microsoft Windows
Retail Amazon, Alibaba, Walgreens, Burberry, Shopkick
Transportation Uber, Waze, BlaBlaCar, GrabTaxi, OlaCabs
Travel Airbnb, TripAdvisor
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Source: P. Evans, “Networks, Data and Platforms,” in Growing Global: Lessons for the New Enterprise, Center for Global Enterprise, 2015.
Trends likely to continue and intensifyFORCES OF CHANGE
Surge in data and tools that can manage and
analyze dataNetworks connect physical, digital, and social
Age of Networks Age of DataFIRM
Age of PlatformsNew business models that that
leverage networks and intelligence
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LINEAR PIPE VS. TRIANGULAR PLATFORM
Elements of value exchangeSource Content Edit/ Curate Create Bundles Multiple channels
RAW MAT’LS PRODUCTION ASSEMBLY DISTRIBUTION
CONSUMERSPRODUCERS
PLATFORM 2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
A PLATFORM: • Is a nexus of rules and
architecture• Is open, allowing regulated
participation• Actively promotes (positive)
interactions among different partners in a multi-sided market
• Scales much faster than a pipeline business because it does not necessarily bear the costs of external production.
PLATFORM
CONSUMERSPRODUCERS
Source: Platform Revolution
Elements of value exchange
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PLATFORMS BEAT PRODUCTS/SERVICES
• Apple iPhone
• Uber
• Facebook• Amazon
• Microsoft Zune, Garmin GPS, Sony PSP, HP Calculator, Olympus Voice Recorder
• Ford, BMW, Nissan• NY Times, Fox News, Walt Disney• Hachette, Norton, Blockbuster, Time Warner
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70%Platforms
30%Non
Platforms
Global Unicorns = 115
Source: P. Evans, CGE; CB Insights, Capital IQ, CrunchBase, 2015
Platform = 80 of 115 companies, $300B valuation
MOST UNICORNS ARE PLATFORMS
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Source: P. Evans, CGE; Coleman Walker, Geoffrey Parker, Tulane University 2016
© Evans
Not Just IPO FundingAccumulated platforms profitsTop 50 public platforms, 2012 Q1 – 2016 Q1
Running Sum of Gross
Profits
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© Evans
CHINA STILL ACCELERATINGGrowth of China’s Leading Platform CompaniesIncrease in net sales from 2011 Q2 to 2016Q1
Source: P. Evans, CGE; Coleman Walker, Geoffrey Parker, Tulane University 2016 2016 Parker & Van Alstyne, with Choudary – licensed under Creative
Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
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1 connection
2 phones
10 connections
5 phones
66 connections
12 phonesMore users = more value = more users…
PLATFORMS LEVERAGE NETWORK EFFECTS
Source: Wikipedia.org 2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
In any market with network effects, the focus of attention must shift from inside to outside the firm.
Source: Platform Revolution
IMPLICATION
Reason: You can’t scale network effects inside as easily as outside.
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To have an external focus, you must have a
community strategy.
... this implies ...
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Shift 1: From resource control to resource orchestrationShift 2. From internal optimization to external interactionShift 3. From focus on customer value to focus on ecosystem value
THE PLATFORM SHIFT
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• Know where you are in relation to platforms: provider, partner, potential partner, competitor.
• Assess your data assets; create a data strategy• Invest in Governance to attract partners and their
investments
IMPLICATIONS FOR PRODUCT/SERVICE FIRMS
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CRITICAL CAPABILITIES FOR FIRMS IN A PLATFORM WORLD• Optimize external as well as internal supply chains• Coordinate a distributed ecosystem• Build and manage a common data layer• Reset strategy to emphasize community as an asset, not
just owned resources
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TAKEAWAYS FROM CHAPTER ONE
A platform is a nexus of rules and open infrastructure. A platform business enables value- creating interactions between external producers and consumers. It sets governance conditions for healthy interactions to occur.
A platform’s overarching purpose: to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants.
Because platform businesses create value using resources they don’t own or control, they can grow much faster than traditional businesses.
Platforms derive much of their value from the communities they serve. The best platforms create strong network effects.
Platforms invert companies, blurring business boundaries and transforming firms’ traditional inward focus into an outward focus.
The rise of the platform has already transformed many major industries—and more equally important transformations are on the way.
Source: Platform Revolution 2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
Platform Revolution: Next Chapter 2 – Network Effects
1. Introduction: Welcome to Platform World2. Network Effects: The Power of the Platform3. Architecture: Basic Principles for Designing Successful Platforms4. Disruption: How Platforms Conquer &Transform Traditional Industries5. Launch: Chicken or Egg? 8 Ways To Launch Successful Platforms6. Monetization: Capturing the Value Created by Network Effects7. Openness: Defining What Platform Users/Partners Can &Cannot Do8. Governance: Policies That Increase Value and Enhance Growth9. Metrics: How Platform Managers Can Measure What Really Matters10. Strategy: How Platforms Change Competition11. Policy: How Platforms Should (and Should Not) Be Regulated12. Future: Industries Facing Imminent Change
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For More Chapter 1 InformationSuggested background: MBA Readings
1. Andreessen, M. (2011). Why Software Is Eating The World'. Wall Street Journal, p.20.2. Cusumano, M. (2010) “Platforms not just Products,” (Chapter 1 of Staying Power)3. Evans, P. & Gawer, A. (2016) "The Rise of the Platform Enterprise: A Global Survey."
Center for Global Enterprise research paper.4. Gawer, A., & Cusumano, M. A. (2002). Platform leadership: How Intel, Microsoft, and
Cisco drive industry innovation (pp. 29-30). Boston: Harvard Business School Press.5. O’Reilly, T. (2015) Networks & The Nature of the Firm (medium.com) August 14, 2015 6. Tiwana, A. (2013). Platform ecosystems: aligning architecture, governance, and strategy.
Newnes.
Geoffrey Parker@g2parker
Marshall Van Alstyne@InfoEcon
(click to order on Amazon) 2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
Click on left hand icons to access content (downloaded slides).
with Sangeet Choudary@sanguit
For More Chapter 1 InformationSuggested background: PhD Readings
1. Hagiu A. & Wright, J. (2015), “Marketplace or Reseller?” Management Science 61, no. 1 January : 184–203.
2. M. Rysman, M. (2009) “The Economics of Two-Sided Markets,” Journal of Economic Perspectives 23, no. 3: 125–43.
3. Parker, G. & Van Alstyne, M. (2000), “Information Complements, Substitutes and Strategic Product Design,” Proceedings of the Twenty-First International Conference on Information Systems (Association for Information Systems)
4. Parker, G., Van Alstyne, M. & Jiang, X. (2017). “Platform Ecosystems: How Developers Invert the Firm” MISQ.
(click to order on Amazon) 2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
Click on left hand icons to access content (downloaded slides).
Geoffrey Parker@g2parker
Marshall Van Alstyne@InfoEcon
with Sangeet Choudary@sanguit