V09 From products to platforms

Variance:
Random spread out of the performance of production steps / platform complements from the average.

Options: 
Things (complements) you can decide to choose. -> only exists for options!

Sharing economy is a way of distributing goods and services, where individuals are said to rent or share things like their cars, homes and personal time to other individuals in a peer-to-peer fashion.

Effects:

• Much more employees (individuals on platform)
• Only few make money (platform owner)

Step-function:
The performance of the whole supply chain is determined by the bottleneck performance. Therefore performance variance is contraproductive. Total Performance: 20.

Platform:
On a platform the option with the highest performance can be chosen. Performance variance is good for platforms. Total Performance: 60.

• Step process (result in large, vertically integrated firms)
  • Interdependence
  • Hierarchy
  • Coordination
  • Risk-aversion
  • Integrality
• Platforms (result in small firms with large ecosystems)
  • Independence
  • Openness
  • Option value
  • Risk increase (for complements!)
  • Modularity
  • Innovation, variation

Digitalisazion is a great catalyst because of the following features.

• Separating information from physical assets
• Explosion of access

Transaction Platforms:
"Serves as an intermediary for direct exchange." - rely on commitment
(Bsp: Air BNB, Twiter, App-Stores)

Innovation Platforms: 
"Serves as a technological foundation upon which other firms develop complementary innovation" - rely on investment
(Bsp: Apple IOS, Andriod, Linux, Nintendo)

Hybrid Companies:
"Take both roles of an transaction and innovation platform"
(Bsp: Apple, Google, Microsoft, Facebook, Amazon)


 

• Create stand-alone value for customers (Single-Player mode for X-Box)
• Subsidize one or multiple sides (TWINT pays for signin in)
• Bring aboard multiple sides at the same time (UBER starting in one city and exand)

• Direct network effects: The attractiveness of the platform to a user depends on how many others are already on the platform.
  • Transaction platform: Twitter
  • Innovation platform: Linux
• Indirect network effects: The value of joining the platform to side X depends on whether side Y is already on the platform (effects can also be negative).
  • Transaction platform: AirBnB
  • Innovation platform: PlayStation

Tipping:
"Set of activities or strategic moves that companies can use to shape market dynamics and win a platform war."

Multihoming:
"Complementors being active on multiple platforms" 

Barriers to entry:
"How difficult is it for complementors to join a platform ecosystem"

Switching cost:
"How unattractive it is for a user to leave thee platorm"

• Coring: "Make your Platform/Product to a esssential element of a technological system and it's market"
• Tipping: "Set of activities or strategic moves that companies can use to shape market dynamics and win a platform war."

Important enough network effects can (and will!) converge an entire market to one platform.

• Winner-takes-all market
  • Transaction platform: Facebook
  • Innovation platform: Android
• No winner-takes-all market
  • Transaction platform: Tinder
  • Innovation platform: Playstation

• Convince other companiess to join the ecosystem and develop complementary platforms.
• Decide how to protect own source of profit while enabling complementors to make profit and protect their own proprietary knowledge. 

• How to maintain the intefrity of the platform
• How to let platforms envolve technologically
• How to maintain platform leadership

• Licence intellecual property (Plug ins for Apple products)
• Subsidize one or both side of the market (TWINT)
• Tipping across Market (Microsoft Edge, Android from Google)
• Competitors / Users Building coalition (TWINT and Banks vs. Samsung Pay)

The form of the collaborative strucutre of a platform (interaction between complementors and platform). Interconnectedness in the industry capability stack brings complexity.

1. User/customer
+ access to products and services under highly competitive conditions
- locked into few powerful platforms

2. Platform leaders
+ leverage huge ecosystem of complementors for own profit /operations
- extreme competition with other platform leaders
- lack of control over what complementors do

3. Platform complementors
+ access to a large group of potential customers
- dependence on platform leader
- weakened relationship to customers
- restricted access to outside options
- Risk of vertical integration from platform leader ("tipping across market"

• Lever 1: Scope
  • Decide which complements to make in-house and which to leave to external companies.
  • Overall goal is to increase the demand for the platform.
• Lever 2: Product technology
  • Decide what should remain hidden and what not.
  • Define where the innovation takes place.
• Lever 3: Relationships with external complementors
  • Define specifications and standards between complementors
  • Influence new product generation
• Lever 4: Internal organization
  • Create internal organization that allows it to manage relationships with complementors
  • Challenge: If some divisions compete agains complementors

• Try to  predict and join the winning platform (winner of platform leadership war)
• Join the platform which communicates openly
• Create products that continuously enhance the value o the platform
• Keep alert to the platform leaders product plan and react to their demands