eday - marshall van alstyne - mit
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Marshall Van Alstyne
Boston University & [email protected]
© 2013 Parker, Van Alstyne & Choudary
Rise of the Platform& What It Means for
Business
InterBrand: 2013 Best Global Brands
These are Platforms
3 of top 5 firms in 2013 by market cap.
Platform firms becoming moreImportant in economy
Firm Market Cap
Apple 438
Exxon Mobile 380
Google 291
Microsoft 282
Berkshire Hathaway 281
% of top 20 firms by market cap since 2001
Platform firms becoming moreImportant in economy
Percentage of Platform Firms weighted byMKT CAP (2001-2013)
35%
30%
25%
20%
15%
10%
5%
0%2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
MK
T C
AP
Weig
hte
d P
latf
orm
Fir
ms
The Product Business Model is Broken
The Product Business Model is Broken
1980-2000 Microsoft platform beats Apple product
Apple launched the PC revolution but Microsoft licensed widely, built a huge developer ecosystem, 6X larger.
Apple Feb 5, 1996
Michael Dell “I’d shut it down and give the money back to the shareholders.”
InterBrand: 2013 Best Global Brands
Nike builds a biz platform
The system must provide a useful function or service
and allow 3rd party access.
Examples:
iTunes: get music onto iPod
SAP: execute ERP systems
Facebook: connect family, friends & acquaintances
Cisco Smart Grids: capture AC/DC sources, route power
Nike Fuel: motion capture and social benchmarking
Products have features, Platforms have
communities
To be a platform
How are these related?
Each Side Attracts More of the Other
eBay BuyersExpedia TravelersXbox GamersAmex CardHoldersAga Khan PatientsYouTube ViewersAirBnb RentersElectric Car DriversMechanical Turk JobsLinkedIn EmployeesAndroid Users
eBay SellersExpedia
Airlines/HotelsXbox Developers
American Express Merchants
Aga Khan DoctorsYouTube
VideographersAirBnb Rooms
Electric Car Charge Stations
Mechanical Turk Laborers
LinkedIn EmployersAndroid Developers
More Amex Merchants… get more Amex Users…
More Amex Users… get more Amex Merchants…
More Android Developers… get more Android Users…
More Android Users… get more Android Developers…
Why platforms beat products every time
(1) Product First Thinking(2) Standard linear value
chain
(3) User bought music retail (or P2P)(4) Minimal network effects
Apple iPod pre-Platform
Apple iPod
$ $
RetailerMusic
ProducerListener
$
Apple iPod combined with iTunes
Apple iPod
$ $
RetailerMusic
ProducerListener
$
Apple iPod post-Platform
(1)Remove supply chain inefficiency
(2)Triangular platform supply network
(3) Apple owns financial chokepoint
(4) Apple helps users find content
(5) Stronger network effects
Apple
User Content
$$
Lumia
Usr Dvpr
PSP
Usr Gam
MP3
User Music
Video
TV
Games
Dvpr
Web
HTML
eBooks
Publi
Calls
User
Zune
Usr Mus
MicrosoftSonyNokia
Apple has vastly stronger network effects.Sony could have done this. It has many great standalone products.Google is not making this mistake with Android
How Apple is killing standalone platforms
Lumia
Usr Dvpr
PSP
Usr Gam
MP3
User Music
Video
TV
Games
Dvpr
Web
HTML
eBooks
Publi
Calls
User
Zune
Usr Mus
MicrosoftSonyNokia
Apple has vastly stronger network effects.Sony could have done this. It has many great standalone products.Google is not making this mistake with Android
2007 Today
$30/share
$6/share
2007 Today
$53/share
$20/share
How Apple is killing standalone platforms
Message for you: A great standalone product might not be sufficient.
How Apple is killing standalone platforms
PolycomSpeakerphone
R1P1 U1 R1P1 U1
CiscoFlip Camera
R1P1 U1
HPCalculator
MP3
User Music
Video
TV
Games
Dvpr
Web
HTML
eBooks
Publi
Calls
User
Message for you: A great standalone product might not be sufficient.
How Apple is killing standalone platforms
Photo
Usr Upld
Flickr
Blkbry
Usr Dvpr
RIM
GPS
Usr Upld
TomTom
MP3
User Music
Video
TV
Games
Dvpr
Web
HTML
eBooks
Publi
Calls
User
Why Apple isn’t killing Kindle: Amazon Ecosystem
© 2012 Zimedia
MP3
User Music
Video
TV
Games
Dvpr
Web
HTML
eBooks
Publi
Calls
User
You can’t make calls … unless you load Skype.
Why Apple isn’t killing Kindle
Monetizing platforms means free pricing is
profitable
Prices Change :: Tweet #1
To price a platform with network effects, who gets the subsidy?
There are 2 types of Free
1)Cellphones & Minutes, Razors & Blades
2)Amazon also uses 2-sided platform pricing. Will do it more often than authors or publishers.
Platform
ReadersWriters
Platforms unlock new value from spare resources and user
generated content
Supply Chains Change :: Tweet #2
AirBnb sells users’ spare rooms,
competing with hotels that must own them
RelayRides sells users’ spare cars, competing with rental firms that
must own them
Instagram sold for $1B not because of contributions from
13 employees but from 30 million users
Employees must see across the platform, which must support a
shared data layer
Internal Organization Changes :: Tweet #3
Sony was a virtual Galapagos of holding companies
1. All teams will expose their data…2. Teams must communicate through
interfaces.3. … no other form of interprocess
communication allowed4. Interfaces, without exception, must be
externalizable.5. Anyone who doesn’t do this will be
fired.
Bezos Platform Mandate
Platforms open themselves to third party contribution
Innovation Changes :: Tweet #4
“A platform is a system that can be … adapted to countless needs and niches that the platform’s original developers could not possibly have contemplated…”
Mark Andreeson: Venture Capitalist, Netscape Founder, Board HP, eBay
Hay Carrier
RacecarFlour Mill
Ford Model T
It’s working when users do something you didn’t
expect
Snowmobile
Sawmill Goat Carrier
Mobile Church
It’s working when users do something you didn’t
expect
− Open to “.com”
Open to developers −
The Rise & Ignominius Fall of MySpace – Business Week 2011
Does Openness Work?
The Rise & Ignominius Fall of MySpace – Business Week 2011
Does Openness Work?
‘‘We tried to create every feature in the world and said, ‘O.K., we can do it, why should we let a third party do it?’ ‘’ says (MySpace cofounder) DeWolfe.
‘’We should have picked 5 to 10 key features that we totally focused on and let other people innovate on everything else.’’
Most firms can only concentrate on most
valuable apps
Profits increase when others add to
platform’s “Long Tail
You don’t need to own this
Platforms get enormous valueFrom 3rd party developers
- Consider product innovation alone
- Harnessing 3rd party resources, innovation occurs at a higher combined rate.
- Even if a platform starts behind, its value will overtake the product leader.Time
Valu
e A
dded
Why Platforms Beat Products
Platforms will displace gatekeepers with meritocratic
crowds
Industry Changes :: Tweet #5
Advice from travelers
replaces that of travel agents
Video production and curation
moves to viewers from TV station
staff
What’s next?
City as Platform
Energy/Smart Grid as Platform
Education as Platform
Healthcare as Platform
If you believe in the power of people connecting, embrace the
platform.
If you convert your product/service to platform, what
would it do?
and Choudary
CREDITSPhotos:
Energy/Smart Grid as Platform -Source: Wikipedia Solar Energy
Education as Platform - © 2012 Tomi Um, MIT Technology Review
Healthcare as Platform -© Aleksandar Stojanovic
Presentation Design:
Sanja [email protected]
Es Dzihttp://darkleaf.webnode.com