By Cyrus F. (Chuck) Gibson, CDB
The recent Platform Strategy Executive Symposium held July 26 at the MIT Media Lab was packed with great information. Content spanned the spectrum –from those just getting started, to those businesses already in the advanced stages of open, online markets.
I have summarized the sessions and offer my reflections on the 10 presentations grouped into five topic themes. Within each theme I’ve listed some key takeaways and commentary. In Part 1 of this summary, I provide some definitions and background. In Part 2, I will summarize current trends and examples from the symposium. A full agenda and speaker list can be found here.
Part 1
Several speakers -- notably, Professors Geoffrey Parker from MIT and Tulane, and Marshall Van Alstyne, from MIT and Boston University -- attempted to define platform economics while admitting that there are many forms and approaches. (More on their ideas can be found in this blog and this one.)
Parker said that the general features of platforms are open standards, the facilitation of third- party participation (new customers, new suppliers, new value-added links of all kinds), and a contractual or strongly implicit set of rules for participation.
There was a wide range among the existing platforms that were prominent during the event regarding how they came about (e.g. either “accidental” or “designed with intent”), as well as in the nature of their value to participants and the particular technologies employed.
Nevertheless, most of the platforms discussed focused on, or aimed at, the following:
o Markets for commodity office products (e.g. as described by Sebastian Wieser, CEO Mercateo)
o Courses and educational services (e.g. as described by Michael Chai, CDO Pearson Publishing and Chris Dellarocas, Boston University)
o Information flow and exchange
o Temporary forums for social interconnections and movements such as Tweets critical of political decisions, access to hashtags, Occupy Wall Street: “The hashtag can be a platform,” It was noted.
o Technology service itself; e.g. “platform as a service” offerings
o The Internet of Things for which Cisco and others intend to design and provide platform(s); there is a huge anticipated growth in connectivity of sensors and systems. Expectations are for growth to go from 50 billion connected devices now to 500 billion in 2017 -- representing half of all Internet traffic, according to Guido Jouret, CTO, Cisco.
o Data collection from joint agencies, and “cognitive computing” for prediction of criminal activity, etc.
o Visual presentations of collected data that enhances users’ ability to understand and absorb information and help them define the next questions to ask.
Takeaways
o Speakers concluded that there is no universal definition of a platform. One generalization is that technically, a platform is a system housed in a server or cloud, enabling access by qualified external parties who stand to benefit and contribute value, as buyers and sellers, and “two-sided markets.”
o A comment was made from the audience: “You know you have a platform when a user does something unexpected.” That is, a central attribute of a platform is access by outsiders and a mutual interdependence of the platform owner and users for creating, vetting and achieving value-add.
History
In his presentation, “From Pipes to Platforms,” Geoffrey Parker said that before the growth of platforms, the electronic link between suppliers (or developers of content) and customers (users, source of demand for the supply) were linear. Platforms emerged as suppliers and customers each became contributors and recipients of value, connecting through the third-party electronic platform.
Some successful platforms were “accidental;” that is, they started as one-sided markets (supplier to a customer) and were not initially designed as a platform. Experience and management guidance led them to become platforms and two-sided markets. An example is iTunes. Today platforms continue to be accidental and evolutionary, but many more -- and especially startups -- are “by design.”
As an example, some of the services at Thompson Reuters initially were delivered in multiple applications on a single desktop. Then, they adapted and evolved because the number of apps grew, including by acquisition of information businesses, and because customers wanted to build their own apps on top of the provided information. Conclusion: “It is very hard to build platforms (in final form) by design.”
Disruption of entire industries has occurred from several platform introductions. For instance, publishing has been disrupted by EBay, Craigslist, Google, etc., as platforms undermined ad revenue sources for newspapers and connected sources of news with readers. A more current example: higher education where learning, socialization, peer networking and certification, once all bundled together, are being broken up and offered online.
Current and future factors point to disproportionately greater growth of platform-based business as a result of:
o availability of the Internet and real-time processing for faster, real-time information and problem-solving,
o availability of big data and analytics for suppliers to provide value
o increasing consumers use of personal devices, enabling greater network effect for platform value-add.
The cloud can also play a role, supporting and enabling platform businesses via Platform as a Service, which is predicted to become more widespread going forward.
Additional Takeaways:
o Thinking of platforms created by “accident” versus by “design and intent” may be useful for business executives when planning.
o Technology, business relevance, and consumer behavior are creating the perfect storm that will lead to growth of platforms and platform-centered businesses.
o Arguably, and strongly implicit from the day’s presentations: Platforms will become the central feature of significant businesses, characterizing the technology infrastructure and becoming fundamental to operations going forward. Peripheral, non-platform-based businesses will depend on their relationship with platform-based businesses for their livelihood.