The Rise of Platforms - And What It Means for Business
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Why do business platforms beat products every time? This is my keynote at EMERCE eDay. We cover changes in global brands, how feedback effects work, how innovation is different, and examples of coming platforms.
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The Rise of Platforms - And What It Means for Business
- 1. Rise of the Platform & What It Means for Business Marshall Van Alstyne Boston University & MIT marshall@mit.edu InfoEcon@twitter.com © 2013 Parker, Van Alstyne & Choudary
- 2. InterBrand: 2013 Best Global Brands
- 4. Platform firms becoming more Important in economy Firm Market Cap Apple 438 Exxon Mobile 380 Google 291 Microsoft 282 Berkshire Hathaway 281 3 of top 5 firms in 2013 by market cap.
- 5. MKT CAP Weighted Platform Firms Platform firms becoming more Important in economy Percentage of Platform Firms weighted by MKT CAP (2001-2013) 35% 30% 25% 20% 15% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % of top 20 firms by market cap since 2001
- 6. The Product Business Model is Broken
- 7. The Product Business Model is Broken
- 8. 1980-2000 Microsoft platform beats Apple product Apple launched the PC revolution but Microsoft licensed widely, built a huge developer ecosystem, 6X larger.
- 9. Apple Feb 5, 1996 Michael Dell “I‟d shut it down and give the money back to the shareholders.”
- 10. InterBrand: 2013 Best Global Brands
- 11. Nike builds a biz platform
- 13. To be a 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
- 14. How are these related? eBay Sellers Expedia Airlines/Hotels Xbox Developers American Express Merchants Aga Khan Doctors YouTube Videographers AirBnb Rooms Electric Car Charge Stations Mechanical Turk Laborers LinkedIn Employers Android Developers eBay Buyers Expedia Travelers Xbox Gamers Amex CardHolders Aga Khan Patients YouTube Viewers AirBnb Renters Electric Car Drivers Mechanical Turk Jobs LinkedIn Employees Android Users Each Side Attracts More of the Other
- 15. More Amex Merchants More Amex Users … get more Amex Users… … get more Amex Merchants…
- 16. More Android Developers More Android Users … get more Android Users… get more Android Developers… …
- 17. Why platforms beat products every time
- 18. Apple iPod pre-Platform Apple iPod Listener $ Music Producer Retailer $ $ (1) Product First Thinking (3) User bought music retail (or (2) Standard linear value chain P2P) (4) Minimal network effects
- 19. Apple iPod combined with iTunes Apple iPod Listener $ Music Producer Retailer $ $
- 20. Apple iPod post-Platform User Content $$ Apple (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
- 21. How Apple is killing standalone platforms Usr Usr Dvpr Usr Gam Mus Lumia Zune Nokia User PSP Sony Microsoft User Calls Music MP3 Video TV Games Dvpr Web HTML Publi eBooks 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
- 22. How Apple is killing standalone platforms 2007 Today Usr 2007 Usr Dvpr Today Gam Usr Mus Lumia Zune Nokia User PSP Sony Microsoft User Calls Music MP3 Video TV Games Dvpr Web HTML Publi eBooks 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
- 23. How Apple is killing standalone platforms R1 P1 Polycom Speakerphone User U1 P1 Cisco Flip Camera User Calls R1 P1 U1 Music MP3 Video TV Games R1 U1 HP Calculator Dvpr Web HTML Publi eBooks Message for you: A great standalone product might not be sufficient.
- 24. How Apple is killing standalone platforms Usr Usr Upld Usr Upld Dvpr GPS Blkbry TomTom User Photo Flickr RIM User Calls Music MP3 Video TV Games Dvpr Web HTML Publi eBooks Message for you: A great standalone product might not be sufficient.
- 25. Why Apple isn‟t killing Kindle: Amazon Ecosystem © 2012 Zimedia
- 26. Why Apple isn‟t killing Kindle User User Calls Music MP3 Video TV Games Dvpr Web HTML eBooks You can‟t make calls … unless you load Skype. Publi
- 27. Prices Change :: Tweet #1 Monetizing platforms means free pricing is profitable
- 28. To price a platform with network effects, who gets the subsidy?
- 29. There are 2 types of Free 1) Cellphones & Minutes, Razors & Blades 2) Amazon also uses 2sided platform pricing. Will do it more often than authors or publishers. Writers Readers Platform
- 30. Supply Chains Change :: Tweet #2 Platforms unlock new value from spare resources and user generated content
- 31. 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
- 32. Instagram sold for $1B not because of contributions from 13 employees but from 30 million users
- 34. Internal Organization Changes :: Tweet #3 Employees must see across the platform, which must support a shared data layer
- 35. Sony was a virtual Galapagos of holding companies
- 37. Bezos Platform Mandate 1. All teams will expose their data… 2. Teams must communicate through interfaces. 3. … no other form of interprocess communication allowed 4. Interfaces, without exception, must be externalizable. 5. Anyone who doesn‟t do this will be fired.
- 38. Innovation Changes :: Tweet #4 Platforms open themselves to third party contribution
- 39. “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
- 40. It‟s working when users do something you didn‟t expect Ford Model T Flour Mill Hay Carrier Racecar
- 41. It‟s working when users do something you didn‟t expect Mobile Church Sawmill Snowmobile Goat Carrier
- 42. Does Openness Work? Open to developers − − Open to “.com” The Rise & Ignominius Fall of MySpace – Business Week 2011
- 43. 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.‟‟ The Rise & Ignominius Fall of MySpace – Business Week 2011
- 44. Platforms get enormous value From 3rd party developers 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
- 45. Why Platforms Beat Products Value Added - Time 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.
- 46. Industry Changes :: Tweet #5 Platforms will displace gatekeepers with meritocratic crowds
- 48. Video production and curation moves to viewers from TV station staff Advice from travelers replaces that of travel agents
- 49. What‟s next?
- 50. City as Platform
- 51. Energy/Smart Grid as Platform
- 54. If you believe in the power of people connecting, embrace the platform. If you convert your product/service to platform, what would it do?
- 55. and Choudary
- 56. CREDITS Photos: 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 Ignjatovic sania.ignjatovic@gmail.com www.saintartdesigns.com Es Dzi http://darkleaf.webnode.com
Notas del editor
- Coke, 13 year champ, dethronedChildren say “Google it” – not done with a marketing budget. “Brands like Apple and Google and Samsung are changing our behavior: how we buy, how we communicate with each other, even whether we speak with each other,” Mr. Frampton said. “They have literally changed the way we live our lives.” – Jez Frampton, Global Chief Exec, Interbrands. 12 of 30 are platform firms,6 of 10 are platform firmsALL of the top 50 risers are platforms. FB at 52 and Prada at 72Stuart Elliot NYT “Apple passes Coca Cola as Most Valuable Brand” Sept 29, 2013 p B5.http://www.interbrand.com/en/best-global-brands/2013/Best-Global-Brands-2013-Brand-View.aspx
- Coke, 13 year champ, dethronedChildren say “Google it” – not done with a marketing budget. “Brands like Apple and Google and Samsung are changing our behavior: how we buy, how we communicate with each other, even whether we speak with each other,” Mr. Frampton said. “They have literally changed the way we live our lives.” – Jez Frampton, Global Chief Exec, Interbrands. 12 of 30 are platform firms,6 of 10 are platform firmsALL of the top 50 risers are platforms. FB at 52 and Prada at 72Stuart Elliot NYT “Apple passes Coca Cola as Most Valuable Brand” Sept 29, 2013 p B5.http://www.interbrand.com/en/best-global-brands/2013/Best-Global-Brands-2013-Brand-View.aspx
- 3 of 5, knock off energy & financePlot shows % top 20 by market cap
- 3 of 5, knock off energy & financePlot shows % top 20 by market cap
- By the time of the antitrust trial, Microsoft had more than 6 times the number of developers
- 12 of 30 are platform firms6 of 10 are platform firmsALL of the top 50 risers are platforms. FB at 52 and Prada at 72Do something with Nike Platformhttp://www.interbrand.com/en/best-global-brands/2013/Best-Global-Brands-2013-Brand-View.aspx“Brands like Apple and Google and Samsung are changing our behavior: how we buy, how we communicate with each other, even whether we speak with each other,” Mr. Frampton said. “They have literally changed the way we live our lives.” – Jez Frampton, Global Chief Exec, Interbrands. Stuart Elliot NYT “Apple passes Coca Cola as Most Valuable Brand” Sept 29, 2013 p B5.
- Pearson: match people to content, deliver content, certify learning
- eBayGoogle YouTubeLinked In Job Posts
- Developers for Search&Ads, Android, Maps, Power other tool searchPositive feedback spirals, explaining growth of platform firms
- First part is digitization
- http://www.dailyfinance.com/2010/12/01/apple-ipad-steals-market-share-from-amazon-kindle/Apple grew from 16 to 32% in 2010Others: Garmin, Cisco Flip Phone, Sony eReader
- http://www.dailyfinance.com/2010/12/01/apple-ipad-steals-market-share-from-amazon-kindle/Apple grew from 16 to 32% in 2010Others: Garmin, Cisco Flip Phone, Sony eReader
- Smart execs! Each co made right decisions for best product strategy under old business model.Others: Sony eReader
- Smart execs! Each co made right decisions for best product strategy under old business model.Others: Sony eReader
- (1) Multiple co-investors (2) Common Data layer “cust also bought”18 million movies, TV shows, songs, magazines Amazon Appstore - thousands of apps and games Cloud-accelerated web browsing - Amazon Silk Free cloud storage for Amazon content Priced at $199 for 7-inch Wi-Fi VersionAmazon Prime members get unlimited, instant streaming of 10,000 popular movies and TV showshttp://www.dailyfinance.com/2010/12/01/apple-ipad-steals-market-share-from-amazon-kindle/Amazon is also being much more sophisticated about giving free data storage service,which allows them to better ‘consummate the match.’
- 2005 Joseph Ratzinger / Pope Benedict XVI NOK 68B BBRY 16B (3x)2013 Jorge Borgoglio / Pope Francis NOK 25B BBRY 4B (4x)Info on Pope almost as important as the Pope
- While Facebook focused on creating a robust platform that allowed outside developers to build new applications, Myspace did everything itself.
- While Facebook focused on creating a robust platform that allowed outside developers to build new applications, Myspace did everything itself.
- From handful of experts to wisdom of crowds
- Brian Epstein discovered the Beatles in LiverpoolScooter Braun “discovered” Bieber on YouTube
- Source: Wikipedia Solar Energy
- Robert Pinsky – US Poet Laureate © 2012 Yuko Shimizu, FastCompany (seated crowd)© 2012 Tomi Um, MIT Technology Review (laptop diplomas)
- Will you be predator or prey, platform or product?
- With a little help from y friends http://www.youtube.com/watch?v=jBDF04fQKtQ about frame 2.16