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Multi sided platform for the internet of things - oral presentation

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Multi-sided platform for the internet of things.
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Multi sided platform for the internet of things - oral presentation

  1. 1. HEC Professional dissertation Multi-sided platform for the Internet of Things 1WATRIGANT Thibaut
  2. 2. What is the Internet of Things? • The overall network behind connected devices that enables them to communicate with their environment 2 @
  3. 3. Why do we talk about a platform: the interoperability issue Nowadays, connected devices cannot talk to each other, as a result services are device-centric instead of being user-centric. 3 Retail HealthQuantified SelfSmart Home Multi-sided platform for the Internet of Things
  4. 4. Which future for an internet of things multi-sided platform? 4 • WHAT: How will the platform be structured? How will network externalities drive the platform structure? • WHY: To what extent is there a market need for interoperability based on data exchange on the market? • HOW: Will the platform be profitable? How can the platform be implemented to maximize success rate? • WHO: Which resources and capabilities best help companies to launch their platform? ?
  5. 5. Which future for a multi-sided platform for the Internet of Things? 5 WHAT: The IoT platform will be structured in 6 sides, linked by strong network externalities WHY: There is a need for interoperability based on data exchange on the market HOW: Considering advertisers as the profit-making side and service providers as well as connected device manufacturers as the subsidized side is optimal to grow thanks to network effects while being profitable WHO: Key success factors to build its platform are reputation and financial resources
  6. 6. What would be such a platform? IoT platform Platform characteristics: • Multi-sided • Cloud and data-based Platform Offerings • Data storage • API library • Data analytics • IP indexation
  7. 7. The platform will be structured in 6 sides, linked by strong network externalities: qualitative approach 7 End-users: want a high-quality service associated with connected devices Device manufacturers: want to sell their offers with a higher profit. Network providers: Want to improve their revenues by finding new customers or more data to transfer. Advertisers: Want to charge higher prices for ads using targeting data Service providers: want to sell their services with a higher profit. Software providers: want to maximize their profit by selling their offer IoT platform
  8. 8. The platform will be structured in 6 sides, linked by strong network externalities: quantitative perceived added profit method 8 Resulting externality matrix:
  9. 9. The platform will be structured in 6 sides, linked by strong network externalities: taking competition into account 9
  10. 10. There is a need for interoperability based on data exchange on the market 10 The platform will make increase customer willingness to pay for connected devices, making grow the internet of things penetration Impacted by the platform
  11. 11. There is a need for interoperability based on data exchange on the market 11 Services (+6,2%): Quality of service improved & new services by data mixing. Price reduction (+1,6 to 5,6%): End price reduction due to new sources of revenue created Security of information (+0,3 to 3%): Method aggregated implying better security solutions Ad absence(-7,7%): Introduction in ads related with connected devices services
  12. 12. Considering advertisers as the profit-making side and service providers as well as connected device manufacturers as the subsidized side is optimal to grow thanks to network effects while being profitable 12 ResultStrategy 1- Focus on growth by relying on service providers and device manufacturers 2- Focus on profitability by attracting advertisers
  13. 13. Key success factors to build its platform are reputation and financial resources 13Note : some other platforms may also be included on this market map that has been built in January 2015
  14. 14. Key success factors to build its platform are reputation and financial resources 14 Key resources & capabilities Firstmoveradvantage Publicknowledgeof thebrand Financialresources Platformoffering versusexpectations Professionalbeliefin platformsuccess Internationalpresence Commercialsaleforce Sizeofpartners ecosystem Platformdevelopment planinaccordance withnetworkeffects Influence rate 5% 12% 9% 18% 18% 3% 5% 15% 15%
  15. 15. To summarize: what’s the future for our Internet of Things platform? 15 …will understand that there is a market need for interoperability based on data exchange between connected devices …and will reach profitability by attracting advertisers … will launch a 6- sides platform and will focus on service providers and device manufacturers to make it grow… One actor with a lot of reputation and financial resources…
  16. 16. Thanks Questions 16
  17. 17. Appendices 0.1 General state of the art: the gap between platform researches and internet of things market news 0.2 General state of the art: literature review 1.1 Qualitative interview guide 1.2 Qualitative interviews: people interviewed 2.1 Quantitative survey: from data need to tangible results 2.2 Quantitative survey: data need understanding 2.3 Quantitative survey: survey marketing 3.1 Perceived added profit methodology: presentation 3.2 Perceived added profit methodology: results 4.1 Mathematical and iterative model: inputs 4.2 Mathematical and iterative model: method 4.3 Mathematical and iterative model: assumptions tested 4.4 Mathematical and iterative model: results 5.1 Actors resources and capabilities evaluation 5.2 Key success factors to build its platform are reputation and financial resources 5.3 Actors resources and capabilities evaluation 6. Bibliography 17
  18. 18. General state of the art: the gap between platform researches and internet of things market news This research bring empirical evidence to theoretical studies related with multi- sided platform and give theoretical insights to the new internet of things market 18 Platform markets Internet of Things Theoretical Empirical
  19. 19. General state of the art: literature review 19 Platform markets Internet of Things Theoretical Empirical (Ropert, Bonneau, & Ramahandry, 2013) (Institut Carnot, 2011) (Haowei, Tianhai, Yuan, & Rencai, 2013) (Vermesan & Friess, 2010) (Gartner, 2014) (Cisco Internet Business Solutions Group, 2011) (Ericsson, 2010) (Morgan Stanley, 2013) (IDC, 2014) (Miorandi, Sicari, De Pellegrini, & Chlamtac, 2012) (Canalys, 2014) (Evans, 2011) (Sriram, et al., 2014) (Rochet & Tirole, 2002) (Hagiu & Wright, Multi-Sided Platforms, 2011) (Balamuralidhar, Prateep, & Arpan, 2013) (Sylvain, 2014) (Parker & Van Alstyne, 2002) (Cusumano & Gawer, 2002) (Caillaud & Julien, 2001) (Zhu & Iansiti, 2007) (Liebowitz & Margolis, 1995) (Rangan & Adner, 2001)
  20. 20. 1.1 Qualitative interview guide 20 Introduction and introduction of the interview: “Dear Mister / Madam, Thanks for having accepted giving your opinion and knowledge. All the information you give me may contribute to the work I am currently undertaking and may be included inside, under your name or anonymously depending on your preference. “ Q2.1-First question, simple to answer and very factual to make the interlocutor confident and talk more easily: “What is your definition and understanding on the Internet of Things? Can you explain to me your day to day work and its link with this market?” Then, react on one sentence and begin asking questions to extract the following data needed: General questions my interlocutor platform perception. Two goals: being sure we talk about the same thing and get information or new ideas using actors’ perceptions on the platform (Q2.2). Among these questions, clarifying and exploring the platform offerings to different actors. Then determining whether they think the platform is more quality driven, installed base driven or expectation driven not by directly asking it to my interlocutor but by asking him to order 3 platform offerings, each one accentuating one of the three previously cited characteristics (Q2.3). Then I will ask which resources and core capabilities best help building such platform in his opinion before asking him evaluate which actor has best success rate in implementing its platform (Q2.4). Questions about his data sharing experiences and issues: I am going to ask them about the awareness concerning data they might be giving already away to try to get an understanding about their experience, and know how related to this issue. How sensitive my interlocutor is to other actors on the platform? To proceed, I will introduce a type of actor, explain what could be its potential role in the platform, ask my interlocutors to comment on this role before asking him to rate between 0 and 5 the importance he would give to this type of actor (Q2.5). How sensitive he is to platform prices? I will introduce the subject by asking my interlocutor what benefits he hope gaining from such a platform. Then I will introduce the cost-side of acceding to such benefits by asking which payment structure would best suit my interlocutor before inquiring about how much would he be willing to pay and how sensitive is its price elasticity (Q2.6). Initial interview guide: Guide redesigned and adapted after each interview
  21. 21. 1.2- Qualitative interviews: people interviewed 21 Confidential
  22. 22. 2.1 Quantitative survey: from data need to tangible results 22 Data need Understanding • From hypotheses to data need • From data need to data gathering methodology Survey design • From data need to survey design • Questions review • Questions design on Google survey Survey marketing • Article on Aruco website • Facebook advertising • Social media advertising • Slideshare presenting the project Data analysis • Data standardization on Excel • Respondents pool constitution • Data analysis per pool • Data graphic representation Data result interpretation • Graphical and analytical analysis of data • Mix between data from quantitative survey and data from qualitative interviews
  23. 23. 2.2 Quantitative survey: data need understanding 23 Data need Understanding • From hypotheses to data need • From data need to data gathering methodology
  24. 24. 2.2 Quantitative survey: data need understanding 24 Survey design • From data need to survey design • Questions review • Questions design on Google survey Survey design on Google SurveyFrom data need Questions review Page title: Connected devices: tell us what you think of their future! Introduction: This poll has been created by Thibaut Watrigant, writer at Aruco.com, while writing a professional dissertation on the Internet of Things market evolution, focusing on IoT data exchange platform to improve quality of IoT- related service. This poll contains 9 questions and will take 5 minutes to handle. Thanks for your answers, all of them being anonymous. Q1.1: Have you already bought a connected device? Yes No Q1.2: While buying, which relative importance you give to the following criteria (Scale: 0 to 5, from “not important” to “the most important thing”) The object and its functionalities Its design Its price Services offered with the device Security of my personal data Advertising absence Page break …
  25. 25. 2.2 Quantitative survey: data need understanding 25 Data analysis • Data standardization on Excel • Respondents pool constitution • Data analysis per pool • Data graphic representation Data exported from Google survey to Excel resulting in anExcel Tab 16x113 to be standardized Pool constitution: three pools Use of Excel « SUMIF » function to analyse every result per respondent pool Data graphic representation per question per pool. Ex: what if we pay you to obtain your data
  26. 26. 2.2 Quantitative survey: data need understanding 26 Data result interpretation • Graphical and analytical analysis of data • Mix between data from quantitative survey and data from qualitative interviews
  27. 27. 2.3 Quantitative survey: survey marketing 27 Survey marketing • Article on Aruco website • Facebook advertising • Social media advertising • Slideshare presenting the project
  28. 28. 3.1 Perceived added profit methodology: presentation 28 We have based network externalities from actor A to actor B quantification on how much perceived added profit the presence of actor B makes on actor A’s income statement. As the effect of an added profit of a certain number of dollars is market dependent (for instance a network provider and an advertiser do not have the same profit scale and margins), all quantification will have to be affected by a factor characterizing profitability level in the different industries in order to be comparable. Actor A Perceived added profit of joining the platform: ΔPercProf = f(Actor A, Actor B, Actor C) Other Actor A Actor B Network externalities between actors A and from actor B to actor A
  29. 29. 3.2 Perceived added profit methodology: results 29 e: number of end-users. d: number of devices compatible with the platform, which is highly correlated with the number of connected device manufacturers having joined the platform. Ad: number of advertisers paying to obtain data in order to contextualize their advertisings. s: number of service providers linked with the platform. So: number of software providers linked with the platform. n: number of network providers linked with the platform. 𝐸 = 𝜆 + 𝜂 𝜆 + 1 𝜎 + 1 −𝜎 −1 𝜆 + 1 −𝛿 −1 −𝜆 −1 −1 −1 −𝜅 𝜒 − 𝜅 𝛼 + 𝜔 𝛼 + 𝜔 −𝜃 −0 −𝜀 𝛼 − 1 −0 −0 −𝛼 −0 𝜑 + 𝛽 𝜑 + 𝛽 − 0 −𝜏 0 −𝛽 0 −0 𝛽 − 1 0 −0 −1
  30. 30. 4.1 Mathematical and iterative model: inputs 30 Kp 2+Kn 2=1, Kp=0.50, Kn=0.75. Cn 2+Ca 2=1, Cn=0.84, Ca=0.40. n1tot=50 million, n2tot=4,000, n3tot=1,000, n4tot=10,000, n5tot=1,000, , n6tot=20. P1=10, P2=7, P3=5, P4=3, P5=3, P6=3. n1,1=1,000, n1,2=5, n1,3=10, n1,4=5, n1,5=5, n1,6=1. 𝑛𝑖+1,𝑗 = 𝑛𝑖,𝑗 + 𝑛𝑖,𝑗 𝐶 𝑛 𝑘 𝐸𝑖𝑘 𝑛𝑖𝑘 𝑛 𝑘𝑡𝑜𝑡 + 𝑛𝑖,𝑗 𝐶 𝑎 𝐴𝑖𝑗 𝐾 𝑛 𝑘 𝐸𝑖𝑘 𝑛𝑖𝑘 𝑛 𝑘𝑡𝑜𝑡 + 𝑃𝑖 𝐸 = −1.5 −1.7 −1.5 −0.5 −1.0 −1.7 −0.3 −1.0 −0.7 −1.0 −1.0 −1.0 −0.7 −0.1 −3.8 −3.8 −0.6 −0.0 −0.5 −0.9 −0.0 −0.0 −1.9 −0.0 −1.2 −1.2 −0.0 −0.2 −0.0 −1.1 −0.0 −0.0 −0.1 −0.0 −0.0 −1.0
  31. 31. 4.2 Mathematical and iterative model: method 31 Input data: key variables and initial conditions 𝑛𝑖+1,𝑗 = 𝑛𝑖,𝑗 + 𝑛𝑖,𝑗 𝐶 𝑛 𝑘 𝐸𝑖𝑘 𝑛𝑖𝑘 𝑛 𝑘𝑡𝑜𝑡 + 𝑛𝑖,𝑗 𝐶 𝑎 𝐴𝑖𝑗(𝐾 𝑛 𝑘 𝐸𝑖𝑘 𝑛𝑖𝑘 𝑛 𝑘𝑡𝑜𝑡 + 𝑃𝑖) Hypotheses tested on business model and on implementation Iterative model Results on platform growth and profitability Test with different hypotheses to maximize results on growth and profitability
  32. 32. 4.3 Mathematical and iterative model: assumptions tested 32 Price expectation strategy -Δpi 125% 110% 50% 111% 102% 102% Investment matrix Aij 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,2 1,2 0 4,3 1,9 1,4 1,5 1 2 4 0,8 0,6 1,5 1 2 4 0,8 0,6 1,5 1 2 4 0,8 0,6 1,5 1 2 4 0,8 0,6 1,5 1 2 4 0,8 0,6 1,5 1 2 4 0,8 0,6 𝑘=1 6 ∆𝑃𝑖 6 ≤ 1
  33. 33. 4.4 Mathematical and iterative model: results 33 nij End-users Device manufacturers Advertisers & data users Service provider Software provider Network provider n1 1000 5 10 5 5 1 n2 1420 6 10 7 6 1 n3 2018 8 10 10 7 1 n4 2869 10 10 14 8 1 n5 4079 13 10 19 9 1 n6 5803 16 10 27 11 2 n7 8263 20 10 38 12 2 n8 11775 26 10 54 14 2 n9 16802 33 10 76 17 2 n10 24014 42 10 107 20 2 n11 34397 53 10 152 23 3 n12 49417 68 10 215 27 3 n13 71286 87 10 306 32 3 n14 103405 113 10 436 37 3 n15 162341 142 11 613 41 3 n16 257288 180 13 866 44 4 n17 413186 231 15 1233 49 4 n18 676059 304 17 1776 54 4
  34. 34. 4.4 Mathematical and iterative model: results 34
  35. 35. 5.1 Actors resources and capabilities evaluation 35 1- Market study of actors having launched their platform end-2014
  36. 36. 5.2 Key success factors to build its platform are reputation and financial resources • Determination of best resources and capabilities to launch its internet of things platform 36 • Building a good product: having financial means to invest in R&D and to be able to manage and secure data (9%), offering services which match different sides’ expectations (18%) and rely on network effects (15%), and building an ecosystem with a lot of actors to raise the number of platform offerings (15%). • Being already known and having a good brand reputation: being known by the public (12%), having professionals believing on platform success (18%), having a big commercial salesforce (5%) and an international presence (3%). • Being the first to launch its platform: 5%,
  37. 37. 5.3 Actors resources and capabilities evaluation 37 2- Determination of key success factors for platform launching Key resources & capabilities Firstmover advantage Publicknowledgeof thebrand Financialresources Platformoffering versusexpectations Professionalbelief inplatformsuccess International presence Commercial saleforce Sizeofpartners ecosystem Platform developmentplanin accordancewith networkeffects Influence rate 5% 12% 9% 18% 18% 3% 5% 15% 15%
  38. 38. 5.3 Actors resources and capabilities evaluation 38 3- Application of these criteria to platform launchers Confidential
  39. 39. 6. Bibliography 39 Amdocs. (2011). Making the most of connected devices. Chesterfield, MO: Amdocs. Atzori, L., Iera, A., Morabito, G., & Nitti, M. (2012). The Social Internet of Things (SIoT) – When social networks meet the Internet of Things: Concept, architecture and network characterization. Cagliari: Elsevier. Balamuralidhar, P., Prateep, M., & Arpan, P. (2013). Software Platforms for Internet of Things and M2M. Journal of the Indian Institute of Science VOL 93:3, 487-498. Caillaud, B., & Julien, B. (2001). Chicken and Egg: Competing Matchmakers. London: CEPR Discussion Paper. Canalys. (2014). Defining the Internet of Things. Pao Alto, CA: Channels Pulse (PCHA), Enterprise Pulse (PENT), Mobile Pulse (PMOB). Cisco. (2014). Future of Innovation: Building IoT platform. Internet of Things World conference (pp. 1-30). Chicago, Illinois: Cisco Research. Cisco Internet Business Solutions Group. (2011, 07 29). The Internet of Things - How the Next Evolution of the Internet is Changing Everything. San Francisco: Cisco Whitepaper. Colistra, G., Pilloni, V., & Atzori, L. (2014). The problem of task allocation in the Internet of Things and the consensus-based approach. Cagliarni: Elsevier. Cusumano, M. A., & Gawer, A. (2002). The Elements of Platform Leadership. Cambridge, MA: MIT Sloan Management Review . Ericsson. (2010, 04 13). thecompany/press/releases/2010/04/1403231. Retrieved 11 23, 2014, from ericsson.com: http://www.ericsson.com/thecompany/press/releases/2010/04/1403231 Evans, D. S. (2011). Platforms Economics: Essays on Multi-Sided Businesses. New York: Competition Policy International (CPI). Filistrucchi, L., Geradin, D., & Van Damme, E. (2012). Identifying two-sided markets. Tilburg: TILEC. Gartner. (2014, 11 11). Press release. Retrieved 11 23, 2014, from gartner.com: http://www.gartner.com/newsroom/id/2905717 Goldman Sachs. (2014). The Internet of Things: Making sense of the next mega-trend. New York: Global Investment Research. Gubbia, J., Buyyab, R., Marusic, S., & Palaniswami, M. (2013). Internet of Things (IoT): A vision, architectural elements, and future directions. Melbourne: Elsevier. Hagiu, A., & Wright, J. (2011). Multi-Sided Platforms. Cambridge, US: Harvard Working Paper. Hagiu, A., & Wright, J. (2013). Do you really want to be an ebay? Harvard Business Review, 103-108. Haowei, W., Tianhai, Z., Yuan, Q., & Rencai, D. (2013). Research on the framework of the Environmental. Xiamen: Institute of Urban Environment, Chinese. ICT, E. C. (2014, 07 23). Internet of Things and Platforms for Connected Smart Objects. Retrieved 11 22, 2014, from ec.europa: http://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/topics/9091-ict-30-2015.html#tab1 IDC. (2014). Worldwide and Regional Internet of Things (IoT) 2014–2020 Forecast: A Virtuous Circle of Proven Value and Demand. Framingham, MA: IDC whitepaper. Institut Carnot. (2011). Livre blanc: objets communicants et internet des objets. Paris: Institut Carnot. Miorandi, D., Sicari, S., De Pellegrini, F., & Chlamtac, I. (2012). Internet of things: Vision, applications and research challenges. Varese: Elsevier. Morgan Stanley. (2013, 10 02). businessinsider.com. Retrieved 11 23, 2014, from 75-billion-devices-will-be-connected-to-the-internet-by-2020: http://www.businessinsider.com/75- billion-devices-will-be-connected-to-the-internet-by-2020-2013-10 Parker, G., & Van Alstyne, M. (2002). Two-sided network effects: a theory of information product design. Management Science, 1494-1504. Perera, C., Zaslavsky, A., & Christen, P. (2013). Context Aware Computing for The Internet of Things: A Survey. Piscataway, New Jersey: IEEE COMMUNICATIONS. Pérez, J. L., Villalba, Á., Carrera, D., Larizgoitia, I., & Trifa, V. (2014). The COMPOSE API for the Internet of Things. World Wide Web commitee (p. 6). Séoul: WWW'14 companion. Rochet, J.-C., & Tirole, J. (2002). Platform Competition in Two-Sided Markets. Toulouse: Journal of the European Economic Association. Ropert, S., Bonneau, V., & Ramahandry, T. (2013). Internet of Things: Outlook for the top 8 vertical markets. Montpellier: Idate research. Sivabalan, A., Raja, M. A., & Balamuralidhar, P. (2013). Towards a LightWeight Internet of Things. Bangalore: Journal of ICT Standardization. Sriram, S., Manchanda, P., Esteban Bravo, M., Chu, J., Ma, L., Song, M., et al. (2014). Platforms: A Multiplicity of Research Opportunities. 9th Invitational Choice Symposium at Erasmus University (pp. 1-19). Rotterdam: Erasmus University. Sylvain, G. (2014, 11 24). Which actors may benefit from an IoT multi-sided platform? (T. Watrigant, Interviewer) Vermesan, O., & Friess, P. (2010). Internet of Things Strategic Research Roadmap. Europe: European Research Cluster. Vottero, F., & Boulègue, A. (2014). Le marché des objets connectés. Paris: Xerfi research. Witchalls, C. (2013). The Internet of Things business index: A quiet revolution gathers pace. London: The Economist Intelligence Unit.

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