Lecture 3 - Platforms

Question 1

What is the definition of a digital platform?

Answer 1

• core technology that serves as a foundation
• additional modular technologies that integrate or
  connect with this core
• and the interfaces in-between

Question 2

which types of platforms are there and what is their definition?

Answer 2

1. transaction platform (They facilitate transitions between many individuals and organisations that otherwise would have difficulty finding or transacting with each other.)
2. innovation platform (They serve as technological building blocks on top of which innovators can develop complementary products/services.)
3. hybrid platforms (They combine the transaction and innovation platform i.e., Google, Amazon and Facebook)

Question 3

what does network effect mean?

Answer 3

refer to the phenomenon where the value or utility of a good or service increases with the number of others using it.

Question 4

what does multi-homing cost mean?

Answer 4

refers to the costs that users face in using or participating in multiple platforms simultaneously. this is both financially but also the time it costs to learn a new interface

Question 5

What does winner-takes-all effect mean?

Answer 5

high multi-homing costs discourage users from multi-homing, amplify network effects for the leading platform, and ultimately allow a single winner to take almost the entire market, leaving little opportunity for competitors

Question 6

what is the definition of an ecosystem?

Answer 6

a set of actors with varying degrees of
multilateral, nongeneric complementarities that
are not fully hierarchically controlled

Question 7

What types of ecosystem architectures are there and what do they mean?

Answer 7

• Open
  Standardised and open interfaces allow greater participation
• Less control over offering
• Greater innovation in offering
• Lower value appropriation, but likely industry standard
• Closed
  Proprietary interfaces limit participation
• Stronger control over offering
• Greater value appropriation, but unlikely to become industry standard

Question 8

what are the architectural design choices the platform leader must make?

Answer 8

1. which complementary functions to do in-house
2. degree of openness and pricing for interface access
3. incentives for complementors to join the platform
4. guaranteeing platform ecosystem benefits relative to the orchestrator’s benefit

Question 9

what influences how open and closed an ecosystem is and how?

Answer 9

Intellectual property rights influence because:
- Whether access to things like APIs is restricted or available to third-party developers.

• The degree to which the platform owner holds patents, copyrights or other exclusive intellectual property over the core technological aspects and functionality of the platform.
• Whether there are fees involved.

Question 10

What is needed for the platformization of a business ecosystem?

Answer 10

1. need to reconfigure both value creation and value capture mechanisms within the existing business ecosystem to drive platformisation.
2. platform must leverage network effects
3. integrate complementary actors like advertisers to expand platform business model
4. incumbent support from existing ecosystem players to establish legitimacy.
5. continuous innovation for sustainable platform growth

Question 11

what does business ecosystem envelopment mean?

Answer 11

describes how a digital platform can platformize an existing ecosystem by absorbing its core offering, without fully disrupting the traditional ecosystem itself while installing a new digital layer on top through the platform.

Question 12

what are the key elements of business ecosystem envelopment?

Answer 12

• Absorbs the focal offering of the traditional business ecosystem into a new and better digital platform ecosystem.
• It does not replace or take over the internal organisation/functions of the traditional ecosystem.
• The traditional ecosystem remains largely intact, but its keystone actors are demoted to complementors in the new digital ecosystem.
• The digital platform installs itself at the core of the combined digital + traditional ecosystem reconfiguring value flows.
• Offers new products by combining traditional offerings with additional digital components.

Question 13

what types of complementary is there?

Answer 13

• Unique complementary (A doesn’t function without B)
• Generic complementarity (standard pieces with little governance concerns): USB drives and USB ports - USB drives are generic storage devices that can be plugged into most computers, phones, etc. without any ongoing relationship between the firms.
• Supermodular complementarity (more of A increases B’s value): Faster internet connections enable higher definition video that provides a better experience.