Platform Strategy & Ecosystems

transcript

Warming Up

Let’s take a look at the 5-year predictable horizon

The world will be faster, more connected, with a billion more participants in the global economy.

A rising middle class in Brazil, India, China, and Indonesia will adopt devices first and computers second, leaping the digital divide.

Gen-Y consumers and employees will be in their 30s, defining the conventions for work and play styles.

4G wireless will be broadly available and 5G will be in limited deployment.

Carrier networks will be optimized for traffic against specific services and media types.

Consumer devices will be dominant, but small devices for data sensing and processing will make up a significant percentage of mobile and Internet traffic.

Most commerce will be initiated via mobile devices and completed on a range of platforms.

Most transactions, when executed, will be multi-party: between the app and the underlying services.

Social media with effective partitions and channels will be the dominant mode of communication.

User attention will continue to fragment, alternately directing and being directed by a range of apps.

Data will be a unit of value and a mechanism of lock-in.

Industries will be platform-shaped, with a few dominant players owning the high-margin platformsand pushing others to supporting roles.

What is a Platform Business Model?

Product to Platform

Product

SubsystemSuppliers

ComponentSuppliers

Raw MaterialsSuppliers

Product to Platform

Product

SubsystemSuppliers

ComponentSuppliers

Product to Platform

Product

SubsystemSuppliers

ComponentSuppliers

Resellers

Products

Consultants

Platform

Platform Business Models

Platform businesses are built on network effects.

The more network effects, the stronger the platform.

Kindle

Usr Book

Usr Gam

Usr Mus

MicrosoftSonyAmazon

Eisenmann, Parker, Van Alstyne (2011), “Platform Envelopment,” Strategic Management

Journal.

User Music

eBooks

Openness is a critical element of all platform businesses.

Eisenmann, Parker, Van Alstyne (2011), “Platform Envelopment,” Strategic Management

Journal.

Quantity

Platform sponsor gives away platform value.

Partners build apps for installed base, adding new layers of value.

Platform sponsor benefits from increased sales & royalties.

Partners benefit from cost savings and installed base.

Parker, Van Alstyne (2011), “Innovation, Openness & Platform Control,”

SSRN.com.

Platform models generate profit through first and third party usage.

Most firms can only concentrate on most

valuable apps

Profits increase when others add to

platform’s “Long Tail”

Parker, Van Alstyne (2011), “Innovation, Openness & Platform Control,”

SSRN.com.

Platform models build digital ecosystems through virtuous cycles.

We view Digital Ecosystems to be the digital counterparts of biological

ecosystems, exploiting the self-organising properties of biological

ecosystems, which are considered to be robust, self-organising and scalable

architectures that can automatically solve complex, dynamic problems.

Digital Ecosystems are a novel optimisation technique where the

optimisation works at two levels: a first optimisation, migration of agents

(representing services) which are distributed in a decentralised peer-to-peer

network, operating continuously in time; this process feeds a second

optimisation based on evolutionary computing that operates locally on

single peers and is aimed at finding solutions to satisfy locally relevant

constraints.

G. Briscoe, P. DeWildeIEEE Conference on BIONETICS (2006)

A digital ecosystem is a distributed, adaptive, open

socio-technical system with properties of self-organization,

scalability and sustainability inspired from natural

ecosystems.

Digital ecosystem models are informed by knowledge of

natural ecosystems, especially for aspects related to

competition and collaboration among diverse entities.

Various authorsWikipedia: Digital Ecosystem

[Ecosystem Competition]

Kishore S. Swaminathan (2009), Chief Scientist, Accenture

What is a Technology Platform?

A technology platform is defined as follows:

It supports a platform business model by adding a digital layer to interactions in the value chain. This makes it possible to interact with the business from any app or device, and makes it possible for the enterprise to analyze the interactions that make up the activity along the value chain. Through the technology platform, each player in the value network becomes part of a digital ecosystem.

Amazon’s pace of innovation is blistering

Amazon’s baseline issharing by default.

All teams will henceforth expose their data and functionality through service

interfaces.

Teams must communicate with each other through these interfaces. There

will be no other form of inter-process communication allowed: no direct

linking, no direct reads of another team’s data store, no shared-memory

model, no back-doors whatsoever.

The only communication allowed is via service interface calls over the

network.

It doesn’t matter what technology they use.

All service interfaces, without exception, must be designed from the ground

up to be externalizable. That is to say, the team must plan and design to be

able to expose the interface to developers in the outside world. No

exceptions.

Anyone who doesn’t do this will be fired. Thank you; have a nice day!

Jeff BezosCEO, Amazon

“Information about package is as

valuable as the package.”

All assets instrumented and

connected

Innovations on customer access to

information

Architect for low cost interactions

in the ecosystem

Information about the package helps us run our business better. That comes from a digital operating model where all our assets are connected and surface information to increase overall value to us and the customer.

David Zanca, SVP IT, Customer Access, and Revenue Systems

Federal Express

Not only do our customers want more information about the packages, but they also now want more interaction with FedEx and expect us to react to changes and resolve problems if they occur.

Thomas Wicinski, VP Digital Access MarketingFederal Express

The new baseline issharing by default.

“An architecture to move at the pace of

change.”

Key pillar of innovation strategy

Future proofs existing assets

Makes AT&T network into a platform and

addressable by other innovators

Creates permeability

“[The API program] is an architectural choice one makes for speed.”

John Donovan, Sr. EVP, Technology and Network Ops, AT&T

If you have infrastructure assets and are going to operate at a pace at which the external market is moving, you have to take capabilities—industry-specific or not—and make platforms from them.

John Donovan, Sr. EVP, Technology and Network Ops

We’re pivoting toward architecting everything we do in an API-centric way.

Jacob Feinstein, Sr. Director, Core ITAT&T

The new baseline issharing by default.

This approach of common platforms

and shared incentives

is the path to digital ecosystem success.

One Last Thought

Given current abundance of choices and scarcity of user attention, compelling experiences must deliver platform capabilities and content to users. Without such experiences, an ecosystem fails to thrive.

Weill & Woerner (2013), “Optimizing Your Digital Business Model,” MIT Sloan Management

Review

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