4 Marshall Van Alstyne Platform Revolution

Summary

Marshall Van Alstyne discusses the transformative impact of digital platforms on traditional business strategies. He illustrates how industry giants like Nokia and Kodak were disrupted by new market entrants like Apple and Instagram, highlighting the shift from supply-side economies of scale to demand-side network effects. Van Alstyne emphasizes the importance of interactions, community ownership, and the need for frictionless entry and exit in platform ecosystems. He also addresses the challenges of competition in the platform era and the role of AI and machine learning in enhancing matchmaking within these ecosystems.

Takeaways

• 😀 The intersection of digital and economy is a key area of focus, particularly in the realm of two-sided networks and platforms.
• 🎓 Marshall Van Alstyne's expertise lies in computer science, economics, and strategy, with a significant emphasis on two-sided networks.
• 📚 His teachings on two-sided networks are popular among MBA students and are now being shared more widely through a book.
• 🚀 The nature of industry and competition has changed, with new strategies required for firms to compete effectively in today's digital landscape.
• 📈 The traditional barriers to entry such as brand recognition, supply chain economies, and regulatory protection are no longer as insurmountable due to the rise of digital platforms.
• 📱 Apple's success in the handset industry, capturing 92% of profits, exemplifies how new entrants can disrupt established markets with innovative strategies.
• 🚗 Companies like Uber and Airbnb demonstrate the value of platform businesses, outperforming traditional giants in their respective industries.
• 🔄 The strategy in platform businesses involves focusing on interactions, network effects, and managing the ecosystem, rather than just product differentiation or cost advantages.
• 🤝 Boundaries in platform businesses are often blurred, with participants taking on multiple roles as both producers and consumers.
• 🤖 AI and machine learning play a crucial role in enhancing the matching function of platforms, creating wealth through more efficient and effective transactions.
• 🌐 Owning the community and relationships is more valuable than owning technology alone, as it allows for easier integration of new technologies into the platform.

Q & A

What is the main focus of Marshall Van Alstyne's expertise?

Marshall Van Alstyne's expertise lies at the intersection of digital technology and the economy, with a particular focus on two-sided networks and platforms.

What significant change in the handset manufacturing industry did Marshall Van Alstyne highlight?

Marshall Van Alstyne highlighted that in 2007, seven companies controlled 99% of industry profits, but by 2013, Apple alone controlled 92% of the industry profits, indicating a significant shift in the competitive landscape.

How does the value of a platform increase according to the transcript?

The value of a platform increases as more users join the ecosystem, creating network effects and demand economies of scale, which in turn attract more users and further increase the platform's value.

What is the role of interactivity in platform business models?

Interactivity in platform business models is crucial as it leads to frequent user interactions, creating network effects and driving demand that scales with the growth of the user base.

Why is it beneficial for platforms to have their sources of value 'monetize' rather than 'multi-home'?

Platforms benefit from having their sources of value 'monetize' on their platform exclusively (mono-home) rather than 'multi-home' across multiple platforms because it helps in capturing more value and data, which is essential for the platform's growth and control.

What traditional tenets of strategy does Marshall Van Alstyne suggest are no longer as effective in the current competitive landscape?

Marshall Van Alstyne suggests that traditional tenets of strategy such as product differentiation, cost advantages, and owning inimitable resources are less effective due to the changing nature of competition and the rise of platform business models.

How does the role of competition change in the context of platform businesses?

In platform businesses, competition is multi-dimensional and often involves 'coopetition' or 'frenemy' relationships, where traditional competitors may become complementary within the ecosystem.

What is the significance of the community in platform strategy according to the transcript?

The community is significant in platform strategy because owning the community relationships allows for easier integration of technology, creating a competitive advantage over those who only possess technology without a strong community base.

Why might a platform business model see fewer mergers and acquisitions compared to traditional businesses?

Platform businesses might see fewer mergers and acquisitions because they benefit from keeping innovation incentives high, compartmentalizing business and technology risks, and solving information asymmetry problems by observing partner transactions on the platform.

How can companies that are not platform businesses optimize their success in a platform world?

Companies that are not platform businesses can optimize their success by participating early in ecosystems, choosing partners carefully, and focusing on creating value through information and community within the platforms they engage with.

What role does AI and machine learning play in the matching function of platforms?

AI and machine learning play a crucial role in the matching function of platforms by improving the efficiency and effectiveness of matches through data analysis, recommender systems, and reputation systems, ultimately creating more wealth through better matches.

Outlines

00:00

📚 Introduction to Digital Economy and Two-Sided Networks

The speaker introduces the concept of the intersection between digital technology and the economy, highlighting the expertise of the next speaker, Marshall Van Alstyne. Trained in computer science, economics, and strategy, Van Alstyne specializes in two-sided networks and platforms. The speaker mentions a popular MBA session on this topic, expressing initial regret that Van Alstyne's knowledge would be widely shared through a book, but ultimately agreeing that widespread understanding of platforms benefits everyone. The speaker emphasizes the importance of coordination in two-sided networks and encourages the audience to read Van Alstyne's book, suggesting they even give copies to competitors to foster collective understanding.

05:02

🌟 The Transformation of Industry and Competition

Van Alstyne discusses how the nature of industry and competition has changed, using examples like the handset industry where once-dominant companies like Nokia and Blackberry lost out to Apple, which wasn't even in the industry initially. He points out that traditional strategies and barriers to entry didn't protect these companies. Van Alstyne also mentions other industries like transportation and hospitality, where new entrants like Uber and Airbnb have significantly disrupted the market. He emphasizes the importance of understanding these changes to engage in new forms of competition and suggests that traditional business strategies must evolve to account for these shifts.

10:03

🔄 The Dynamics of Modern Strategy and Competition

The paragraph delves into the traditional principles of strategy, such as creating barriers to entry and product differentiation. Van Alstyne contrasts this with the modern focus on interaction and network effects, where user engagement creates value. He gives examples like Apple's device interactions and how they foster network effects, leading to new barriers to entry. The speaker also discusses how boundaries can change, with companies like Uber and Airbnb blurring the lines between buyers and sellers. He emphasizes the importance of managing these interactions to create value and the need to balance mono-homking and multi-homing strategies to control the ecosystem.

15:06

🌐 The Shift to Platform-Centric Business Models

Van Alstyne explains the shift from traditional business models to platform-centric ones. He points out that in a platform model, the focus is on interactions and community, rather than just controlling resources. The speaker discusses how platforms like Salesforce leverage their user base to develop new features, creating a market exchange that accelerates growth. He also touches on the importance of keeping technology modular to manage risk and innovation. Van Alstyne suggests that less merger and acquisition activity is typical in platform businesses, as they prefer to keep partners at arm's length to maintain innovation and manage risk.

20:08

🤝 Navigating the Platform World and Future Predictions

The speaker addresses the question of whether every company needs to be a platform, acknowledging that not every firm can or should be one. He suggests strategies for companies that can't build platforms, such as partnering on someone else's platform or leveraging spare capacity and resources. Van Alstyne also discusses the importance of data and AI in matching functions on platforms, emphasizing how better data leads to better matches and thus more wealth creation. He concludes with a note on the upcoming executive education program on platform strategies.

🤖 The Role of AI and Machine Learning in Platform Matching

In this segment, the role of AI and machine learning in enhancing the matching function of platforms is explored. Van Alstyne explains that platforms aim to create matches between different parties, and the better the data they have, the better they can facilitate these matches. He mentions recommender and reputation systems as examples of AI techniques that improve matches. The speaker also points out that platforms can create new capabilities that expand the sets of possible matches, not just improve the efficiency of existing ones.

Keywords

💡Two-sided networks

Two-sided networks refer to platforms that facilitate interactions between two distinct groups or parties, typically consumers and service providers. In the video, Marshall Van Alstyne discusses how these networks have become a popular session in his MBA classes, highlighting their importance in modern business strategies. Examples from the script include platforms like Uber and Airbnb, which connect riders/drivers and travelers/hosts, respectively.

💡Platform strategy

A platform strategy involves creating a business model where the platform itself is the central point that allows for interactions and transactions between different user groups. The video emphasizes how platform strategies have become crucial in the digital economy, with companies like Apple and Facebook leveraging this model to dominate their markets, as mentioned in the script where their market valuations are discussed.

💡Network effects

Network effects occur when the value of a product or service increases with the number of users. The video script explains how the frequency of interactions on platforms creates network effects, which in turn create demand economies of scale. An example given is Apple's ecosystem, where the more users that join, the more valuable the platform becomes, attracting even more users.

💡Ecosystem

An ecosystem, in the context of the video, refers to the community and environment created by a platform that supports interactions and transactions. The speaker mentions how owning the community is easier for adding technology than vice versa, illustrating the importance of an ecosystem in platform strategy. Companies like Facebook and Airbnb are highlighted as examples of businesses that have successfully built ecosystems.

💡Monetization

Monetization in the video refers to the process of generating revenue from a platform's ecosystem. The speaker discusses how platforms open around key control points that can be monetized, flipping the traditional logic of barriers to entry and exit. An example is how Uber and Airbnb provide incentives to attract new drivers and hosts, respectively, to their platforms.

💡Competitive advantage

Competitive advantage is the attribute that enables a company to outperform its competitors. The video script mentions how the speaker initially regretted sharing his knowledge on two-sided networks, fearing it would diminish his competitive advantage. However, he later acknowledges that widespread understanding of platforms can benefit all participants in an ecosystem.

💡Regulation

Regulation in the platform context refers to the oversight and control exerted by authorities to ensure fair competition and consumer protection. Towards the end of the script, the speaker hints at the need to consider the regulatory implications of large platforms that have become monopolies, questioning how to regulate them in the modern digital landscape.

💡Supply-side economies of scale

Supply-side economies of scale are cost advantages that occur when per-unit production costs decrease as the scale of production increases. The video contrasts this traditional concept with demand-side economies of scale, emphasizing the latter's importance in platform businesses. The speaker notes that while supply-side still matters, the focus has shifted towards demand-side due to network effects.

💡Demand-side economies of scale

Demand-side economies of scale occur when the value of a product or service increases as more consumers use it, driving up demand. The video script explains how platforms leverage these economies of scale through network effects, creating a feedback loop that increases the platform's value as more users join, as exemplified by the growth of Apple's market share in the smartphone industry.

💡Complementarity

Complementarity in the video refers to the strategic relationship between two products or services where one enhances the value of the other. The speaker discusses how traditional competitors can become complementary in a platform ecosystem, as seen with Apple and Google allowing Microsoft's Skype on their platforms under certain conditions that add value to their ecosystems.

💡Modularity

Modularity in the context of the video is the design principle where a system is divided into independent, interchangeable modules. The speaker mentions how platforms benefit from a modular ecosystem, allowing for compartmentalization of business and technology risks. This approach enables innovation and flexibility, as companies can integrate new modules without overhauling the entire system.

Highlights

The speaker, Marshall Van Alstyne, is a renowned expert in the intersection of digital technology and economy, particularly in two-sided networks and platforms.

His teachings on two-sided networks are popular among MBA students, indicating the practical value of understanding platform strategies.

The speaker's book on platform strategies is set to become a blockbuster, suggesting its potential to widely influence business practices.

Understanding platforms is beneficial not only for individual businesses but also for the entire ecosystem they operate in.

Two-sided networks can benefit from coordinated efforts, unlike traditional competition, where uniformity is not advantageous.

The nature of industry and competition has changed, as evidenced by the rise of companies like Apple in the handset industry.

Traditional barriers to entry such as brand recognition and economies of scale are no longer as effective due to the changing competitive landscape.

Companies like Uber and Airbnb have disrupted traditional industries, demonstrating the power of platform business models.

The value of a platform is in its ability to facilitate interactions and create network effects, which are new forms of competitive advantage.

Boundaries between buyers and suppliers can be blurred, allowing for more dynamic and flexible business models.

Platform strategies involve managing the ecosystem to ensure that value is captured and not just created.

The speaker emphasizes the importance of community ownership in platform strategies, as it facilitates the addition of technology more easily.

Traditional strategies focused on product differentiation and cost advantages, but platforms require a focus on interaction and community.

The role of AI and machine learning in platforms is crucial for matching supply and demand effectively.

Investments in capabilities can expand the sets of possible matches on a platform, creating new forms of value.

Not every company can be a platform; strategies for non-platform companies involve careful partner selection and leveraging existing ecosystems.

The speaker will be part of an executive education program on platform strategies, offering further insights into this business model.

Transcripts

so the idea is about bringing you

knowledge of the intersection of digital

and the economy see there and that's

exactly where our next speaker lives he

was trained as a computer scientist also

as an economist and strategist

he's been particularly apply 'near in

the field of two-sided networks and

platforms in fact it's probably my most

popular session that I teach to my MBA

students is basically when I channel our

next speaker Marshall Van Alstyne and I

explain to them about two-sided networks

and platforms and the students love it

and so it's with a twinge of regret when

I found out that he was going to write

this up as a blockbuster book and just

let everybody know about it and I was

thinking oh there goes one of my my

competitive advantages knowing this

stuff from up from Marshall and now

everyone's going to know it and those of

you who have been coming to the annual

conferences I've also been benefitting

from Marshalls insights and deep

research in this area but it's only a

twinge of regret because I think it's

actually good for more and more people

to learn about that not just because I'm

altruistic and I want the world to be a

better place but also because the more

people who in your ecosystem will

understand platforms the better off you

are as well that unlike some types of

competition two-sided networks actually

benefit when people are on the same page

and coordinate with each other and the

work that Marshalls been doing has been

showing how effective that can be so I

encourage you to take a look at this

book I think we've got signed copies of

it for our sponsors available there and

you can also of course buy copies of it

at Amazon or elsewhere and give it to

all of your your competitors and members

of your ecosystem so a please join me in

welcoming Marshall Van Alstyne

we'll have to thank you for that kind

introduction because a lot of the

economics I learned I learned from Eric

so just applying these techniques in new

ways so I want to convince you that

nature of industry and competition has

genuinely changed I'm not quite sure you

know exactly which organizations you

might be with but how would Taiyo to

compete with Ford might be the old rules

of strategy how might try to compete

with uber really the new rules of

strategy or how might Kodak have

anticipated some of the problems that

it's facing and looked into the future

to see what kinds of competition it

should be addressing let's start with a

couple of facts I really want to show

you how competition has changed and why

it's changed to see if it can give you a

couple of rules for manipulating how you

would engage in new forms of competition

the data are really rather compelling if

you look at the number of handset

manufacturers in 2007 seven of them

controlled 99% of industry profits and

these were named companies most of you

will recognize Nokia on blackberry and

anyone still willing to admit carrying a

blackberry these days well what's

fascinating is that these were Nokia

Samsung Sony Ericsson Motorola

Blackberry others 99% energy profited

controlled and they had what by all

accounts but and what we teach in

business school were insurmountable

barriers to entry they had name brand

recognition they had supply chain

economies of scale they had world class

logistics in telecommunications you're

often protected by regulatory barriers

protection what's interesting is if you

look at even the research dollars Nokia

alone had spent 40 billion dollars in

R&D and should have had phenomenal

features to protect them in these

marketplaces and yet something happened

six years later one company had 92

percent of industry profits and that

company wasn't even in the industry at

that point so Apple is now controlled 92

percent of the profits Samson was only

one with other small amount of profits

and everyone else had zero or negative

profits in the industry what's

interesting you want to ask the question

is it likely that all seven incumbents

lacked in execution strategies and had

clueless management to their benefit I

give them more credit I think not I

actually think that what's happened is

that strategy has changed the nature of

competition in these industries has

changed something different is happening

but don't just take a look at

telecommunications how about another

couple of industries I will just give

you a couple others you might be

familiar with take a look at the data

where's we go to this how many of you

knew that uber is now more valuable in

BMW

BMW found it a century ago all right I

was actually a Munich for their for

their Centennial the park capital

markets put them at 53 billion dollars

uber is now valued in the private equity

markets at 60 billion dollars I found

out from one of their staff just

yesterday okay they've now almost

doubled their employees are now up to

7,000 employees as opposed to it as

opposed to 5,000

similarly Marriott 200,000 employees 17

billion dollars in the Airbnb founded

only in 2008 is worth 21 billion dollars

Walt Disney you know how many of us have

seen have our kids watch these movies we

have we have there everyone knows and

loves their content and yet Walt Disney

is worth half of Facebook even if these

numbers are off by a factor of two it's

extraordinary what's going on the one

that's not quite comparable is Kodak

versus Instagram we compare the numbers

from their heyday versus the

point-of-sale Kodak I love it as example

of a true industrial Eric company

founded in 1888 reached its zenith one

hundred and forty five thousand

employees thirty billion dollars and yet

Instagram had only 13 employees when it

sold for a billion dollars something's

different something really is different

and in the nature of industry these days

so I want to start with so what are the

traditional tenets of strategy this is

what we've been teaching for you know 15

years and I studied this in this very

building 20 years ago I don't admit it's

that long ago but what we learned about

is the forces what you want to segregate

supply and demand you want to create

barriers to entry for others entering

your markets you want product

differentiation so chipping heart charge

high prices or you want

costs in order to have a cost advantage

and can offer low prices all you want to

own and control the inimitable resources

so that your competitors can't do the

same things you do what is it that firms

are doing differently today well one of

the things I want to draw your attention

to is we're now focusing on interaction

so Apple has you interacting with their

device every couple of hours those

interactions are constantly taking place

those interactions are creating the

network effects these are demand

economies of scale the frequency of

these interactions are creating the

relationships the network effects that

are creating the demand that come as a

scale or new kinds of barriers to entry

as the demand curve moves out as more

people join the ecosystem the value

Rises which increases value the

ecosystem which attracts more people

which brings more people which brings

more value to the ecosystem that

interactivity users creating value for

users is what's creating a lot of that

value it's a different mechanism

another thing is that boundaries can be

altered you're not just subjugating

buyers and suppliers to keep them out

now you may be mixing and matching them

you can ride with over today and

drive with them tomorrow you can stay

with Airbnb tonight and host with them

tomorrow the best example of this was

actually Salesforce when when they got

started they had one hundredth the

number of Engineers that s AP and Oracle

had how did they manage to get moving so

quickly they had one their clients built

new features on top of their platform

they marketed these features to other

clients their demand became their supply

that increased the number of folks

working on the products by an order of

magnitude and help them grow incredibly

they had a market exchange in b2b space

two years ahead of the Apple iTunes

Store known is that

comput headed competitors run keeping

them out entirely can become

complementary it just has to be on your

terms it is the case that both Apple and

Google allow Microsoft Skype onto the

platform both Apple and Google allow

Amazon eReader onto the platform under

specific cases where they bring you

value you want to come in the trick

whenever possible is to actually get

them to Mono home you want the sources

of value to be on your platform if

possible but not on the competitors

platform you want to see if you can

manage that as opposed to multi-home you

want their sources of value to

multi-home you want your sources of

value to Mono home to stick with you

competition is now also

multi-dimensional the way that it didn't

used to be of course its platform one

platform it's Apple versus Google it's

myspace versus Facebook it's

Android you know it's BMW versus Toyota

but you now also have to think about

keeping your sources of value on

platform this is that mono homing versus

multihoming you MySpace sorry Facebook

doesn't want Zynga on myspace Apple

doesn't want Angry Birds on Android if

they can help it that's one of things

that you can try to manage if you can if

you can reward folks to keep them in

your ecosystem then you have to make

sure that partners don't exploit other

partners if that happens you can drive

one side of this feedback market off

platform so when Zynga started sending

out spam notices to too many of the

users on Facebook Facebook had to turn

that down and ratchet that off if folks

could exploit Apple is magnificent at

keeping malware and porn and bad

software off of the iTunes platform that

protects the ecosystem you look after

both sides of the market to maximize the

value of those interactions

you also have to make sure that they're

creating value for the platform and not

just taking it away if Zynga starts to

tip the interactions off platform into

the cloud Facebook doesn't capture that

value anymore if it's the case that

Google Maps starts to tip those

interactions off the Apple iPhone Apple

doesn't capture that value anymore you

must be very careful about capturing the

data and capturing the value on your

terms even as these competitors create

value on top of the platform

another element of this is critical you

don't have to own all the critical

resources if this were Windows you might

own Word PowerPoint and Excel your phone

comes preloaded with a dozen apps the

mapping the contact manager the phone in

the browser there are the critical

things but you want the ecosystem to

create all this incremental value in

your behalf you don't need to own that

and if you do try to control it you'll

restrict the growth of the ecosystem the

way that keeps the value small when in

fact your task is to grow it as much as

possible

one other interesting observation we

find is that you'll probably see on a

platform less mergers and acquisition

than in a traditional business model so

of course you use M&A to enter new

businesses in the way my Facebook took

over Instagram or Apple bought Siri to

enter voice or Google bought Android to

enter mobile these big systems that they

don't have but once the platform's

established more often than not you'll

want to keep folks at arm's length for a

variety of reasons the first one has

been obvious for a long time it's been

true for for ages even before platforms

not acquiring the business keeps the

innovation incentives what happens as

soon as you buy a Silicon Valley startup

well the founders leave to go to another

Silicon Valley startup right this way

you keep them off platform where you

still have the incentive to keep

innovating the second thing is what

happens if an app fails you

compartmentalize that risk by keeping it

on platform as distinct so you've

compartmentalised the business risk by

keeping it separate it's a business

version of modularity that same thing

applies also to the technology you

compartmentalize the technology risk if

someone builds their stack and PHP

someone else in Java someone else in

assembly code you don't want to own

those technological headaches by keeping

it as modulized components on ecosystem

partners attached to the platform you

compartmentalize the technology risk in

addition to compartmentalize the

business risk

lastly you solve an information

asymmetry problem if you keep a partner

and you can observe their transactions

on platform now you know how many

transactions are doing and what those

transactions are worth before this you

had to send an army of accountants in to

go examine the private books of the

company know how much value they're

really creating now you can see what

kind of compliment they would be and

solve that information asymmetry problem

before doing an actual acquisition so

each of these reasons you get an

advantage

from the modular ecosystem and the

reconfigurable components and less M&A

in the small things even as you might

still observe them in the large things

one last thing I want to draw your

attention to is predicting the

competition

publishers know how to deal with other

publishers Houghton Mifflin knows how to

deal with mcgraw-hill how do you do it

you own the distribution channels to the

schools in the bookstores and you own

the copyrighted material so that you

can't get

competition that's owning the

indispensable asset how does Toyota

compete with Ford well I invented

just-in-time inventory they know

operations and supply chain as well as

anybody how to swatch compete with Timex

low-cost or fashion or differentiating

into sports its feature and product and

differentiation by the traditional rules

of strategy none of these inside their

industries anticipated competition from

Amazon Netflix Facebook Samsung Timex

and swatch are now having fits for Apple

watches

they don't have the ecosystem they've

just got the technology how would you

anticipate that and how might you deal

with how would you even think about

solving those kinds of problems the

traditional way of anticipating

competition is effectively to define the

boundaries of your industry based on the

features that you produce so if you look

at the features of your watch your car

your service are you product

differentiation should already low cost

in this so well I would assume overlap

with an iPod or how it is how would i

pod interact with an iPhone or PSP

personal selling personal Playstation or

another device it's a feature overlap to

distinguish the differences in product

that's not the right way to think about

things in platforms it's this external

value creation it's the community the

ecosystem that's creating value what you

want to do is to look for who has the

relationship

who owns the community thing but in the

following way if you own the community

it's much easier to add a technology to

a community then we used to add a

community to a technology I'll say that

again it's easier to add a technology to

a community than it is to add a

community to a technology technologies

duplicatable or its functions our

duplicatable but if you only relation

relationship it's very straightforward

to bring in new things exactly as Apple

brought in video it brought in accessing

the web it brought in these watches and

other devices if you own the community

you own that relationship it's very easy

to have either your own technology or

partner technology brick come in and

take over just the individual product

space so to summarize there are several

key features that really define the

differences in strategy so first of all

the boundaries are no longer distinct

and you're not always trying to dominate

one in fact the boundaries can be very

blurry and you're now in the frenemy and

coopertition space indeed even the

overlap between producers and consumers

is very high they are not distinct in

the same way second you'd focus on the

core competencies previously now you

need to focus on the core interactions

how much you're getting them to engage

with your products and services so that

others can attach to that as well

formerly we focused on supply-side

economies of scale now we must focus on

demands that economies of scale I know

it's not that supply-side doesn't matter

of course it matters it will always

matter but we now also need to focus on

the network effects and demand side

economies of scale that distinguishes

these new business models it's not just

owning an immutable resource it's

getting partners to bring those

resources to you to you and it's not

just those it's the community itself as

an asset what can your community bring

to you and how can you motivate them to

contribute what they have and keep it on

your platform as it and keep it off

competing platforms and it's no longer

barriers to entry and boulevards for

exit in that case you're trying to keep

the other folks out and anyone was

weakened struggling you wanted to kick

them out of the ecosystem as fast as

possible here it's frictionless entry of

demand and supply you want as many users

as possible

uber gives away bribes to get new

drivers and riders in the system Airbnb

gives away bribes to get into people

into the system it's frictionless entry

of demand and supply we flipped the

logic what's happening and you're

opening around key control points that

you can monetize and the innovation is

no longer just by the firm that's why

the firm wasn't together with an open

ecosystem those things together or what

helped

the new tenets of strategy in the

platform business models so with that

I'm very happy to take any further

questions we've covered just a tiny

piece of this strategy chapter but there

are a whole number of different things

about getting these things launched

about how you build the network effects

one of the architectures of these

businesses to help them launch an

increase in value they're also as these

grow enormous marketplaces and become

gigantic firms monopolies today like the

monopolies of a century ago how do we

regulate them what are the antitrust

implications as these firm become

juggernaut so with that I'm happy to

take any questions I

just wanted to add one point Marshall

while we do have the book available in

June we'll be launching the first

executive education program on platform

strategies featuring Marshalls co-author

of platform revolution Jeff Parker and

each of our stakeholders gets five free

seats to that so if you'd like to

participate in that please let me know

floors open for questions

thanks Marshall great talk what are the

questions that I see in talking to a lot

of companies is is

do they have to be a platform you know

in a lot of sectors you can if you look

at it not every not every participant

can be a platform you know there'll be

some that went in and developed the

platform so do you have a view of what

the strategy should be for those who

can't build the platforms or won't be

the winning platforms how do they

optimize their success in a platform

world or can they now Paul think that's

a great question so not every firm can

be a platform not every program can be a

platform so it's partly a function of

how far along the ecosystem is and what

the assets of the particular company are

the earlier you start the greater the

chances that that firm can be a platform

after a while they're probably going to

have to be a partner on someone else's

platform and after that they're probably

going to be off platform I mean imagine

now trying to create the latest greatest

app on Android it would be extremely

difficult to do it the earlier you can

participate the earlier you can be the

platform the later then you're going to

have to choose your partners carefully

and after that you're probably going to

have very very tough time again in most

cases these markets concentrate we can

want to take home markets so you want

earlier advantages if you can acquire

them we have a long list of tests of

things to help you decide what firms can

do there so look for expensive

gatekeepers can be displaced look for

spare capacity and resources just as

with Airbnb and with uber

look for industries where you can create

incremental value through information

and through community those are those

are excellent places to actually try to

seek leverage in shifting a business

model into becoming a platform

thanks Marshall this is Prashant from

Accenture inch of high performance a

fascinating presentation my question is

about the technology beneath the

platform so actually the two-part

question first is matching the

fundamental function of platforms and if

so what is the what is the role of AI

what is the role of machine learning in

that matching function

so the goal of the platform is to

consummate the match you want as many

matches as possible whether it's people

and content people in people people and

ideas whatever you the goal of the

platform were to consummate the match

the way to do that use data on both

sides of the market you need data on the

consumption and any data on the supply

and the better the data you have the

better you can do that match if you look

at recommender systems are a crucial or

you know element of that Netflix has

that Google has it Google is really good

at getting you exactly what you want

when you search whether it's a YouTube

video whether it's a product search

that's a recommendation that's an

artificial intelligent techniques other

recommender systems reputation systems

all of those are better constituting

match I'll give you a really simple

reason every time you create a match in

an economic sense you are creating

wealth you're creating a transaction

where two parties come together to

create wealth the more of that you do

the more wealth you create that's what

you've got to do

imagine this rods work but there's

Matthew together to make a match more

efficient

but in two sided markets you can also

create new capabilities yeah a matter

for uber an app that makes you able a

recommendation that improves things so

it's not just efficiency of match in

multi-sided markets that and the

platform's you describe you're creating

capabilities that also can improve the

quality of a match so it's a dual knot

so it's not just efficiency it's a

different form of effectiveness so as I

have to thank microphone for adding

quite correctly that we really really do

need to invest also in the capabilities

you can you could create better drivers

you could create better environments at

Airbnb you can create better

capabilities on either side which allows

to in some sense what you're doing is

you're expanding the sets of matches

that are possible so you don't just take

the matches as given you can also make

investments in ways that create new

kinds of matches and that's a very

important point okay I encourage all of

you to seek marshal out to ants to

answer any of your questions but now

we're going to take a 10-minute bio

break also as Eric mentioned we do have

signed copies of the book for all of our

corporate members donors and

stakeholders those are at the

registration table so we'll see you back

in this room for the productivity

employment in inequality panel session

in ten minutes okay thank you