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VALUE CREATION IN COMPANIES 2.0
> FREEMIUM, > PLATFORM BASED BM > TWO SIDED PBBM > MULTISIDED PBBMMICHAL GROMEK
RESEARCHER ON FINTECH & CROWDFUNDING
#SE.LINKEDIN.COM/IN/MGROMEK
STOCKHOLM
SCHOOL OF ECONOMICS
1320 ENTREPRENEURSHIP AND OPPORTUNITY
STOCKHOLM, MARCH 3RD 2017
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"100 YEARS AGO THE LIFE EXPECTANCY OF FIRMS WAS 90 YEARS. TODAY IT IS DOWN TO 10-15 YEARS "
SOURCE : HTTPS : / /WWW .YOUTUBE .COM/WATCH?V=DBRXOXJUV_C , SSE , MASTER IN BUSINESS AND MANAGEMENT , ACCESSED 15TH OF FEBRUARY 2017
STOCKHOLM
SCHOOL OF ECONOMICS
"HALF OF THE FORTUNE 500 COMPANIES HAVE DISAPPEREAD SINCE 2000"PIERRE NANTERME , CEO ACCENTURE , 2016 , BASED ON HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL- REVOLUTION-AND-DIGITAL-BUSINESS-MODELS?QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2
SOURCE : HTTP : / /WWW .VISUALCAPITALIST .COM/CHART-LARGEST-COMPANIES-MARKET-CAP-15-YEARS/ HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)
IN ORDER TO GROW, WALMART HAD TO BUILD MORE STORES - AND FACEBOOK?
MARKET CAP VALUATIONS —INTERNET VS. PLATFORM COMPANIES
STOCKHOLM
SCHOOL OF ECONOMICS
SOURCE: HTTPS://WWW.ACCENTURE.COM/FR-FR/_ACNMEDIA/PDF-2/ACCENTURE-PLATFORM- ECONOMY-TECHNOLOGY-VISION-2016-FRANCE.PDF (ACCESSED 3RD OF MARCH)
1995
2015
Alibaba Alphabet Amazon.com Apple Baidu eBay Facebook JD.com LinkedIn Netflix Priceline.com Salesforce Tencent Twitter Yahoo!
Tech Companies and Born-Digital Organizations
Apple Axel Springer Copart Fox Communications IAC/InterActive Corp iLive iStart Internet Live Microsystems Netcom Online Netscape PSINet RentPath Storage Computer Corp. Wave Corporation Web.com
Internet Companies
$2,560,902 $MM
$16,752 $MM
+15,187.1%
GROW OF
PLATFORM
COMPANIES
1995-2015
ADAPTED FROM PARKER & VAN ALSTYNE , WITH CHOUDARY , 2016 , AND UPDATED JANUARY 2017 HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)
VALUATION OF THE COMPANIES FROM THE (UPCOMING) "FOURTH INDUSTRIAL REVOLUTION"
ADAPTED FROM PARKER & VAN ALSTYNE , WITH CHOUDARY , 2016 , AND UPDATED JANUARY 2017 HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)
POWER OF MULTISIDED PLATFORM
WORLD LARGEST ACCOMENDATION
PROVIDER OWNS NO PROPERTY
WORLD LARGEST TAXI COMPANY
OWNS NOT A SINGLE CAR
WORLD LARGEST RETAILER DOESN'T
OWN A WEARHOUSE
WORLD LARGEST MEDIA COMPANY
DOESN'T CREATE CONTENT
CLICK HERE FOR MORE INFORMATION ABOUT
PIPES VS PLATFORM BUSINESS MODEL
TRADITIONAL PIPE BUSINESS MODEL
EXAMPLE: CAR
CONSUM
PTION
DISTRIBUTION
LOGISTICS
PROCESSIO
N
PRODUCTIO
N
INPUT
ADAPTED FROM PARKER & VAN ALSTYNE 2016 FROM HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)
SELLER OF PRODUCTS AND / OR SERVICES
SMACIT TO MAKE LINEAR PROCESS EFFICIENT
SUPPLY-SIDE ECONOMIES OF SCALE
MANAGER OF THE FIRM WITH DISTINCT BOUNDARIES
FIRST MOVER ADVANTAGE
OWNERSHIP OF RESOURCES
STOCKHOLM
SCHOOL OF ECONOMICS
SMACITS = Social M = Mobile A = Analytics C = Cloud IT = IoT
TRADITIONAL PIPE BUSINESS MODEL
MULTI & TWO SIDED PLATFORM MODEL
ADAPTED FROM PARKER & VAN ALSTYNE 2016 FROM HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)
STOCKHOLM
SCHOOL OF ECONOMICS
UNICORNS TEND TO BE PLATFORMS (115 UNICORNS)
SOURCE : P . EVANS , CGE ; CB INSIGHTS , CAPITAL IQ , CRUNCHBASE , 2015
NON PLATFORN 30%
PLATFORM 70%
STOCKHOLM
SCHOOL OF ECONOMICS
PLATFORMS BY TYPE
CLICK HERE FOR MORE INFORMATION ABOUT
PIPES VS PLATFORM BUSINESS MODEL
TWO SIDED & MULTISIDED PLATFORM BUSINESS MODEL
CUSTOM
ERS PRO
DUCERS
ADAPTED FROM PARKER & VAN ALSTYNE 2016 FROM HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)
DESTINATION FOR SOLVING CUSTOMER NEEDS
SMACIT TO CO-CREATE VALUE
DEMAND-SIDE ECONOMIES OF SCALE (NETWORK EFFECTS)
LEADER OF AN ECOSYSTEM WITH FUZZY BOUNDARIES
FIRST TO SCALE ADVANTAGE
ACCESS TO RESOURCES
PLATFORM
PLATFORM BASED BUSINESS MODEL
STOCKHOLM
SCHOOL OF ECONOMICS
EXAMPLE.
PHILIPS HEALTH SUITE, PARTNERED UP SALESFORCE,
AMAZON AWS, IOT, AND ALI CLOUD.
ALLOWS PERFORMING PATIENT MANAGEMENT, DATA
COLLECTION, AND MANAGEMENT OF HOME DEVICES.
SOURCE : HTTP : / /WWW .USA .PHILIPS .COM/HEALTHCARE/ INNOVATION/ABOUT-HEALTH-SUITE (ACCESSED MARCH 3RD 2017)
PLATFORM BASED BUSINESS MODEL
STOCKHOLM
SCHOOL OF ECONOMICS
EXAMPLE PRODUCT
PLEASE START WATCHING AT 2:02 MIN
SOURCE : HTTPS : / /WWW .YOUTUBE .COM/WATCH?V=8QPUUC6GH4G (ACCESSED 3RD .03 .2017)
STOCKHOLM
SCHOOL OF ECONOMICS
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TWO SIDED PLATFORM
SOURCE :2016 PARKER & VAN ALSTYNE , WITH CHOUDARY – LICENSED UNDER CREATIVE COMMONS ATTRIBUTION-SHAREALIKE 4 .0 INTERNATIONAL (CC BY-SA 4 .0) .
Phone Callers
Uber Drivers
eBay Sellers
Xbox Developers
Amex Merchants
Aga Khan Doctors
YouTube Videographers
AirBnb Rooms
Tesla Charge Stations
Mechanical Turk Laborers
LinkedIn Employers
Upwork Projects
Android Developers
Phone Callees
Uber Riders
eBay Buyers
Xbox Gamers
Amex CardHolders
Aga Khan Patients
YouTube Viewers
AirBnb Renters
Tesla Car Drivers
Mechanical Turk Jobs
LinkedIn Employees
Upwork Freelancers
Android Users
HTTP : / /WWW .SLIDESHARE .NET/MARKETREVOLUTION/SHSU-SHARING-ECONOMY-COLLABORATIVE-CONSUMPTION FROM HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)
POWER OF MULTISIDED PLATFORM
STOCKHOLM
SCHOOL OF ECONOMICS
USERS ARE CREATING VALUE FOR OTHER USERS.
SOURCE: CAÑIGUERAL “PLATFORMS ARE EATING THE WORLD” SLIDESHARE.NET
CLICK HERE FOR MORE INFORMATION ABOUT
PIPES VS PLATFORM BUSINESS MODEL
PLATFORM LEVERAGE NETWORK EFFECTS >>>
HTTP : / /WWW .SLIDESHARE .NET/ETEIGLAND/NEW- INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)
METCALFE’S LAW:
MORE USERS = MORE VALUE = MORE USERS…
2 PHONES
12 CONNECTIONS
5 PHONES 12 PHONES
60 CONNECTIONS
STOCKHOLM
SCHOOL OF ECONOMICS
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TAKE ONE MINUTE AND LIST FIVE POINTS WHY WHAT MIGHT NOT WORK WITHIN THE PLATFORM BUSINESS MODEL?
STOCKHOLM
SCHOOL OF ECONOMICS
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PLATFORM BASED MODEL
ENOUGH RESOURCES ON THE SUPPLY SIDE. (UBER PL DEMAND 3X HIGHER THAN SUPPLY) CUSTOMER SERVICE THAT FITS THE CULTURE OF CUSTOMERS (DIDI VS. UBER) LIMITATION OF BAD QUALITY PROVIDERS ON THE PLATFORM (UBER'S 4.5 RATING)CHICKEN EGG PROBLEM WINNER TAKES ALL MARKET
STOCKHOLM
SCHOOL OF ECONOMICS
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SOURCE : PROF KARIM LAKHANI , OPEN INNOVATION HOW CAN I USE THE CROWD , ESBRI 26 .02 .106
FREEMIUM BUSINESS MODEL
EXAMPLE:
CHARACTERISTCS:
YOUR COST OF ADDING ONE ADDITIONAL USER IS MARGINAL OR ZERO. (ECONOMY OF SCALE) YOU HAVE OR WILL SIGNIFICANT TRACTIONS OF USERS.FREEMIUM IS NOT ONLY FOR IT SERVICES, BUT MUSIC (SPOTIFY), ANALYTICS (STATISTA), PRESENTATIONS, VIDEOS, ....
ONLY 8% OF THE USERS BUY PREMIUM SERVICES
FREEMIUM EXAMPLE:
STOCKHOLM
SCHOOL OF ECONOMICS
TOONIA COLOURBOOK
1 million downloads
doubling of pricepaid
no traction
SINCE 2013: 2 MILLION DOWNLOADS (40K IN FEBRUARY 2017) PRICE 9,99 EURO BETTER RETENTIONS BIG AMOUNT OF PROFIT ON THE "PACKS"
SOURCE : PARTLY FROM , HTTPS : / /WWW .SLIDESHARE .NET/JESSICATAMS1/RUNNING-A- FREEMIUM-BUSINESS-MODEL- IN-THE-KIDS-CATEGORY-GORAN- IVASIC? QID=16B1E5D5-50D7-41AC-99DD-ED4CD69FEBAE&V=&B=&FROM_SEARCH=4 (ACCESSED MARCH 2ND)
launch of free app
FREEMIUM EXAMPLE:
STOCKHOLM
SCHOOL OF ECONOMICS
TOONIA COLOURBOOK
THE DEVELOPERS DECIDED TO CREATE AN ENTIRE PACKAGE OF SUBSIDIARY BRANDS
SOURCE : HTTPS : / /SENSORTOWER .COM/ ACCESSED MARCH 2017
STOCKHOLM
SCHOOL OF ECONOMICS
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SOURCE : HTTP : / /WWW .BUSINESSINSIDER .COM/PROBLEMS-WITH-FREEMIUM-MODEL-2013-5?R=US& IR=T& IR=T (ACCESSED 2ND OF MARCH 2017)
FREEMIUM
“IT CAN WORK WONDERFULLY OF COURSE, BUT USUALLY IT CRUSHES AND DESTROYS COMPANIES, NOT ONLY BECAUSE IT …. “
STOCKHOLM
SCHOOL OF ECONOMICS
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SOURCE : HTTP : / /WWW .BOTHSIDESOFTHETABLE .COM/2012/05/23/ ITS-MORNING- IN-VENTURE-CAPITAL/ (ACCESSED 1ST OF FEBRUARY)
ADVANTAGES OF FREEMIUMCONVERSATION. CUSTOMER SERVICE. MARKETING EXPENSES:
EASY TO UPSET STATS FROM INVESTORS LOWER AND LOWER COSTS TO START BIG USERBASE FOR USER ANALYTICS. NOT USING THE COMPETITION.
STOCKHOLM
SCHOOL OF ECONOMICS
PIC
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TAKE ONE MINUTE AND LIST FIVE POINTS WHY WHAT MIGHT NOT WORK WITHIN THE FREEMIUM BUSINESS MODEL?
STOCKHOLM
SCHOOL OF ECONOMICS
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DISCUSS YOUR ARGUMENT WITHIN YOUR GROUP - IF FREEMIUM IS A SUITABLE BUSINESS MODEL FOR YOUR STARTUP. (MIN. ONE PRO AND ONE CONT ARGUMENT?) YOU WILL BE ASKED TO PRESENT. 3 MINUTES.
STOCKHOLM
SCHOOL OF ECONOMICS
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SOURCE : 4% + HTTPS : / /WWW .FORBES .COM/SITES/BENKEPES/2014/02/24/CONFIRMATION-OF-DROPBOXS-MONSTER- RAISE/#43B12BD17678 (ACCESSED 2ND OF MARCH 2017) , 1% + HTTPS : / /WWW .FORBES .COM/SITES/VICTORIABARRET/2012/11/13/DROPBOX-HITS-100-MILLION-USERS-SAYS-DREW- HOUSTON/&REFURL=&REFERRER= (ACCESSED WND OF MARCH 2017)
CHALLENGES OF FREEMIUMCONVERSATION. CUSTOMER SERVICE. MARKETING EXPENSES:
USERS DON’T CONVERT TO PAID USERS. DROPBOX HAS A RATE OF 1 PAYING USERS PER 25 FREE USERS. (OR 1% AS THE NUMBERS ARE DISPUTED)
FREEMIUM USERS OUTNUMBER THE AMOUNT OF PAID USERS 100-TO-1 IN SUPPORT FORUMS AND MIGHT DROWN YOUR CUSTOMER AND TECH SERVICE. COMPANIES STATE: “CUSTOMER SERVICE IS NOT INCLUDED IN THE FREE TIER, BUT CAN YOU REALLY IGNORE YOUR CUSTOMERS?”.
AS ONLINE MARKETING IS BEING BASED ON CTR AND AFFILIATE MARKETING RELIES ON USER CONVERSATION IT THE ONLINE MARKETING COSTS HAS TO INCREASE BY 96 TIMES TO RECEIVE FOUR PAYING CUSTOMERS. (DROPBOX EXAMPLE). VIRAL PRODUCT OR YOU CAN’T AFFORD TO ADVERTISE.
STOCKHOLM
SCHOOL OF ECONOMICS
1. MAKE SURE TO BE VERY CLEAR ABOUT WHAT
IS AND IS NOT INCLUDED IN FREEMIUM.
2. CALCULATE THAT ONLY ONE OUT OF 100
USERS MIGHT PAY FOR YOUR SERVICE.
3. CREATE LEAN CUSTOMER SUPPORT TOOLS,
SEE AIRBNB OR FACEBOOK AS INSPIRATIONS.
4. THINK ABOUT DIFFERENT PREMIUM
PACKAGES CONNECTED TO SPECIFIC NEEDS.
(TONNIA DRAW BOOK EXAMPLES)
5. MAKE SURE, THAT USERS UNDERSTAND THAT
THEY USE A SERVICE THAT HAS BEEN CREATED
BY SOMEBODY AND IS NOT MECHANICAL.
6. PLAN YOU MARKETING COSTS CLEARLY AND
LOOK FOR UNIQUE PR STRATEGIES TO RECEIVE
ATTENTION.
7. PAY CLOSE ATTENTION TO ONLINE
MARKETING COSTS, (ADVERBS, SEO, AFFILIATE)
AND BUILD IN BUDGET BORDERS. THE
EXPENSES MIGHT RUIN THE BUDGET.
RECOMMENDATION FREEMIUM
STOCKHOLM
SCHOOL OF ECONOMICS
SLACK, A REAL-TIME MESSAGING, ARCHIVING
AND SEARCH FOR THE WORK PLACE, IS
OFFERING ITS USERS $100 TO ANSWER 6
QUESTIONS. I’LL SAY IT AGAIN, A NEW
COMPANY THAT HAS MADE IT TO A 1.1 BILLION
DOLLAR VALUATION WITH ITS FREE PRODUCT
BEING IN THE MARKET LESS THAN A YEAR, IS
PAYING USERS FOR INFORMATION.
LIFEHACK FREEMIUM
SOURCE : HTTP : / /WWW .GEEKTIME .COM/2014/11/25/WHY-A-FREEMIUM-PREMIUM- BUSINESS-MODEL-DOESNT-WORK (ACCESSED 1ST MARCH 2017 (
DO SOMETHING UNUSUAL TO GET TRACTION
WHAT IS CHEAPER THAN TO USE TRADITIONAL
ONLINE MARKETING TOOLS.