Section10

Question 1

What is a (innovation) platform and what does it require?

Answer 1

Definition:

• A foundation technology or service that enables a broader ecosystem
• Requires complementary innovations to be useful
• Is not a ‘finished’ product or service

Question 2

Step processes vs. platforms

Answer 2

• Step processes (products):
  
  • High interdependence
  • Hierarchy and top-down coordination
  • Low incentives for risk-taking
• Platforms:
  
  • Low interdependence (modularity)
  • Openness and high incentives for risk-taking
  • Provide option value

Question 3

Transaction vs. innovation platforms

and what are the barriers to entry?

Answer 3

• Transaction platforms:
  
  • Facilitate direct exchange (e.g. ride-hailing)
  • Often rely on low barriers to entry/exit
• Innovation platforms:
  
  • Provide a technological foundation for complementors
  • Typically high barriers to enter or leave

Question 4

What are network effects?

Answer 4

• Network effects make a platform more valuable as usage grows
• Direct: Value increases with the number of users (e.g. social media)
• Indirect: Value increases with the number of complementors on one side, attracting users on the other side

Question 5

Why does ‘tipping’ occur?

Answer 5

• Tipping happens when standardisation and network effects lead to a single winner-take-all
• Can be limited by multihoming (using multiple platforms) or market segmentation
• Strategies include bundling complements and forming coalitions

Question 6

What is ‘variance’ and ‘options’?

Answer 6

• Variance: How far outcomes spread from the average
• Options: The ability to choose after outcomes become clear
• For step processes, high variance is bad (bottlenecks)
• For platforms, high variance can be good (select the best complement)

Question 7

Product architecture: integrality vs. modularity

and what are they typical for?

Answer 7

• Integral architecture: Many interdependencies, typical of step processes
• Modular architecture: Loosely coupled components, typical of platforms
• Modularity fosters openness and innovation

Question 8

Essential platform strategies (3)

Answer 8

• Build stand-alone value first (e.g. iPhone’s initial offerings)
• Subsidise one side to grow users/complements
• Synchronise adoption across multiple sides (e.g. social networks at universities)

Question 9

Management implications for platforms (4)

whats a good structure and what needs to be managed?

Answer 9

• Less hierarchy, more inspiration and support
• Accept some chaos to foster creativity
• Emphasise flexibility over pure efficiency
• Manage risk-taking trade-offs (downside vs. upside)

Question 10

Complementors & Users

Benefits & drawbacks of using a platofrm

Answer 10

• Complementors:
  
  • Gain access to large user bases
  • Face risk from platform leader changes or vertical integration
• Users:
  
  • Benefit from competitive offers
  • Risk lock-in to a dominant platform