Lecture 4 - Platforms and Distribution Flashcards
What are platform businesses?
A middle man between producers and consumers, offering producers a way to sell to more consumers e.g. Amazon, eBay, Airbnb
What are the stages of a traditional business model?
- Raw materials
- Production
- Assembly
- Distribution
What are the stages of platform business models?
- Raw materials/ Source content
- Production/ Edit/ curate
- Assembly/ create bundles
- Distribution/ multiple channels
What are ownership costs?
- Often tech based firms have advantage over other orgs due to limited ownership costs
- Are costs incurred by a firm by purchasing, maintaining and depreciating physical assets
What are transaction costs?
- Costs that are incurred by the firm when it creates a transaction in the marketplace
What are network effects?
- Sum total value added for users depends on total nodes in network
- Each additional node adds value to entire network
- ‘Tipping point’ scale enough to attract additional users to sustain growth
- Each point of critical mass is individually specific to the platform
What are features of platforms?
- Capable of vast returns
- Introduce new interactions between participants and thus new value creation
- Generate and subject to network effects
- Generally lower ownership and transaction costs can be achieved
- Create value by controlling a linear set of transactions
What are some considerations of a platform?
- Distinctiveness and size
- Platform sides
- Multi-homing costs
What are strategies for traditional pipeline orgs?
- Resource control (RBV argues control of VRIO resources)
- Internal optimisation (create value by optimising chain of product activities)
- Customer value (Maximise lifetime value of individual customers at end of linear process)
What are strategies for platform orgs?
- Resource orchestration (resources community member owned, network becomes asset)
- External interaction (create value by facilitating interaction between producers and consumers)
- Ecosystem value (maximise total value of expanding ecosystem)
What implications do platform businesses have for modern businesses?
- Competition becomes more dynamic and complicated in a ‘platform world’
- Porter still applies, but forces behave differently and new factors arrive
- ‘Learn the new rules of strategy for a platform world or begin planning you exit’
What is coopetition?
Term used to describe cooperative competition - mutually beneficial partnerships that make both parties more competitive
Platforms & competition: How can platforms create a vision for disruption?
- Develop new advantages by understanding how to satisfy stakeholders better
- Seeking out new knowledge necessary for predicting or creating new temporary windows of opportunity
Platforms & competition: How can platforms create capabilities for disruption?
- Build the capability for speed
- Create the capability to surprise competitors
Platforms & competition: How can platforms create tactics for disruption?
- Shift rules of competition
- Use signals to influence future strategic interactions
- Execute simultaneous or sequential strategic thrusts
