L11: Platform Modularity & Envelopment Flashcards
Modularity (Blank)
Explain modularity
decomposed elements like LEGO bricks
What are the 3 types of benefits in relation to modularity
Strategic
innovative
system
Strategic benefit
Agility
flexibility
variety
differentiation of products between customer segments
System benefits
no system reliance (LEGO)
composable architecture
Innovation benefits
innovation speed as to fewer dependencies
decoupling possible
radical innovation at component level
What is a module?
An extension to an app with new features
Two types of modules
Dependent
Independent
Dependent module
Interacts with other modules (Subway Surfer)
Independent module
Interact with platform (Google)
4 different forms of modularity (model)
2 dimensions:
Disparity in updating
User heterogonity
4 forms:
Modular in use (sell components)
Modular in use (promote apps)
Integral
Modular in production
Integral
Every couple of years, the typical smartphone user buys a new device and discards (or, hopefully, recycles) her old phone. Full replacement is needed because the phone is integral in design—even the battery is internal to the structure and cannot easily be replaced independently. By incorporating all of the components into an in-tegral package, manufacturers such as Apple can create a sleek, intricate, high-performance product without facing trade-offs that might make the phone bigger and bulkier. This integral hardware design has been key to Apple’s extraordinarily high profits.
Modular in use (2 types)
The modular smartphone concept (ongoing development and new modules developed) discussed to this point is what is called modular-in-use, be-cause it is intended that the end users personally make changes to (i.e., update) their devices.
Modular-in-production
some products are modular-in-production, meaning that a platform is designed to accommodate modules that can be swapped one for anoth-er during manufacture of the product, but it is not necessarily intended that users themselves make the swap.
The modularity penalty
The performance of a modular product can be bad ad the components are not optimized to work together
The integrality penalty
The complexity of dealing with all the component’s interactions
Can give high inventory costs due to big safety stocks, and less robust - if one thing shots down it all does
Drawbacks of modularity
Increase risk of imitation
increase risk of fuzzy platform profile
increase risk of module drowning
Platform Envelopment (blank)
What is Platform Envelopment?
A strategy for platform providers to enter a new market by bundling it’s own platform’s functionality with that of the target’s = leveraging shared user bases and common components
What is needed for succesful envelopment?
Strong network effects and overlapping userbases
3 types of envelopment attacks
Complements
weak substitutes
Functional related
3 benefits of envelopment
Price discrimination
Economies of scope
Opportunity of tying at an attractive price due to userbase overlap
Provide examples of envelopment
Apple OS X/Adobe PDF
Facebook news feed/Twitter
Iphone/gameboy
What is bundling
Selling two product together at a discounted price
2 bundling forms
Mixed
Pure
Pure bundling
Attacker offers core platform (A)+new platform (T’) = (AT’) where the new platform (T’) is functionality similar with the target platform (T)
Mixed bundling
Attacker offers core platform (A) and enter target platform (T)’s market by offering a new platform (T’) and core+new platform (AT’)
The company is competitive on different markets
Tying through bundling
The attacker seeks to capture T customers who also purchase A, by tying the purchase of A and T’ in an AT’ pure bundle
This reduced the market share of T
Example: Disney + og HULU
