1.
Geoffrey Parker
Dartmouth College
@g2parker
Marshall Van Alstyne
Boston University
@InfoEcon
Chapter 1
Introduction: Welcome to Platform World
Platform 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 Choudary
Platform Thinking Labs
@sanguit

2.
1. Introduction: Welcome to Platform World
2. Network Effects: The Power of the Platform
3. Architecture: Basic Principles for Designing Successful Platforms
4. Disruption: How Platforms Conquer &Transform Traditional Industries
5. Launch: Chicken or Egg? 8 Ways To Launch Successful Platforms
6. Monetization: Capturing the Value Created by Network Effects
7. Openness: Defining What Platform Users/Partners Can &Cannot Do
8. Governance: Policies That Increase Value and Enhance Growth
9. Metrics: How Platform Managers Can Measure What Really Matters
10. Strategy: How Platforms Change Competition
11. Policy: How Platforms Should (and Should Not) Be Regulated
12. Future: Industries Facing Imminent Change
Platform Revolution: Chapter 1 - Introduction
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3.
@InfoEco
SOMETHING HAS CHANGED
FIRM 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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4.
THESE ARE THE MOST FAMOUS GLOBAL BRANDS
Source: Interbrand 2015 % is growth relative to prior year, $ is value of brand equity
@InfoEco
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5.
13 OF THESE ARE PLATFORMS
Based on presence of a developer or buyer/seller ecosystem.
@InfoEco
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6.
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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7.
Source: P. Evans, CGE; CB Insights, Capital IQ, Crunc
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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8.
DIGITAL ECONOMY IS DOMINATED BY PLATFORMS
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9.
PLATFORMS ARE OVERTAKING ENERGY AND BANKING
9
Source: Visualcapitalist.com, Bloomberg
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10.
10
Source: 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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11.
11
INDUSTRY EXAMPLES
Agriculture 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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12.
12
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 intensify
FORCES OF CHANGE
Surge in data and tools
that can manage and
analyze data
Networks connect physical,
digital, and social
Age of Networks Age of Data
FIRM
Age of Platforms
New business models that that
leverage networks and intelligence
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13.
LINEAR PIPE VS. TRIANGULAR PLATFORM
Elements of value exchange
Source Content Edit/ Curate Create Bundles Multiple channels
RAW MAT’LS PRODUCTION ASSEMBLY DISTRIBUTION
CONSUMERSPRODUCERS
PLATFORM
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14.
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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15.
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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16.
16
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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17.
Source: P. Evans, CGE; Coleman Walker,
Geoffrey Parker, Tulane University 2016
© Evans
Not Just IPO Funding
Accumulated platforms profits
Top 50 public platforms, 2012 Q1 – 2016 Q1
Running Sum
of Gross
Profits
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18.
© Evans
CHINA STILL ACCELERATING
Growth of China’s Leading Platform Companies
Increase in net sales from 2011 Q2 to 2016Q1
Source: P. Evans, CGE; Coleman Walker,
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19.
19
1
connection
2 phones
10
connections
5 phones
66
connections
12 phones
More users = more value = more users…
PLATFORMS LEVERAGE NETWORK EFFECTS
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20.
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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21.
To have an external focus,
you must have a
community strategy.
... this implies ...
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22.
Shift 1: From resource control to resource orchestration
Shift 2. From internal optimization to external interaction
Shift 3. From focus on customer value to focus on ecosystem value
THE PLATFORM SHIFT
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23.
• 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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24.
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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25.
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 Revolution2016 Parker & Van Alstyne, with Choudary – licensed under Creative
Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).

26.
Platform Revolution:
Next Chapter 2 – Network Effects
1. Introduction: Welcome to Platform World
2. Network Effects: The Power of the Platform
3. Architecture: Basic Principles for Designing Successful Platforms
4. Disruption: How Platforms Conquer &Transform Traditional Industries
5. Launch: Chicken or Egg? 8 Ways To Launch Successful Platforms
6. Monetization: Capturing the Value Created by Network Effects
7. Openness: Defining What Platform Users/Partners Can &Cannot Do
8. Governance: Policies That Increase Value and Enhance Growth
9. Metrics: How Platform Managers Can Measure What Really Matters
10. Strategy: How Platforms Change Competition
11. Policy: How Platforms Should (and Should Not) Be Regulated
12. Future: Industries Facing Imminent Change
(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).

27.
For More Chapter 1 Information
Suggested 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

28.
For More Chapter 1 Information
Suggested 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