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Winning in an Era of Platforms


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A framework, a methodology and a set of strategic elements to help entrepreneurs (and enterprises) deploy a platform approach, swiftly hack growth and outperform competition.

Published in: Business, Technology

Winning in an Era of Platforms

  1. 1. Winning in an Era of Platforms A radical approach to swiftly grow, transform markets and outperform competition Floyd DCostaDec, 2013
  2. 2. 2 Winning in an Era of Platforms Change is here! A new breed of enterprises is disrupting markets and transforming complete industries From Google and Amazon to Apple and Facebook, platform businesses are dominating the landscape and displacing market leaders faster than ever before Organization Market Cap Apple 438 Exxon Mobile 380 Google 291 Microsoft 282 Berkshire Hathaway 281 Position Brand 1 Apple 2 Google 3 CocaCola 4 IBM 5 Microsoft Top 5 firms in 2013 by Market Cap. InterBrand: 2013 Best Global Brands Ref: Bloomberg, InterBrand and Marshall van Alstyne
  3. 3. 3 Winning in an Era of Platforms The product based business model, as it stands today, is broken Many traditional product strategies are based on management principles, methods and approaches developed in 20th century VS
  4. 4. 4 Winning in an Era of Platforms LINEAR VALUE CHAIN While traditional businesses source material, add value, sell and ship finished products to customers…. NETWORKED VALUE CIRCLE …. the emerging business leaders develop platforms, establish network ecosystems, and connect consumers with a virtually endless array of options (of resources) to choose from What’s at the core of this change? A shift from linear value chain models to networked value circles Ref: Global Networked Value Circle Report [Harris, Mckay, DCosta and Eavenson]
  5. 5. 5 Winning in an Era of Platforms What’s driving the change? A confluence of emerging technologies is catalyzing the platform business The Result: A level playing field required to succeed in business 1 23 4 Mobile With varying degrees and capabilities, mobile technology provides access to platforms anytime, anywhere Data Data and analytics facilitates matchmaking - connecting value consumers with relevant value creators Social The world is becoming hyper-social. Social networks allow people to maintain an online identity, connect, and communicate globally Cloud Cloud computing provides the underlying infrastructure to quickly build and deploy digital platforms at fraction of the original cost
  6. 6. 6 Winning in an Era of Platforms • Cost and revenue are generated, both to the left and the right of the value chain • Because of network effects, platforms enjoy increasing returns to scale. • Value grows as the platform matches demand from both sides. • Users will pay more for access to a bigger network, so margins improve as user bases grow. By harnessing dual-sided network effects, platforms are able to grow swiftly, revolutionize marketplaces and substitute incumbents Why are platform businesses winning? Dual-sided network effects • In traditional businesses, growth beyond some point usually leads to diminishing returns:Acquiring new customers becomes harder as fewer people, not more, find the firm’s value proposition appealing. Ref: Strategies for Two-Sided Markets [Eisenmann, Parker and van Alstyne]
  7. 7. 7 Winning in an Era of Platforms So how do businesses succeed in this fast evolving ‘Platform Era’? “In the future, businesses will no longer compete over superior products, but over better evolved platforms” 01 A Definition 02 A Framework 03 An Approach 04 Some Strategic Elements
  8. 8. 8 Winning in an Era of Platforms Defining a ‘platform’ – Understanding the paradigm shift from owning to enabling value creation and consumption Platforms enable the creation and exchange of value between users, with the business only providing the infrastructure enabling users to interact Source: Bloomberg Business Week, Yahoo Finance • Facebook bought Instagram for $1B . • Instagram has only 13 employees. But it has 30 million users • Wall Street investors recently gave Twitter a $24.9 billion valuation. • Twitter has only $500 million in revenue, no major physical assets, and no profit. • Similarly, LinkedIn is worth $26 billion. • And Facebook, despite a poorly executed IPO, is now valued at $120 billion, making it one of the 30 most valuable companies in the world.
  9. 9. 9 Winning in an Era of Platforms Getting started - A five point framework to seed, cultivate and harvest platform thinking Business Model Innovation democratize value creation Network Value Circles redefine competition Open Innovation Culture a radical new ethos Social A positive impact Prosumerism blurring between value creators and consumers Technology every company, an IT company Remember, a platform is a system, which other entities should be able to easily connect with, build products and services on top of it, and co-create value
  10. 10. 10 Winning in an Era of Platforms The way forward - A high-level approach to crafting platforms Strategy is crucial - Deploying traditional ‘linear’ thinking, would definitely result in a wasted opportunity for a network business Map and understand the ecosystem [industry and organization] Identify opportunities in the value chain to harness networks and channel co- creation [Think beyond your own products and services] Incubate partnerships and nurture multiple- sided communities; enable peer segments to interact via your platform Experiment; Hack growth [focus on enhancing the system, to enable others to easily connect, create and consume higher value propositions on top of your platform] Leverage technology; develop a digital platform to enable the effortless creation, exchange and consumption of value 1 4 3 2 5
  11. 11. 11 Winning in an Era of Platforms Getting it right – Basic elements of a successful platform strategy Based on their overall position and approach, platforms place varying emphasis on each of the three building blocks. • The Toolbox creates connection by making it easy for others to plug into the platform • The Magnet creates pull that attracts participants to the platform with a kind of social gravity. • The Matchmaker fosters the flow of value by making connections between producers and consumers. • Connection: how easily others can plug into the platform to share and transact • Gravity: how well the platform attracts participants, both producers and consumers • Flow: how well the platform fosters the exchange and co-creation of value. Ref: Three Elements of a Successful Platform Strategy [Bonchek and Choudary] 3 determining success factors 3 building blocks
  12. 12. 12 Winning in an Era of Platforms If you have a query, suggestion, request or comment, I’d like to hear from you! Connect @floyddcosta “A platform is a system that can be ….., adapted to countless needs and niches that the platform’s original developers could not have possibly contemplated, much less had time to accommodate.” - Marc Andreessen