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Platform Strategy & Ecosystems

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Platform Strategy & Ecosystems

  1. 1. Platform Strategy & Ecosystems SVForum: Apps to Ecosystems February 20th 2014
  2. 2. Warming Up
  3. 3. Let’s take a look at the 5-year predictable horizon
  4. 4. The world will be faster, more connected, with a billion more participants in the global economy. A rising middle class in Brazil, India, China, and Indonesia will adopt devices first and computers second, leaping the digital divide. Gen-Y consumers and employees will be in their 30s, defining the conventions for work and play styles. 4G wireless will be broadly available and 5G will be in limited deployment. Carrier networks will be optimized for traffic against specific services and media types. Consumer devices will be dominant, but small devices for data sensing and processing will make up a significant percentage of mobile and Internet traffic.
  5. 5. Most commerce will be initiated via mobile devices and completed on a range of platforms. Most transactions, when executed, will be multi-party: between the app and the underlying services. Social media with effective partitions and channels will be the dominant mode of communication. User attention will continue to fragment, alternately directing and being directed by a range of apps. Data will be a unit of value and a mechanism of lock-in. Industries will be platform-shaped, with a dominant player occupying the highmargin platform position and pushing others to supporting roles.
  6. 6. What is a Platform Business Model?
  7. 7. Product to Platform
  8. 8. Product to Platform
  9. 9. Product to Platform
  10. 10. A platform business model is defined as follows: It is a business model which builds value for multiple sides in a given market by consolidating customers, simplifying marketwide processes, and rewarding each player in the value network between the value network and the customers.
  11. 11. There are many examples of platform business models in action today.
  12. 12. Eisenmann, Parker, Van Alstyne (2006),“Strategies for Two-Sided Markets,” SSRN.com.
  13. 13. There are many examples of digital platform business models in action today.
  14. 14. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Desktop OS: Unix, Mac, Windows PDAs: Palm, Psion, Newton Game Consoles: Wii, Xbox, PlayStation Network Switches: Cisco, IBM, HP Multimedia: Adobe/Flash, MS/Silverlight, Google-Apple/HTML5 Payment Systems: PayPal, Google Checkout, Visa, Apple, Mobile Felica Mobile Devices: iPhone, Android, Symbian, Blackberry Enterprise Systems: Salesforce, Oracle, i2, IBM, SAP Social Networks: Facebook, MySpace, LinkedIn, Monster, Twitter Batteries: Sony, Panasonic, Sanyo, A123 Web Search: Google, Bing+Yahoo!, Baidu eBooks: Amazon, iPad, Nook, Sony Smart Grids: IBM etc. Health Care: Microsoft, WebMD, IBM etc. Eisenmann, Parker, Van Alstyne (2011), “Platform Envelopment,” Strategic Management Journal.
  15. 15. Platform businesses are built on network effects. The more network effects, the stronger the platform.
  16. 16. Usr Usr Book Usr Gam Mus Kindle Zune Amazon User PSP Sony Microsoft User Calls Music MP3 TV Video Games Dvpr Web HTML Publi eBooks Apple Eisenmann, Parker, Van Alstyne (2011), “Platform Envelopment,” Strategic Management Journal.
  17. 17. Openness is a critical element of all platform businesses.
  18. 18. Eisenmann, Parker, Van Alstyne (2011), “Platform Envelopment,” Strategic Management Journal.
  19. 19. Platform sponsor gives away platform value. Partners build apps for installed base, adding new layers of value. Price V4 V3 V2 V1 Platform sponsor benefits from increased sales & royalties. p1 q1 Partners benefit from cost savings and installed base. Quantity Parker, Van Alstyne (2011), “Innovation, Openness & Platform Control,” SSRN.com.
  20. 20. Platform models generate profit through first and third party usage.
  21. 21. Most firms can only concentrate on most valuable apps Profits increase when others add to platform’s “Long Tail” Parker, Van Alstyne (2011), “Innovation, Openness & Platform Control,” SSRN.com.
  22. 22. Platform models build digital ecosystems through virtuous cycles.
  23. 23. “ We view Digital Ecosystems to be the digital counterparts of biological ecosystems, exploiting the self-organising properties of biological ecosystems, which are considered to be robust, self-organising and scalable architectures that can automatically solve complex, dynamic problems. Digital Ecosystems are a novel optimisation technique where the optimisation works at two levels: a first optimisation, migration of agents (representing services) which are distributed in a decentralised peer-to-peer network, operating continuously in time; this process feeds a second optimisation based on evolutionary computing that operates locally on single peers and is aimed at finding solutions to satisfy locally relevant constraints. G. Briscoe, P. DeWilde IEEE Conference on BIONETICS (2006)
  24. 24. “ A digital ecosystem is a distributed, adaptive, open socio-technical system with properties of self-organization, scalability and sustainability inspired from natural ecosystems. Digital ecosystem models are informed by knowledge of natural ecosystems, especially for aspects related to competition and collaboration among diverse entities. Various authors Wikipedia: Digital Ecosystem
  25. 25. [Ecosystem Competition] Kishore S. Swaminathan (2009), Chief Scientist, Accenture
  26. 26. There are three main types of platform business models. They have differentiated power to generate digital ecosystems.
  27. 27. Boudreau and Lakhani (2009), “How to Manage Outside Innovation”, MIT Sloan Management Review
  28. 28. Given current abundance of choices and scarcity of user attention, compelling experiences must deliver platform capabilities and content to users. Without such experiences, an ecosystem fails to thrive.
  29. 29. Weill & Woerner (2013), “Optimizing Your Digital Business Model,” MIT Sloan Management Review
  30. 30. What is a Technology Platform?
  31. 31. A technology platform is defined as follows: It supports a platform business model by adding a digital layer to interactions in the value chain. This makes it possible to interact with the business from any app or device, and makes it possible for the enterprise to analyze the interactions that make up the activity along the value chain. Through the technology platform, each player in the value network becomes part of a digital ecosystem.
  32. 32. Amazon’s pace of innovation is blistering
  33. 33. Amazon’s baseline is sharing by default.
  34. 34. “ All teams will henceforth expose their data and functionality through service interfaces. Teams must communicate with each other through these interfaces. There will be no other form of inter-process communication allowed: no direct linking, no direct reads of another team’s data store, no shared-memory model, no back-doors whatsoever. The only communication allowed is via service interface calls over the network. It doesn’t matter what technology they use. All service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No exceptions. Anyone who doesn’t do this will be fired. Thank you; have a nice day! Jeff Bezos CEO, Amazon
  35. 35. “Information about package is as valuable as the package.” All assets instrumented and connected Innovations on customer access to information Architect for low cost interactions in the ecosystem
  36. 36. “ Information about the package helps us run our business better. That comes from a digital operating model where all our assets are connected and surface information to increase overall value to us and the customer. David Zanca, SVP IT, Customer Access, and Revenue Systems Federal Express Not only do our customers want more information about the packages, but they also now want more interaction with FedEx and expect us to react to changes and resolve problems if they occur. Thomas Wicinski, VP Digital Access Marketing Federal Express
  37. 37. The new baseline is sharing by default.
  38. 38. This approach of common platforms and shared incentives is the path to digital ecosystem success.
  39. 39. Thank you Please send questions and comments to: @sramji sramji@apigee.com

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