Last Tuesday, 28th June 2022, we hosted an interesting TheNTWKInteract: From Platform Revolution to... with Geoff Parker, Marshall Van Alstyne, Peter C. Evans, and of course our NTWKers.
Let me do a mix of takeaways from my previous research to prepare TheNTWKInteract and what happened last Tuesday.
I have to recognize that 2 years ago when I was participating in the webinar Platform Leadership Executive Webinar by PSI Platform Strategy Institute with Peter C. Evans, Dyan Finkhousen, Geoff Parker, Marshall Van Alstyne I was dreaming that one day I will have them at TheNTWK.
Since TheNTWK was founded we have learned from Dyan Finkhousen about Ecosystems, Peter C. Evans about Platform Talent, Platform Trends, Web3, and more... and last week, Geoff Parker and Marshall Van Alstyne talked about the evolution of the platforms over the last 10 years.
So, it was an honor to have with us the 3 co-chairs of the MIT Platform Strategy Summit, this year you are celebrating a special edition celebrating their 10th Anniversary!!! and I tried to go together through that journey:
So, let's start with the recap:
2013 - What is a Platform?
The first year of the MIT Platform Strategy Summit was focused on the basics: what is a platform. Geoff appointed that "the signs were getting pretty obvious that something had changed in the economy" and "we started to talk about openness, as one of the determinants of firm structure as a difference there" said Marshall.
📁 Go to the MIT Initiative on the Digital Economy Library
2014 - Platforms across industries
Starting to arise platforms across industries: energy, staffing, education, publishing: ✅ Shoe companies selling healthcare --> Data-driven functional integration ✅ Coffee houses competing with MasterCard --> Platform envelopment ✅ Thermostats selling services --> Data-driven functional integration ✅ People driving cars they don’t own --> Efficiency from spare capacity ✅ Schools without teachers --> Efficiency from spare capacity ✅ Hotels that don’t own rooms --> Efficiency from spare capacity
2015 - Invert the Firm
When asking about the importance of investing in the Community so the Ecosystem to our guests: "sharing economy was just beginning to gel" Peter appointed that "the language around platforms, the consensus as to what it should be called, and how to define these things were still very formative". I think till today there is not yet a consensus on how we have to call the different types of platforms and a lot of work to do to explain this kind of business model. But one common idea arises the concept of the inverted firm. Marshall shared "we had some good intuitions, and we had formal theoretical models, but we didn't have proof"..." We now have data that, if you're optimizing your ecosystem, you're probably more valuable than just optimizing the product. Those firms that have sought to open up into harnessed external innovations and changing the structure, to create the inverted firm, are more valuable than those that don't"
📁 Invest in the Community: “Most big data these days is small potatoes” “use your analytics for ecosystem optimization, not product optimization” Marshall (From YouTube Library)
2016 - Platform Revolution
The year that Annabelle Gawer and Peter C. Evans published “The Rise of the Platform Enterprise” the first global survey of platform companies is when we start the Europeans see that we are not on the scene. And in Spring'16 it was launched the Platform Revolution Book co-authored by Geoff Parker, Marshall Van Alstyne, and Sangeet Paul Choudary. The year that got real traction with incumbent firms and they were trying to understand why some sectors have different speeds on "platformizitation" for example Health, fragmentation and massive inefficiency make it very attractive but the risk on experimentation. Which markets were likely to transform, this is what our guests said: 1. "In general products depreciate through use, by contrast, platforms with network effects appreciate through use because they have network effects users create value, which attracts users to create more value. So that grows in value over time! 2. How easy is it to invert the firm? How easy is it to orchestrate 3rd apart value, for example, the proportion of valuable information, it is really easy to create network effects by spreading information from interaction, then it is easy to make the transformation? 3. Healthcare, fragmentation, and massive inefficiency make it very attractive but the main problem is the risk of experimentation. So we have to find ways to mitigate that risk."
📁 Go to the MIT Initiative on the Digital Economy Library
📁 How Platforms change Strategy Summing up Van Alstyne noted: “The failure to transition to a new approach explains the precarious situation that traditional businesses find themselves in… the writing is on the wall: Learn the new rules of strategy for a platform world or begin planning your exit.”
2017 - Whoever owns the data owns the opportunity
📁 PLATFORM STRATEGY SUMMIT Report. Six Emerging Themes: ✅ Platform Globalization, ✅ Platform Consolidation, ✅ Increased regulation, ✅ Platforms go Industrial, ✅ Competition for developer talent, ✅ Drivers for innovation 📁 Go to the MIT Initiative on the Digital Economy Library
2018 - Everywhere there can be a platform, there will be a platform
📁 PLATFORM STRATEGY SUMMIT Report - Takeaways ✅ Platforms are making new business models possible. ✅ Platforms are accelerating network effects by creating value and participation. ✅ Hiring talent and finding skilled workers can be fast-tracked on platforms. ✅ The value of data is recognized, mined, and monetized. ✅ Platform regulation is changing the landscape. And I would like to highlight the Takeaways about the Healthcare platforms and Digital Health: ✅ New platform ecosystems are reaching out to external partners to develop new services. ✅ Patients are receiving care via virtual methods at increasing rates. ✅ A pandora's box of privacy concerns opens along with more medical data sharing. 📁 Go to the MIT Initiative on the Digital Economy Library
2019 - Antitrust traditional laws don't work in platform markets.
The trends highlighted for this year on TheNTWKInteracts with Marshall, Peter, and Geoff were:
1. "A big shift in the world and people who have been paying attention to these things are gonna get called in.
2. Began to focus on the allocation of venture capital and B2B side
3. Why wasn't Europe generating that level of innovation? And it wasn't that consumers weren't embracing platforms? They were. European consumers and were an attractive market for many platforms, the control or the dealing with antitrust or competition policy got a lot of attention. But another big question was, why wasn't Europe generating the startups that would lead to growth in this space
4. But the idea is that there's a spillover of some kind that requires orchestration. This explains why you get two-sided pricing because you discount one group in the market to get another because it's a spillover benefit. Antitrust traditional laws don't work in platform markets.
5. Externalities cause market failures --> market failures require interventions => or you need some way to correct that markets don't correct market failure. So what we've got are a system whereby market failures are happening and fake news or misinformation. And it's a negative externality, and we don't have institutions to deal with it".
📁 "unchecked growth can harm market ecosystems, as well as society, which is why international regulatory and antitrust discussions are heating up."
2020 - Platforms adapt to survive
📁 PLATFORM STRATEGY SUMMIT Report Highlights: ✅ Supperapps and experience platforms are on the rise ✅ Industrial firms are adapting business models to become orchestrators of platform ecosystems. ✅ Policy issues regarding data and information ownership will intensify as platforms become engines of value creation. 📁 Go to the MIT Initiative on the Digital Economy Library 2021 - Tomorrow’s Business model meet today’s challenges My second online MIT Platform Strategy Summit, where I decide to write a Fast Takeaways 😀
📁 PLATFORM STRATEGY SUMMIT Report Highlights ✅ Platform-to-platform integration is on the rise. Sharing networks, resources, and opportunities can help customer service and increase business value. ✅ New lifelines for traditional businesses. Platforms are becoming core to industrial businesses along with AI and data analytics. ✅ Green energy opportunities. Platforms will play a major role in “the great energy transition.” ✅ Regulatory constraints. Laws aimed at regulating platforms will reshape global marketplaces, especially giant B2C platforms suspected of restricting competition ✅ Chinese tenacity. Business model innovation is rapid-fire in China. Other nations need to watch super-apps and learn best practices. ✅ Leadership redefined. Being a leader in a platform company requires an understanding of platform trends and an embrace of change. Corporate transformation must be driven from the top down: the CEO needs to visit customers and also persuade employees of the benefits. ✅ Big tech expansion. Platform giants are increasingly exploring the financial and healthcare sectors.
2022 - From Platform Revolution to...
and then, the interaction started with NTWKers discussing:
SUPPLY-SIDE
Erich Joachimsthaler " it's always still a supply-side question, you know, it seems to me more supply-side centric rather than the power of community?"
Geoff: "if you're in a network effect, or platform world, you have to decide which part of the value side you're going to light up is it going to be more of a community of same-side network effects where you're generating value for people like you, or you're going to be connecting an ecosystem running a marketplace and trying to do some kind of cross side."
"The traditional mindset is focused in the wrong direction: you're the one responsible for production, and those assumptions break down, or rather, the conclusions break down when that assumption doesn't work anymore. So it'd be an assumption that third parties are doing production, your job is orchestration, and you don't have to control the resources." appointed Marshall
NETWORK EFFECTS
Sameer Singh " when you're evaluating early-stage companies, it's often easier to spot a same-side network effect as opposed to a cross-side one."..." Mainly because essentially the output variable is slightly different, it's very, very unlikely to see a same-side network effect where you're going to see sales or revenue hasn't as the output project, it's much more often engagement and revenue comes away down the line, which is why it kind of those, those common equations don't tend to work very well, if you use engagement, as as a proxy tends to work fairly well. "You want to see, cohorts improve over time and future cohorts look better than previous cohorts."
NFTs
Tatjana Li 李雅娜 Now as the NFT is more coming into play on the platforms, wouldn't that automatically shift the discussion more to the demand side?
"I think one thing that's interesting in the economics of, for example, blockchains is that they get more valuable or any kind of cryptocurrency, they get more valuable as more users use them so precisely to your point on the demand side" Geoff replies
"There are some people that are very passionate about how NF T's enable communities, and what we see NFT projects with almost no communities and same-side network effects at all. So it's, it's a hugely varied space. But we are seeing more and more NFT platforms, there are more than 100 with a market cap of about $80 billion. So it's going to be very interesting to see this space evolve and would love to have more people with platform economics and practitioner background, explore this space and help the crypto Bros and others, understand the underlying economics associated with it." Peter exposed
REGULATION
Anna Noakes Schulze "could talk to us about some possible mechanisms to account for negative externalities in situations where regulations and legal structures simply cannot?"
"A tiny piece is to distinguish when interactions are on-platform versus off-platform. If the externalities occur on-platform, typically the platform will manage them... When it happens off-platform for example it's global warming? They absolutely don't work. If markets don't self-correct to market failures, could we use Koshien mechanisms to assign liability and property rights to pull these back into the marketplace, such that we design decentralized mechanisms to handle externalities. " said Marshall
"The platforms are they going to encourage companies to internalize those externalities, so for example, on carbon[...]So then the platform becomes responsible as an information source for what is being traded on the platform" Peter added.
FROM PLATFORM REVOLUTION TO:
Geoff: "I call it evolution at this point. I mean, I think the revolution has arrived. You're seeing evolution dependent upon country, and industry. What we haven't talked about, and we'll have a whole panel dedicated to it is geographic differences. And in particular, sort of data divides driven by some of these geopolitical issues, which we've not given a lot of attention to in the past, but I think has a big impact on firms and other organizations."
Marshall: " I think the platform business model is here to stay next generation, I think it's a permanent generation. But you'll see curves on their power, and you'll see more participation and you'll see users getting a greater share of that value."
Peter: "Business leaders need to consider not only platform best practices but also platform next practices to keep the pace with the rapidly changing moment"
So, let's see next week at the 10th Anniversary of the MIT Platform Strategy Summit what are going to be the hot topics, see you there! as Peter said"I see the MIT platform strategy Summit is bringing kind of academic knowledge in analysis, and theory testing, but also marrying it with practitioners that were actually doing small and very large scale initiatives as well"
PS: And in this 10 year's journey cannot be missed what happened in the Economy, have a look at the Top 10 most valuable companies! (Source Ranking Charts)
Sources: MIT Initiative on the Digital Economy Library and TheNTWKInteract: From Platform Revolution to... with Geoff Parker, Marshall Van Alstyne, Peter C. Evans
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