As I noted in my previous summary, the recent Platform Strategy Executive Symposiumhttp://digital.mit.edu/platform/ 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.
From a business perspective, hig
hlights of the day and points of greatest audience interest were around specific cases or industries. For example, Jeff Jarvis, CUNY School of Journalism, discussed the huge disruptions in media. In addition, Marshall Van Alstyne, Boston University/MIT, and Sangeet Choudary, Founder of Platform Thinking, explained concepts leading to specific rules and principles about management and platform creation.
Several speakers noted the wide variety of origins, value-add, and platform features suggesting that while a platform may be central to a specific business, and while the technical tools are widely available, it may be very hard to generalize about them in a way useful to business executives. (This is an important area for further research as I note later in this summary.)
Among the key case examples offered during the day were:
- Sebastian Weiser, CEO of Mercateo, described how as a platform provider of commodity office supplies, he has coped with crises, key decision points, and negotiation with customers over the life of his business.
- At Thomson Reuters, CTO James Powell said that unexpected, as well as planned experiences with several information-based platforms led to fundamental questions about the business model and the organization. For instance, the company had to consider whether to “grow horizontally with more variety on existing platforms, or form a new platform, or create entirely new verticals?” (It was noted that Amazon did the latter in selling electronic storage as a service apart from its books and goods purchasing platform.)
- Disruption of newspaper publishing by platforms has revealed a fundamental difficulty in the models and the old way of doing business vs. what is required, Jarvis said. The old mindset was that “Content is our product,” he said, but today, mass media must give way to a mindset where “we are in the relationship business, as a collaborator with communities and individuals.”
Business-view Takeaways
o Business thinking and guidance for platform development and exploitation is essential, said Geoff Parker, of MIT and Tulane. Executives should pursue the following questions: What are our business models? How do we nurture an ecosystem of players? How do we find or create data and flows of information?
o Businesses that have platforms as their core strategic resource must be planned, developed and managed up to the top-most business executive and team.
o Platforms must be seen as significant opportunities as well as threats. Typically, executives require significant mindset changes to fully understand these implications, and sometimes, the shock-treatment of business failure is required for employees to see it.
Platform-creation Discussion
- The cost of platform creation is falling, according to Parker, as the underlying technology follows Moore’s Law.
Choudary, of Platform Thinking, advised entrepreneurs about concepts and principles for initiating a platform business from scratch. Start with a “seed” or initial interchange of information to start a relationship with an outside party, he said. The core unit of activity of the business is not “business processes,” but “interactions.”
From my perspective, while specific and universal principles for managing established platforms may be elusive at the present time, it appears they do exist for the business-creation startup, as described by Choudary.
Competition and sustainability
· Lower cost platform creation means lower cost of entry for competition, Parker noted.
· Because technology is at the heart of a platform-dependent business – indeed, such enterprises are the epitome of “digital businesses”-- and technology can be duplicated and copied, these businesses must continuously be looking not only for technological innovation and upgrades, but for new business models, acquisitions, and value-added partnerships. Mercateo is a good example.
· “Platforms beat products every time,” Van Alstyne, said. This was an important message for business and economic theory-based models that need to understand platform management. Disintermediation can occur in open business models where an ecosystem partner inserts itself at the customer-contact layer and then expands their own platform, he said.
· Parker’s conceptual model led to a connection between economic principles and business rules and principles. The model consisted of layers: infrastructure at the bottom; applications next, and the most open applications at the top. “You can be open at the top or open at the bottom, but not both,” he said. And “You must have at least one control point in the layers which you do not relinquish to openness. This was Illustrated by SalesForce.com’s cloud architecture and management structure as described by Peter Coffee, VP Platform Strategy, Salesforce.
Competition and Sustainability Takeaways
o For any business that is not platform-based executives should ask, “What are the alternative sources of supply for the product or services we provide and what is the end-beneficial value derived from what we provide? What are the substitutes for those things?” With that in mind, the business can design or initiate a technology platform.
o Next steps for research should include further testing and elaboration on the layers model and its implications for management. This could be done by analyzing case studies using the layers model that Van Alstyne described. Research should continue to draw on economic concepts and theory, an approach which thus far has been productive for understanding the dynamics of platforms in business.
o An extended background and reading list can be downloaded in the attachment to this blog.