Platform Dynamics - The rise and dominance of Platforms
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The document discusses the evolution and significance of platforms compared to traditional products, highlighting their economic impact and the role of network effects in driving success. It provides examples of various companies across sectors that have transitioned to platform models, emphasizing the importance of community building and data in facilitating connections. Key elements of successful platforms include creating incentives, leveraging social media for growth, and capturing data to enhance matchmaking between producers and consumers.
Platform Dynamics - The rise and dominance of Platforms
- 2. How many are platforms? 2 Source: Interbrand
- 4. Platforms beat products 4 Firm Founded Employees Market Cap BMW 1916 116,000 $60B Uber 2009 12,000 $62B Mariott 1927 226,000 $35B AirBnB 2008 5,000 $31B Disney 1923 195,000 $17B Facebook 2004 20,000 $489B Kodak 1888 45,000 $30B (heyday) Instagram 2010 13 $1B (acquired)
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- 7. to Artisans producing products one by one Mass production
- 8. Supply side economies of scale 8
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- 10. Value Chain How do you grow? 10 Manufacturer Wholesaler Retailer Consumer
- 11. Supply Side Economies of Scale or Scope Lean towards oligopolies or monopolies 11
- 14. Standards: The proto-platform • Language • Math notation • Electrical outlets • Fire hydrant hoses • Rail gauges • Gas tanks • Payment terminals / systems • Operating systems 14 Who else?
- 15. Why are operating systems closer to a platform than a standard? 15
- 16. Definition of a platform • A foundation technology or set of components (could also be a service) used beyond a single firm • Allows multiple parties (“market sides”) to transact across the platform • Value of the platform may increase non-linearly with more users – depends on strength of network effects 16
- 18. Network Effects Whoever sold the first telephone was the greatest salesperson ever 18
- 19. Network Effects When the value of an individual product grows as the network grows 19
- 20. Virtuous Circles 20 Buyers join the platform Which encourages sellers to participate Which encourages more buyers to join Which brings more sellers onbaord
- 21. 21 More Amex Merchants … get more Amex Users… More Amex Users … get more Amex Merchants…
- 22. 22 More Android Developers … get more Android Users… More Android Users … get more Android Developers…
- 23. Double sided network effects 23
- 24. Uber: Double sided network effects 24 Riders Drivers $10 off your next ride for each referral $400 to referred drivers after 50 trips (Toronto) Uber Advertisers
- 25. Social Media: Double sided network effects 25 Content Consumers Content Creators Shared content with friends Links and collaborations with other creators Facebook, Instagram, YouTube, TikTok, etc. Advertisers
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- 27. Nike is in the platform business 27 Nike ID
- 28. Nike is in the platform business 28 Nike+
- 29. McCormick Spices is in the platform business 29 https://www.youtube.com/watch?time_continue=157&v=L5yx7G9HY20 (Start at 1:24)
- 30. Products have features, platforms have communities. Building these communities will be an essential ingredient going forward. 30
- 31. Where do we see platforms? Platforms unlock unmonetized areas 31 Sector Platforms Transportation Healthcare Retail Education Sports, Fitness, Recreation Labour Home Improvement Entertainment Travel Childcare Banking and Finance
- 32. Where do we see platforms? 32 Sector Platforms Transportation Uber, Lyft, Toro, HonkMobile Healthcare OpenCare, RateMDs Retail Amazon, eBay, Shopify, Etsy Education Edx, Kahn Academy, TED Sports, Fitness, Recreation Fitbit, myfitnesspal, Strava Labour Upwork, Mechanical Turk, GetFriday Home Improvement Homestars, Jiffy Entertainment YouTube, Twitch Travel AirBnB, VRBO Dating and Relationships Tinder, Bumble, Grindr, OK Cupid Childcare HelloSitter Banking and Finance Lendingloop, Lending Club, Prosper
- 33. Successful Platforms Creates connection by making it easy for others to plug into the platform. This infrastructure enables interactions between participants. For example, Apple provides developers with the OS and underlying code libraries; YouTube provides hosting infrastructure to creators; Wikipedia provides writers with the tools to collaborate on an article; and JC Penney provides stores to its boutique partners. 33 1. The Toolbox
- 34. Successful Platforms Creates pull that attracts participants to the platform with a kind of social gravity. For transaction platforms, both producers and consumers must be present to achieve critical mass. Apple needed to attract both developers and users. Similarly, eBay needed both buyers and sellers. Platform builders must pay attention to the design of incentives, reputation systems, and pricing models. They must also leverage social media to harness the network effect for rapid growth. 34 2. The Magnet
- 35. Successful Platforms Fosters the flow of value by making connections between producers and consumers. Data is at the heart of successful matchmaking, and distinguishes platforms from other business models. The Matchmaker captures rich data about the participants and leverages that data to facilitate connections between producers and consumers. For example, Google matches the supply and demand of online content, while marketplaces like eBay match buyers to relevant products. 35 3.The Matchmaker
- 36. 36 “A platform is a system that can be … adapted to countless needs and niches that the platform’s original developers could not possibly have contemplated…” Mark Andreeson: Venture Capitalist, Netscape Founder, Board HP, eBay
- 37. Platform Economics Revenues from unlocking value from unused products / service
- 38. Things to consider • Where’s the opportunity to platform-ize • Create a platform or join an existing platform? • How do you create trust within a platform? 38
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- 42. Apple gets its platform on
- 43. Apple gets its platform on 43
Editor's Notes
- #3: How many are going into platforms
- #9: How many car companies How many companies make packaged goods
- #11: You’re Loblaws how do you grow?
- #13: Electrical outlets Fire hoses Rail Gauges
- #14: Electrical outlets Fire hoses Rail Gauges
- #15: Electrical outlets Fire hoses Rail Gauges
- #27: https://medium.com/@smitty/what-i-learned-from-100-s-of-hours-studying-platform-businesses-platform-building-basics-part-1-1ae6e75c6cf0