Platform Business Models: Implications for Value Creation
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1. Platform business models are disrupting traditional linear "pipeline" models through network effects and access over ownership. 2. Ecosystem leadership is key for platform companies, requiring understanding users, expanding boundaries, leveraging resources, and cultivating trust across the ecosystem. 3. Many jobs will be automated through technologies like AI, robotics, and blockchain, while jobs requiring creativity, social-emotional skills, and non-routine problem solving will increase in demand. Skills will need to constantly adapt to an uncertain future.
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Platform Business Models: Implications for Value Creation
- 1. Platform Business Models --- Implications for Value Creation February 2018
- 2. If the rate of change on the outside (of an organization) exceeds the rate of change on the inside, the end is near.... -Jack Welch
- 3. Digital is the main reason just over half the Fortune 500 companies have disappeared since the year 2000. -Pierre Nanterme, CEO Accenture, 2016 Yet..Digital disruption has only just begun.
- 4. All our knowledge is about the past, but all our strategic decisions are about the future What we don’t know we don’t know about the future What we know What we know we don’t know Conway 2003
- 5. Thx to R. Wieselfors, Ericsson for photos
- 6. Thx to R. Wieselfors, Ericsson for photos
- 7. “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” - Bill Gates, The Road Ahead, 1996
- 9. H.I.S. Co. has two Henn na Hotels run “entirely” by robots and plans to open 100 hotels. Food deliveriesCheck-in Other Automated Tasks Concierge Porters Cleaning Lawnmowing Room Service Robot Trashcan Robot fish
- 10. Assembly Welding Food service Housekeeper Bookkeeping Telephone operator Programmers Data scientists Four types of jobs Autor et al., 2003 Cognitive “Brains” Manual “Hands” Routine “Well-defined rules” Non-routine “Rules difficult to define”
- 11. Decline in routine jobs, even after recovery H. Siu (Univ of BC) & N. Jaimovich (Duke Univ), 2015 In 2000, the U.S. cash equities trading desk at Goldman Sachs’s New York headquarters employed 600 traders, buying and selling stock for large clients. Today there are just 2 traders left.
- 12. People • “Net generation” • 24x7 “mobile” workforce • Knowledge via MOOCs • Sharing not owning • Sustainability • Gigs and not jobs Technology • Broadband/wifi • Smart phones • Cloud • Internet of Things • Data/ML/NN • Autonomous vehicles • Smart Robotics • VR/AR/Holography • 3D printing/ALM • Blockchains Open Source IP • Software • Hardware • Physibles Convergence of….. Finance • Microlending/microfinance • Crowdfunding/equity/P2P • Cryptocurrencies/tokens • Blockchains • Mobile money and payments • M2M and R2R payments
- 13. Banking is essential, but banks are not. - Bill Gates Industry transformation?
- 14. From the north of Sweden
- 15. https://bitcoin.org/bitcoin.pdf “…an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”
- 17. Technology replacing Energy and Banking Updated from http://www.visualcapitalist.com/chart-largest-companies-market-cap-15-years/ $905B $660B$730B $512B 2018 $280B
- 18. The New Multinationals CGE Platform Database with Quid visualization, 2015 Over $3 trillion in firm market cap Selected platform companies Emerging platform clusters 2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
- 19. Intangible assets 87% of S&P 500 Market Value
- 20. FIRM FOUNDED EMPLOYEES MKT CAP BMW 1916 125,000 $60B UBER 2009 11,000 $48B MARRIOTT 1927 227,000 $51B AIRBNB 2008 5,000 $31B WALT DISNEY 1923 195,000 $167B FACEBOOK 2004 21,000 $512B WALMART 1962 2,300,000 $298B ALIBABA 1999 50,000 $469B Adapted from Parker & Van Alstyne, with Choudary, 2016, updated January 2018 Something fundamental is changing
- 21. Access to resources, not ownership
- 22. “Pipeline” business models Parker & Van Alstyne, with Choudary, 2016 Linear
- 23. Platform-based business models Network Effects Value rises as more people use the platform Metcalfe’s LawParker & Van Alstyne, with Choudary, 2016
- 24. Pipeline BMs vs Platform BMs • Seller of products and/or services • SMACIT to make linear process efficient • Supply-side economies of scale • Manager of firm with distinct boundaries • First mover advantage • Ownership of resources • Destination for solving customer needs • SMACIT to co-create value • Demand-side economies of scale (network effects) • Leader of ecosystem with fuzzy boundaries • First to scale advantage • Access to resources PLATFORM CONSUMERSPRODUCERS Elements of value exchange Adapted from Parker & Van Alstyne 2016
- 25. Shifting market logics Ericsson & Augur 2011
- 26. PLATFORM CONSUMERSPRODUCERS Ecosystem Leadership Ensure central position within ecosystem Develop deep understanding of users on both sides Expand/cross industry boundaries Leverage resources in ecosystem Create attractiveness through cultivating trust Leverage networks for ecosystem leadership 1. Encourage interactions across all “boundaries” 5. Scale through operational excellence 4. Create agility through control over and access to resources, not ownership 3. Define value co- creation opportunities to provide holistic solutions 2. Use AI to analyze data from multiple sources Teigland 2017
- 27. Expanding industry boundaries “to build the future infrastructure of commerce” “We want to help small businesses grow by solving their problems.” - Founder & CEO Jack Ma
- 28. Alibaba’s Ecosystem– “Doing more with less”
- 29. Technologies enabling interactions among strangers AI/Big data – Predicting/prescribing transactions Biometrics – Identification in transactions Robots/automation – Conducting transactions 3D printing – Localizing transactions Blockchain – Financing and securing transactions VR/AR – Experiencing transactions
- 30. PLATFORM CONSUMERSPRODUCERS Ecosystem Leadership Ensure central position within ecosystem Develop deep understanding of users on both sides Expand/cross industry boundaries Leverage resources in ecosystem Create attractiveness through cultivating trust Leverage networks for ecosystem leadership 1. Encourage interactions across all “boundaries” 5. Scale through operational excellence 4. Create agility through control over and access to resources, not ownership 3. Define value co- creation opportunities to provide holistic solutions 2. Use AI to analyze data from multiple sources Teigland 2017
- 32. Interpersonal trust – people Institutional trust – platform Enabling trust between strangers 1st Rev 2nd Rev 3rd Rev Changing nature of trust Institutional trust - brand 4th Rev
- 33. TRUST: The prerequisite to the ability to scale • Third parties attached to platform – Fraud – Operational – Health, safety • Payment systems – Functionality – Fraud • Privacy of data – Cybersecurity – Ethical usage of personal data Trust in Digital Environments
- 34. Exploitation Improving existing value creation activities Exploration Developing new value creation activities Adapted from March 1991
- 35. CREATORS1. Platform actors 3. Business model CREATION CURATION CONSUMPTION 2. Core interaction to produce value unit CONSUMERS CREATORS CONSUMERS COMPANY CREATORS CREATORS COMPANY COMPANY COMPANY CONSUMERS CONSUMERS CONSUMERS Adapted from Parker, Van Alstyne, & Choudary, 2016, Boudreau & Lakhani, 2009, 2013, Kohler 2016 INTEGRATOR PRODUCT TWO-SIDED CORE INTERACTION VALUE UNIT PLATFORM ACTORS
- 37. CREATORS1. Platform actors 3. Business model CREATION CURATION CONSUMPTION 2. Core interaction to produce value unit CONSUMERS CREATORS CONSUMERS COMPANY CREATORS CREATORS COMPANY COMPANY COMPANY CONSUMERS CONSUMERS CONSUMERS Adapted from Parker, Van Alstyne, & Choudary, 2016, Boudreau & Lakhani, 2009, 2013, Kohler 2016 INTEGRATOR PRODUCT TWO-SIDED CORE INTERACTION VALUE UNIT PLATFORM ACTORS
- 38. Community platform Hierarchical firmVS E.g., Microsoft ~ Created by employees within organizational boundaries E.g., eZ Systems ~ Created by community collaborators regardless of affiliation The Flipped Firm: New model of value creation?
- 39. * More and more, firms are becoming part of distributed knowledge creation. e.g. IBM, Oracle, Intel (Bonaccorsi et al., 2006) * Community and firm share experiences and knowledge to co-create value * Community is seen as a complementary asset to be leveraged and combined with firm’s internal assets to deliver competitive solutions (Dahlander & Wallin, 2006) * However resources of community that firm wants to leverage are outside firm boundaries and embedded in community with competing logic * Firms try to influence the communities in different ways (Dahlander & Wallin, 2006; Dahlander &Magnusson, 2008; Jarvenpaa & Lang, 2011; West & O’Mahony, 2008) Involvement of Firms in Open Source Communities
- 41. •Content management software, #1 in media industry •Customers: UN, FT, WSJ, Vogue, Hitachi, 3M, BMW
- 42. eZ Software development team
- 43. Opportunities and challenges with firm-sponsored OSS communities OSS communities as complementary asset for firms with great potential for firms to turn community outputs into new service offerings BUT, there is potential for goal conflict between the firm and the community since the firm is in control Firm’s goal is to profit from the investment Community’s goal is to improve the shared technology
- 44. A Private-Collective Community Model von Hippel & von Krogh (2006)
- 45. But there’s tension... Private Model Distribution of returns and delegation of value creation solely to Collective Model Openness and free distribution of intellectual ideas for common or public good VS von Hippel & von Krogh 2003
- 46. Developing a community as a complementary asset Teigland et al., 2014
- 47. Community platform Hierarchical firmVS E.g., Ford ~ Created by employees within organizational boundaries E.g., Local Motors ~ Created by community collaborators regardless of affiliation The Flipped Firm: New model of value creation?
- 48. • 100xs lower capital cost • 5xs faster production “Local Motors is the place for people to create influential vehicles together.” https://launchforth.io/explore/ • 100xs lower capital cost • 5xs faster productionhttps://launchforth.io/explore/
- 49. • 100xs lower capital cost “Local Motors is the place for people to create influential vehicles together.”
- 50. Olli - 3D printed autonomous vehicle with IBM Watson https://www.3dprintingbusiness.directory/news/local-motors-prepares-serial-production-ollie-3d-printed-smart-vehicles/ From 25-30,000 parts to 50 partsFrom 25-30,000 parts to 50 parts
- 51. Integrating offline and online communities in local and mobile factories Arizona Maryland Tennessee Germany
- 52. Developing a community as a complementary asset Teigland et al., 2014
- 55. From factories to office parks to….
- 56. “Third Places” and co-working spaces
- 57. Trading one job for a number of “gigs”…
- 58. Sharing economy for workspace? http://www.bbc.com/news/business-35246320
- 59. Gigging and Entrepreneuring in co-living/co-working spaces As a member of TechFarm you will have access to all houses in the network. Imagine being a remote worker and hang out in Hong Kong for 2 months, Bali for 4 monts, Stockholm for 6 months, and have a sense of community and home in all places.
- 60. Do-it-yourself (DIY) microfactory networks
- 61. Increasing forces for local community and circular economies
- 62. Walkable towns without cars Shopping, dining, outdoor movie theater, concerts, comedy, events, etc.
- 64. All jobs have been created within non-routine Food service Housekeeper Programmers Data scientist Admin Assistant Manufacturing
- 65. Jobs that did not exist in 2006 • App developer • Social media manager • Uber/Lyft driver • Driverless car engineer • Cloud computing specialist • Big data analyst/data scientist • Sustainability manager • YouTube content creators • Drone operators • Millennial generational expert https://www.weforum.org/agenda/2016/06/10-jobs-that-didn-t-exist-10-years-ago/
- 66. •Major retailers in USA closed down more than 5000 stores in 2017 and plan to close >1000 stores in 2018 •20-25% of USA malls to close within 5 years http://clark.com/shopping-retail/major-retailers-closing-2017/US https://www.cnbc.com/2017/12/04/retail-jobs-decline-as-amazons-robot-army-grows.html Retail and supporting mall jobs hit hard in USA
- 67. Increasing demand for Data Scientists
- 68. The Blockchain is the glue that is going to drive a productivity revolution across the globe on par with what Henry Ford did with the automobile. — Paul Brody, Americas Strategy Leader, Technology Sector, Ernst & Young
- 69. Cognitive Manual Routine Non-routine Predicted Automation Rate 64-69% Predicted Automation Rate <20% Future Skills in Demand • Creativity • Complex problem solving • Generating new patterns • Coordinating others • Negotiating • Emotional intelligence Predicted Automation Rate 81% Predicted Automation Rate 26% Future Skills in Demand • Fine and gross motor skills • Mobility • Natural language processing • Navigation • Sensory perception • Social and emotional capabilities van der Zande et al., 2018
- 70. Changes in the top 10 skills
- 71. Primary Required Capabilities Gross and fine motor skills Sensory perception Mobility to some extent Sample Tasks Assembling Picking and sorting Welding Cooking Predicted Substitution Rate: 81%* Primary Required Capabilities Fine and gross motor skills Mobility Natural language processing Navigation Sensory perception Social and emotional capabilities Sample Tasks Plumbing and electrician Assisting with surgery Janitorial work Dog walking Predicted Substitution Rate: 26%* Cognitive Manual Routine Non-routine Primary Required Capabilities Retrieving information Recognizing known patterns Optimizing and planning Logical reasoning/problem solving Natural language processing Sample Tasks Data processing, e.g., calculating, bookkeeping Customer service, e.g., cashiers, tel operators, bank tellers Predicted Substitution Rate: 64-69%* Primary Required Capabilities Creativity Complex problem solving Generating novel patterns Coordinating others Social and emotional capabilities Sample Tasks Legal writing Negotiating Teaching Diagnosing diseases Predicted Substitution Rate: <20%* Capability mapping onto the 2x2 job matrix van der Zande et al., 2018
- 76. All our knowledge is about the past, but all our strategic decisions are about the future What we don’t know we don’t know about the future What we know What we know we don’t know Conway 2003
- 77. What will determine success? • Lifelong learning • Experience (Mastery) • Money • Networks
- 78. Exploitation Improving existing value creation activities Exploration Developing new value creation activities Adapted from March 1991
- 79. twitter
- 82. Knowledge through MOOCs (Massively Open Online Courses)
- 83. Trading one job for a number of “gigs”…
- 86. Banking is essential, but banks are not. - Bill Gates Industry transformation?
- 88. What will determine success? • Lifelong learning • Experience (Mastery) • Money • Networks
- 89. Why do networks matter? Casper & Murray 2002 German biotech scientists
- 90. BA Two individuals (organizations) with the same number of contacts…
- 91. …but with very different access to resources BA
- 92. Design your social networks 1. Build relationships across diverse networks 2. Ask “What if?” and challenge basic assumptions 3. Go from “Problem Solver” -> “Solution Finder” 4. Ensure access to resources, not ownership Boundary spanner
- 93. “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” - Bill Gates, The Road Ahead, 1996 Scenario Thinking
- 94. Robin Teigland robin.teigland@hhs.se www.robinteigland.com www.slideshare.net/eteigland @robin.teigland If you like this presentation and would like to contribute to our research, we accept bitcoins: 1HthhUB62EzqEyKaAKvF1LGTabcdp4HsU. Thank you!!!!!