Resources for platform

strategies
Session 8

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What is a platform
• A platform is a business model that creates value by facilitating
exchanges between two or more interdependent groups, usually
consumers and producers.
• In order to make these exchanges happen, platforms harness and create
large, scalable networks of users and resources that can be accessed on
demand. Platforms create communities and markets with network
effects that allow users to interact and transact.

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Players in a platform ecosystem

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Network effects
• Demand side economies of scale
• Enhanced by technologies that enable efficiencies in social networking,
demand aggregation, app development,
• Suppliers and customers may be seen as resources

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Roles within platforms
• Accretive vs depletive roles
• Platform competition from unrelated industries
• Competition from established platforms with superior network effects
• Target an overlapping customer base with a distinctive new offering that
leverages network effects
• Competition from platforms that collect the same set of data as your firm

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Shift from being a pure ‘pipeline’ business to
a platform business
• Resource control to resource orchestration
• Internal optimization to external interaction
• Change from focus on customer value to ecosystem value

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Resources in platforms
• Strong up front design that can attract the desired participants, and
enable the desired interactions
• Start with a single type of high value interaction, and spread the
scope later
• Categories of resources in platforms
• Resources that enable a firm to create a platform
• Resources that enable a firm to leverage a platform to create profits
• Resources that enable a firm to enter a market where competing platforms
are already dominant
• Resources that enable a firm to resist attacks from competing platforms

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Access openness and resource openness
• Access openness refers to the granting of access to external
complementors to participate and conduct business on a platform by
providing them with dedicated resources to interact with the
platform. For example, a host can provide interfaces, such as APIs
(Application programming interface), to allow outside developers to
create new apps on top of the platform. Here, access refers to the
access to participate.
• By contrast, resource openness refers to opening the platform’s
valuable resources by forfeiting the IPR of the resource. For example,
a platform owner can opensource a platform’s codebase

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Examples of platforms
• Google Search, Facebook, Amazon Web Services, Amazon
Marketplace, Android

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Differences between various platforms
• Platforms are very different in how they create network effects,
interactions they enable, approaches to solving “chicken and egg”
problems (do you build the demand side first or the supply side?),
openness levels, growth dynamics, subsidies, competitive strategies
and monetisation methods
• Getting the critical mass is important in getting a platform started.
Getting the first 1000 or million customers may be the most difficult.
Hence resources that enable firms to achieve this may be critical.

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Platform forking
• A hostile firm, i.e., a forker, bypasses the host’s controlling boundary
resources and exploits the platform’s shared resources, core and
complements, to create a competing platform business.
• For example, Amazon has created its proprietary Fire OS platform,
which appropriated the open platform core of the Android
OpenSource Project (AOSP). Furthermore, Amazon has not only
copied Android’s core but has expanded the exploitation to its app
complements that are shared for distribution
• Response to forking- e.g. Google’s responses, which modified
Android’s boundary resources to curb exploitation and retain control

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• Technically, a platform fork “forks” the platform’s core, but
strategically the technical fork is a means to create a new platform
that directly competes with the host platform while maintaining
compatibility with it. Compatibility offers a means to exploit the host
platform’s complementarities, especially its apps.
• creating a fork of the platform core saves at least between $1 and $2
billion in initial development cost and provides significant additional
savings in each subsequent version if the forker manages to maintain
compatibility

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Platform envelopment
• “platform envelopment strategies,” whereby a dominant platform
(the enveloper) operating in a multi-sided market (the origin market)
enters a second multi-sided market (the target market) by leveraging
the data obtained from its shared user relationships.
• effects of “privacy policy tying,” a strategy whereby the enveloper
requests consumers to grant their consent to combining their data in
both origin and target markets. This may allow the enveloper to fund
the services offered to all sides of the target market by monetizing
data in the origin market, monopolize the target market, and
entrench its dominant position in the origin market
• Here the resource used is “another attractive platform”

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Impact of platform envelopment strategies
• Leverage shared user relationships and/or common components. For
example, Google entered into mobile operating systems by bundling
Android with Google Search, two separate platforms, in order to,
among other possible goals, leverage the data generated by users of
both platforms. Such data were effectively monetized through
Google’s online advertising platforms. This strategy allowed Google to
fund its entry in a way that could not be replicated by other
competitors and contributed to its eventual dominance of the mobile
operating system market

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• Platform envelopment strategies are viable not only when bundling
platforms that are complements but also when they are weak
substitutes or are functionally unrelated. Google entered online
display advertising by bundling DoubleClick’s online display platform
and its own online search platform, which were regarded as
complements by many advertisers and weak substitutes by others
• Facebook or Alibaba, penetrated retail banking by combining a
payment system platform with its online advertising businesses

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Volumes as a resource
• A (positive) membership externality exists when the value received
by a member of one side increases with the number of members on
the same or another side. In the case of social networks, users benefit
from being able to reach out to a larger number of users. As another
example, consumers benefit more from a restaurant reservation
platform if they have more restaurants to choose from when making
a reservation. This is a traditional indirect network externality. A
(positive) usage externality exists when the members of a group
benefit when members of the same or the other group intensify their
use of the platform. For example, users of a social network may
benefit when other users post additional content.
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“When a platform enters a pipeline firm’s
market, the platform almost always wins”

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Impact of platforms-1
• Platform creates a new type of online marketplace and increase
the exchanges among various businesses in the global scope. For
instance, the Chinese e-commerce platform, Alibaba.com is a
business-to-business website, connecting manufacturers from a
variety of countries with buyers around the world.

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Impact of platforms-2
• Platform features an infrastructure that brings external sellers
and buyers together, regardless of sources through data-driven
matchmaking, with little internal resources or inventory. In
business logistics and supply change management, it can go
beyond the just-in-time delivery and reach zero inventory
through platform.

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Impact of platforms- 3
• The network effect has shifted from traditional business-to-
business network or managerial ties to the platform based
virtual business networks in the global business market.
Platform becomes a business hub attracting many sellers and
buyers all over the world through internet. Therefore, the
network effect is enhanced in the digital platform.

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Impact of platforms-4
• The platform has displaced traditional intermedia in the
connected ecosystem. The role of sellers and buyers in the
platform ecosystem is flurrying in the digital age in which a
producer and a user can swap with each other. As such, a buyer
can become a seller and a seller can become a buyer in an
interactive way. Such a swap effect attracts more participants
and accelerates the market expansion.

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Impact of platforms-5
• Platform in the shared economy has expanded the opportunity
for business-to-business crowding sourcing and crowd funding,
creating values by unlocking the spared resources. Given the
platform openness, companies can have a wide access to
external sources for new product development, idea generation
and innovation through the various types of business platform.

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Example of a platform- Sports league
• E.g. Cricket T20 leagues- Components of the platform
• Franchisee teams- whose owners bid to have their own teams (Revenue for
the platform)
• Well known players who have their own following (who are contracted by the
teams)
• Cricket boards of different countries who get a share from their contracted
players revenues
• Sponsors of the tournaments for different years
• Viewers of the matches- both in the stadium and through television
• TV companies that bid for the right to telecast live matches
• Business firms that pay to telecast their ads in these matches
• How are the different platform components mobilised?
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Competing for value- T20 cricket leagues
• Inter-nation cricket series, multinational tournaments
• Other formats of the game
• Different boards of the cricket playing countries who earn their
revenues from their domestic and international matches
• Owners of cricket stadiums in different parts of the world
• Other T20 leagues in other countries

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E.g. how does competition of IPL have
cooperation and competition with this platform
• IPL vs ICL
• IPL Vs Other country leagues- e.g. BBL
• IPL Vs other formats
• Which resource ensures that IPL has a competitive advantage over
other competitors?

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