L02 L: Digital Platforms Flashcards
Platforms are evolving organizations or meta-organizations that:
Federate and coordinate constitutive agents who can innovate and compete.
They create value by generating and harnessing economies of scope in supply or demand. And they entail a modular architecture composed of core and periphery.
(Gawer 2014)
Topics Digital Platforms
(1) Economic perspective; Platform as multi-sided markets
(2) Engineering perspective; Modularity and platform architectures
(3) Platform ecosystems; Continuum from closed to open systems
Direct Network Effects
When the value of a good to a user increases with the number of other users (installed base) of the same or similar product
Aka: same side network effects; positive consumption externalities; economies of scale in demand; see Gawer (2014)
Indirect Network Effects
The presence of other type of actors (e.g., complementors) generates additional value.
Complementary goods: Additional goods (and services) that enable or enhance the value of another good.
Attract a large user base:
(1) Attract a large user base:
(1.1) The company already has the users it needs on another platform / leverage existing user groups.
(1.2) Use publicly available data as a substitute for one user group.
(1.2.1) Collect data from public sources and organize it to create a useful service that attracts consumers;
(1.2.2) Encourage users to submit improved data directly to the platform;
(1.2.3)Charge companies for preferred ad placement.
The Platform’s builder’s checklist. Making the right decisions in building a platform – getting both sides on board:
(1) Attract a large user base
(2) Offer stand-alone value
(3) Plant a seed by recruiting marquee users
(4) Reduce users’ risks
(5) Can I make my platform compatible with legacy systems?
(2) Offer stand-alone value
(2.1) Start with an industry niche / service that is useful even if few others join the platform.
(2.2) Service for one side initially.
(2.3) Find or build small social groups.
(3) Plant a seed by recruiting marquee users:
(3.1) Pay them to join or for initial creation of content
(3.2) Buy the marquee brand
(3.3) Create ‘fake’ content
(4) Reduce Users’ risk
(4.1) Pay-as-you-go pricing
(4.2) Subsidize early users
(5) Can I make my platform compatible with legacy systems?
(5.1) Offer just enough compatibility to attract new users
(5.2) Anticipate resistance from legacy systems
A Module is:
A module is a unit whose elements are powerfully connected among themselves and relatively weakly connected to elements in other units.
Modularity can be created by standardizing interfaces between units
Continuum from modular to integral designs
(Baldwin & Clark, 2000: 63)
LAYERED MODULAR ARCHITECTURE OF DIGITAL TECHNOLOGY (Yoo et al 2010)
From top to bottom:
Content layer
Service layer
Network layer
- Logical transmission
- Physical transport
Device layer
- physical machinery
- logical capability
PLATFORM ARCHITECTURE
A set of core components (and interfaces) with low variety and a
complementary set of peripheral components with high variety (Baldwin & Woodard, 2009; Gawer 2014).
ADVANTAGES OF PLATFORM ARCHITECTURES
Advantages
- Reduced cost of production (e.g. economies of scale)
- Shared components between models
- Reduced R&D lead times
- Reduced systemic complexity
- Improved ability to update products
- Customization by (re)combining components
DIS-ADVANTAGES OF PLATFORM ARCHITECTURES
Disadvantages:
- Decreasing distinctiveness
- Sub optimization
