Category Archives: Platform Models

Book Review: Irene Ng’s “Value and Worth: Creating New Markets in the Digital Economy”

ValueWorthWhat follows is my January 14, 2013 Amazon.com review of Irene Ng’s latest book, Value and Worth:  Creating New Markets in the Digital Economy.  The review article was entitled:  The Tao of Value Creation and Growth for Businesses in Our New Digital World.

Irene Ng’s lucid and accessible book, “Value and Worth: Creating New Markets in the Digital Economy,” is a remarkable accomplishment, a work that should not be overlooked (that is, it most certainly should be read!) by current and prospective business managers, leaders, and entrepreneurs in every economic sector.

As national and world economies become more and more “digitized,” the opportunities/horizons for “business value creation” are expanding at a phenomenal rate. However, identifying and capitalizing on these new opportunities (i.e., new markets served by new business models) will be very difficult or impossible if we do not “update” our own “mental software” for construing and exploiting such opportunities. Ng’s book provides such an “upgrade path,” by taking us on an intellectual journey that leads us, as business people in the 21st century, to many new, useful vantage points that will significantly influence our business planning and practice.

The book is very extensive in its coverage and development of new ways of looking at value creation, markets and business models in an increasingly digitized world, so in this review it is only possible to illustrate that with a couple of examples.

Ng explicates her own perspective on the concept of “value” vs. the concept of “worth” as foundational to all her other analysis and commentary on business in a digitized world. “Value” is that which is beneficially realized by people or organizations as “use” [of something] in one or many specific contexts (for example, I use and benefit from my mobile phone and phone service while driving home from work, in an emergency situation, etc.). “Worth,” on the other hand, is what is assessed in the act of exchange (purchase, barter, et al), most often within a market (for example, I will pay $300 for the ownership of a mobile phone and the use of the mobile communications network service). By drawing this dichotomy of “value” and “worth,” Ng clarifies the somewhat elusive concept of “value co-created in context” from the more visible concept of entering into an “exchange relationship or transaction.” While exchange relationships/transactions have undergone significant digitization over the past few decades (credit cards, electronic payments, new payment or exchange methods (PayPal, eBay, etc.), the digitization of the world of individuals and organizations using their own “agency” and “resources at hand” (including products and service they have purchased) to “co-create” “value in context” is only starting to get underway. CIT (communications and information technology), mobile platforms, and social networks and media are among the world-wide developments that are opening up the possibility to discover and create new value (in context) and additional amounts and forms of worth (in exchange)that were not possible pre-digital.

Based on these fundamental principles, Ng explores, analyzes, and explains the many different ways and different models of how value can be created in an increasingly digitized world (value which consumers or organizations and businesses can grow and realize through “use in context” and through “worth-based exchanges, including markets). Often the ways of thinking, offered up by Ng’s framework, seem to depart from those we have inherited/adopted based on our classical economics education and assumptions, but once we begin to apply the central concept of “value in use/in context,” we begin to realize that “exchange and markets” can come back into play in surprising ways.

For example, Ng discusses the (by-now-well-known) phenomenon of “big data.” Ng points out that the current conventional concept of “big data” as massive amounts of anonymous data of consumer, use, behavior patterns–that can be used by businesses to serve customers–may be limiting and sub-optimal. If there is a market/exchange structure in which consumers/users retain rights to conceal or reveal (i.e., trade/exchange their own individual behavioral information), then we might have a scenario in which total aggregate economic value and worth (for both consumers/users and businesses)may exceed the aggregate economic value and worth that could be realized if “big data” is anonymized (i.e., excludes lower levels of behavioral information about individual users’/consumers’ realization of “value in use/context”). This is just one example of the many ways the journey, which Ng accompanies us on and guides us on, brings us to new and opportunity-rich vantage points and perspectives.

“Value and Worth: Creating New Markets in the Digital Economy” is an incredible work that has been carefully and very effectively designed, for our intellectual and business benefit, by a unique, extraordinarily insightful individual who has integrated and delivered on her many years of experience and expertise as a business executive, a management science researcher/scholar, a university and business educator, a consumer, and a person. The “worth” (price) of the book is clear and established, and I am fully confident that every reader (current and prospective business managers, leaders, and entrepreneurs) will realize (as I have/am) a “value” that very far exceeds the “worth” (the monetary expenditure/payment) of the “exchange transaction,” thus yielding an extraordinary reader ROI.

Who Benefits When Online Platforms Flatten Markets For Contract Labor?

The convergence of the proliferation of “online labor platforms” and the lingering employment crisis has catalyzed attention to “online labor platforms,” as indicated by this NY Times article “The Boom in Online Freelance Workers.”  Innovation and disruption go hand-in-hand–certainly where online platforms are emerging in the domain of work.

A March 2012 research paper by Ajay Agrawal, et al, “How Do Online Platforms Flatten Markets for Contract Labor?” develops in-depth analysis of one potential area of disruptive effects:  namely the flatten of contract labor rates across advanced and emerging economies.  Here is the abstract:

Despite the internet’s ability to “flatten” markets, we find evidence of a significant penalty for job applicants from less developed countries (LDCs) on a major online platform for contract labor; developed country (DC) employers are less likely to hire LDC applicants, even after controlling for many observable characteristics including education, experience, and posted wage. However,platform-specific experience, which increases the likelihood of success for all applicants, has a disproportionately large benefit for LDC applicants. We attribute this DC employer behavior to the standardized and easily verifiable attributes of this platform-specific information, which disproportionately benefits applicants from LDCs whose off-platform experience and education is costlier for DC employers to evaluate. Our interpretation is consistent with another finding that LDC employers, whom we posit are more easily able to evaluate off-platform LDC experience, neither penalize LDC applicants nor disproportionately reward their platform-specific experience. Furthermore, we find evidence that DC employers with more experience on the platform are significantly more responsive to platform-specific experience, implying that even this information is costly to interpret since it requires investing in experience on the platform.

 The paper was published electronically on the internet earlier this year and is available here:  OLLaborPlat.

 

 

On the way to Part 2: “‘Modern Platforms’ and ‘Service Science:’ New Ways of Understanding “Platform” Mechanisms, Interests, and Outcomes

In recent weeks, I have been getting underway to develop Part 2 of the working paper I drafted in late 2011, “Part 1: ‘Modern Platforms’ and ‘Service Science:’ New Ways of Understanding ‘Platform’ Mechanisms, Interests, and Outcomes.”  Whereas Part 1 mainly introduced “Service Science” as a way of understanding “modern platforms,”  Part 2 will be more focused on the topics of mechanisms and interests (and I am realizing I will be needing a Part 3 to address the subject of outcomes).

Having said that (and in anticipation of Part 2),  I realize that I did provide some commentary on “mechanisms” in Part 1 and that it might be helpful to provide an excerpt of that commentary here, without the numerous citings and comparisons to “service science” theories and concepts, as some contextual stage-setting for Part 2.   So here it is:

Platforms are a kind of regulating membrane (a selected and configured repertoire of protocols, mechanisms, rules, regulations, etc.) that provides a normative and structural framework for the organization of “service systems” and “value-creation networks” relationships and interactions, through which value is created and exchanged.  

Platforms emerge under certain conditions, as opportunities to establish and enact value co-creation and exchange are discovered to be possible and realizable, and they are then exploited and capitalized on by different “service systems” in different ways.  Perhaps the most important condition that has created opportunities for the discovery and exploitation of expanded protocols, mechanisms, etc. that make up “modern platforms” is information technology. At any rate, the possibility and potential for specific “artificial constructs or entities” (platforms) arise out of conditions, but the platform constructs and entities are not actuated until some “service systems” have actuated them by discovery and selection, design and manipulation, or even  by accident. 

What are some of the protocols, mechanisms, rules, etc. that may be operant in “modern platforms?”  Some might involve the volume and rate of integrating different kinds of geographically-dispersed “service systems” in a broader range value co-creating interactions and exchange relationships.  One might be the ability to maintain exchange relationships that are not dependent on single or infrequent significant transactions, but are somehow based on other norms of relationship and exchange that are reinforced by different mechanisms.  Another might be different arrangements for value-extraction and monetization (aka, pricing and revenue models) across “service systems,” time, certain conditions, etc.  Some possibilities and opportunities present in the “genome” of the “modern platform” have been discovered and exploited by different “service systems” to date, others may still be discoverable and then subject to exploitation. 

In some cases, a single “service system” (a company or a person, for example) can lead and/or dominate this process of discovery and exploitation, and such a lead or dominance may confer leverage to that particular “service system” to guide or regulate value creation and exchange and to even extract a higher or dominant share of value for itself.  The “platform businesses” that have been hailed by Phil Simon in The Age of the Platform would presumably be among such “service systems;” these companies (and in some cases, mainly a central lead entrepreneur) have been able to extract and shape from the raw possibilities of today’s “modern platform opportunity set” a subset of different protocols, mechanisms, etc. and have been able to lead, nurture, advance the development of particular “value-creation networks” in which that originating company/”service system” comes to dominate and to some extent control the service ecosystem (through more leverage in the balance or exclusive access to certain mechanisms, etc.).

Certainly, actuating and exploiting the “artificial” construct or entity that a “modern platform” consists of is not a simple task, rather one that requires significant insight and computation (intelligence) within and across “service systems.”  Establishing a functioning platform is in some sense like establishing a new complex game (rules, etc.) AND getting players engaged and playing.  However that occurs or is accomplished (whether by a “creator” and “master” or a by swarm), in the end, there will be “a game,” the “artificial” construct or entity we are calling the “platform.”  The “platform” is therefore a distinct “something,” though not really visible or easy to define:  it is what makes the playing of the game (“value-creation network”) possible and actual for all the engaged “service systems.” But we are only beginning to understand the nature and the properties of this “something” in an economic context, even as companies and individuals are leveraging and exploiting it through their “modern platform businesses.”

My most recent post, “Memento Mori:  ‘Digital Remains’ and the Regulative Functions of Platforms,” also provides some hints as to where I will be heading in Part 2.

Memento Mori: “Digital Remains” and The Regulative Functions of Platforms

Over the past couple of years, a few of my Facebook friends passed away.  In one case, the young man’s family was able to step in and manage the “Facebook exit” gracefully.  In another, the eventual exit was a bit more ad hoc and stretched out a bit longer, but the family and friends were eventually able to put the Facebook profile to rest.  In the third case, the suicide of a remarkable colleague with no surviving direct relations, it has been quite a different story:  even a year later, his profiles are still active on both Facebook and LinkedIn (and God knows where else).

A virtual afterlife?  A forensic or historical artifact?  A market externality?

It may seem strange and inappropriate to some, but these cases led me to wonder if social networks and other platforms should not be required to offer users settings for “end-of-life” options…. the possibility to provide instructions as to the disposition of one’s “digital remains.”  While existing laws do govern disposition of physical remains and possessions, our “digital remains” (except for when  copyright or intellectual property laws apply) are unregulated and do not even have a legal status within our current framework of laws.

Many questions arise:  what rights, if any, do we, our families/descendents have to our “digital remains?”  Can there or should there be a defined, regulated legal space between the “public domain” and that which is proscribed by copyright and intellectual property laws?  Does all of this have to do with legal concepts of privacy or of property?  Why don’t “legal use” arrangements, such as leases and licensing agreements, seem to apply automatically to our leftover digital goods and assets (which are frequently connected to private property or perhaps more often arise as “products” out of often extensive value co-creation processes between us, platforms, and others)?

Once again, while it may seem somewhat bizarre or macabre to be raising this set of issues in this context, I can assure you that its shock effect is entirely utilitarian:  I am only interested in making a point about the regulative functions of platforms.

In my run-up to producing my Part II of Part 1: “Modern Platforms” and “Service Science:” New Ways of Understanding “Platform” Mechanisms, Interests, and Outcomes, I have been thinking quite a lot about how platforms are de facto regulators (often invisibly, subtly, and frequently disruptively conferring, precluding, and reallocating the rights and obligations of platform participants), challenging and altering institutional and legal structures of identity, privacy, property, and allocation of co-created value.

Certainly, our governmental and judicial systems have been caught flat-footed by these blitzkrieg developments that have suddenly fully permeated personal life-worlds and commercial spheres of interaction, agreement, and transaction (with thousands of examples ranging from Facebook to ODesk, et al). And only a few platform scholars have begun to plumb and explore these economical and social deep-sea trenches: most notably,  as in “Platform Rules: Multi-Sided Platforms As Regulators,” Boudreau, Kevin J. and Andrei Hagiu,  Platforms, Markets and Innovation, edited by Annabelle Gawer.  That article/chapter,

provides a basic conceptual framework for interpreting non-price instruments used by multi-sided platforms (MSPs) by analogizing MSPs as “private regulators” who regulate access to and interactions around the platform. We present evidence on Facebook, TopCoder, Roppongi Hills, and Harvard Business School to document the “regulatory” role played by MSPs. We find MSPs use nuanced combinations of legal, technological, informational, and other instruments (including price-setting) to implement desired outcomes. Non-price instruments were very much at the core of MSP strategies. 

However, as of yet, such research has been scarce, and there has been only limited exploration and explication of “non-price value exchange mechanisms” established and activated through new e-based platform models.

What Hagiu, Boudreau, and some others do (in contrast to those scholars who tend to focus on the classical industrial and economic characteristics of platforms or to those writers and commentators who optimistically proclaim platforms as the “market marvels” and “growth and ROI engines” of the 21st century) is this:  they start to look objectively and analytically below the “surface aura” of platforms into the essential structures, logic, and processes that define, comprehensively, what they are or “are like” (what they are similar in function to):  “‘private regulators’ who regulate access to and interactions around the platform” (through “nuanced combinations of legal, technological, informational, and other instruments (including price-setting [AND NON-PRICE INSTRUMENTS]) to implement desired outcomes”).

So to repeat my assertion from above:   “platforms are de facto regulators (often invisibly, subtly, and frequently disruptively conferring, precluding, and reallocating the rights and obligations of platform participants), challenging and altering institutional and legal structures of identity, privacy, property, and allocation of co-created value.”

Often, citing an extreme case helps to saliently and clearly make a point that might otherwise be obfuscated or even suppressed by autonomous forces or by design and more or less active intent.  We now are starting to see discussions and legal challenges related to data privacy and some other phenomenon in the context of a Facebook or a Google.  But these are just small, limited bits of issues and evidence of what might be a broader and more serious atrocity (perhaps even a kind of “crime against humanity”).  If we want to know more about the “bodies that lie buried” in platforms, we will all have to start digging deeper and wider, thinking harder, and connecting more dots (not just commercially as suppliers and consumers, but also economically, legally, and ethically as 21st century human beings).

Thinking about our own “digital remains” and their fates may be a sobering thought, but quite possibly a very helpful one.

 

Publish or Perish (and Profit): The Academic/Scientific “Information Publishing” Struggle Enters Its Final Phase

In my most recent post on this subject, Where There’s Smoke, There’s Fire:  Radical Change in the Academic Publishing Ecosystem, I reported on an intensifying battle between the creators and users of scientific/academic information, on the one hand, and, on the other, the traditional publishers of this information (which are trying to maximize their shareholder value in the midst of a real Kuhnian  revolution and significant transformation of what fundamentally  constitutes publishing and distribution models).

A new development of late, in the form an advisory issued by Harvard Library (Faculty Advisory Council Memorandum on Journal PricingMajor Periodical Subscriptions Cannot Be Sustained), describes the following economic conditions:

  • Many large journal publishers have made the scholarly communication environment fiscally unsustainable and academically restrictive. This situation is exacerbated by efforts of certain publishers (called “providers”) to acquire, bundle, and increase the pricing on journals.
  • Harvard’s annual cost for journals from these providers now approaches $3.75M. In 2010, the comparable amount accounted for more than 20% of all periodical subscription costs and just under 10% of all collection costs for everything the Library acquires. Some journals cost as much as $40,000 per year, others in the tens of thousands.
  • Prices for online content from two providers have increased by about 145% over the past six years, which far exceeds not only the consumer price index, but also the higher education and the library price indices.
  • These journals therefore claim an ever-increasing share of our overall collection budget. Even though scholarly output continues to grow and publishing can be expensive, profit margins of 35% and more suggest that the prices we must pay do not solely result from an increasing supply of new articles.

The conclusion drawn:

It is untenable for contracts with at least two major providers to continue on the basis identical with past agreements. Costs are now prohibitive. Moreover, some providers bundle many journals as one subscription, with major, high-use journals bundled in with journals consulted far less frequently.

Wow! Little commentary is needed here on my part.  What is happening is startlingly clear (and different ways of referring to it).  But what happens next will be the big question, as (a) creators and users push back, (b) new competitive publishing and distribution models and organizations arise (such as INFORMS, et al), and (c) traditional publishers try to milk profits from cash cows in the short-term while trying to innovate and diversify in to “value-added” discovery and collaboration platforms.

In the mean time, Harvard’s directives to its faculty include the following:

  • Consider submitting articles to open-access journals, or to ones that have reasonable, sustainable subscription costs; move prestige to open access.
  •  If on the editorial board of a journal involved, determine if it can be published as open access material, or independently from publishers that practice pricing described above. If not, consider resigning.
  •  Contact professional organizations to raise these issues. Encourage professional associations to take control of scholarly literature in their field or shift the management of their e-journals to library-friendly organizations.
  •  Encourage colleagues to consider and to discuss these or other options.
  •  Sign contracts that unbundle subscriptions and concentrate on higher-use journals.
  • Move journals to a sustainable pay per use system,
  •  Insist on subscription contracts in which the terms can be made public.

The tide is turning.

Link to paper: ” “The Economics of Two-Sided Markets” by Marc Rysman

Excellent, foundational 2009 paper on “the basics,” “The Economics of Two-Sided Markets” scratches the surface of a very complex phenomenon that is now emerging, on an accelerating and expanding  basis, through modern  platform organizations.  Rysman:   “Broadly speaking, a two-sided market is one in which 1) two sets of agents interact through an intermediary or platform, and 2) the decisions of each set of agents affects the outcomes of the other set of agents, typically through an externality.”     Link to paper>2sidedmarkets.

Where There’s Smoke, There’s Fire: Radical Change in the Academic Publishing Ecosystem

Sniff, sniff.

A recent Forbes article, “Elsevier’s Publishing Model Might be About to Go Up in Smoke,” returns to the discussion  of the potential self-immolation of traditional academic publishers, as many fail to respond to rapidly shifting conditions, especially technology disintermediation and new platform business models.

“No,” the article states,  “there isn’t a monopoly on scientific journal publishing: but there is on the last 50 to 60 years’ worth of papers that have been published and are now copyright of said publisher. This is leveraged into the power to make college libraries pay eyewatering amounts for subscriptions. … There’s not much new about this analysis and investors in Reed Elsevier, the owners of Elsevier, either do or should know all of this. … However, there’s something happening that might change this, for Reed Elsevier shareholders, quite delightful position. That is, a revolt of the academics who provide both the papers and the readership.”

Sniff.

As new potential channels for publication and distribution occur, academics (who are tired of giving up value to commercial interests and who are generally not stupid people) are not surprisingly seizing the opportunity to “go direct” to “the market.”

As I noted in my recent post, prominent academic researcher/platform economist, David S. Evans, has risen to the occasion to eschew traditional publishing rigmarole and has decided to simply release a compendium of segments of his research directly into the public domain.  The quote from the preface of his publication ( “Platform Economics: Essays on Multi-sided Businesses” ), circulating as a PDF in the public domain, is quite remarkable:

Given the subject of this collection, there is some irony in how I’ve chosen to bring these essays to you. Publishing has traditionally been a two-sided model. Publishers get authors and readers together. They typically make their money by charging the reader and giving some fraction of the earnings to the author as royalties.
 This 20th century model of publishing doesn’t serve authors of academic books well. Often, publishers set the price of academic books relatively high, expecting to earn the greatest profits from libraries and a handful of aficionados. For most books that aren’t aimed towards a popular audience, including most academic books, royalties are quite small. Optimistically, I might have been able to buy a pretty good new bicycle if I had published these essays in the traditional fashion, but I’d rather have more people read my work than collect the chump change from royalties.
 Therefore, the two-sided publishing model fails in two ways: the author doesn’t make much money, and the author doesn’t get read by very many people. Moreover, most publishers in my experience are still using 20th century technology to produce and distribute books. It can take many months—if not years—from a book’s conception to its appearance in a reader’s hands.
And therein lies the paradox. In order to bring my work into the 21st century, I have decided to publish my collection of essays about two-sided markets in a one-sided way. I ditched the intermediary and chose to connect directly with likely readers. I’m sure some of you would prefer the feel of paper and leather but hopefully the price is right. It was easy for me to decide to make this volume free (a bit more on Amazon) because it cost almost nothing to produce and distribute it.
 An earlier version of this book appeared in 2010. It consisted of a series of urls (website addresses) that took readers to the original papers which they could then download. I promised a real e-book in the early part of 2011. At least I got the year right which for an economist is pretty good.

Change is evident here (sniff).

In some of my previous blog posts, I have discussed business and social issues related to ongoing transformation of the general domain of publishing/news and information/media industries, key sectors of our economy and our society.   These have included: (1)  “The Huffington Post: A short course in platform business economics?,” (2)  “Huffington Post (Redux): Not just business as usual…,”   (3) “In The News: Platform/Other Business Model Transformation Underway in News Publishing/Media,” (4)   “From Supply Chain to Publishing:  Changing the Way Publishing Works.”

Another of my posts (sniff), “The Business Model for Distributing “Scientific Publications” — A “Peer Review” Finds a “Canary in the Coal Mine,”” discusses the specific, unique domain of “academic and scientific publishing” and some of the implications of the changes we may need to address as the traditional model gives way to something new.  While such changes promise greater freedom of publication and distribution, the resulting openness may lead us to confront a different set of issues that will impact how science is done and what are the standards and measures of its validity. 

So while change is evident (sniff), it is clearly non-linear.

Study: What are Business Platforms and why they represent the future of outsourcing

HfS Research, an outsourcing industry research firm, recently published a new study that reports continued rising interest in “Business Platform” approaches to business process outsourcing (BPO).   The actual report in PDF format can be found via a link at the bottom of this article:  “What are Business Platforms and why they represent the future of outsourcing‘”

The article and the report contain some excellent insights into the development of this approach to business process outsourcing, a phenomenon HfS defines — for the outsourcing domain/empirical context — as follows:  “Business Platforms, enabled by the fusion of Cloud Computing, SaaS and BPO innovations in an integrated singular managed service, are emerging rapidly as the desired “one-to-many” utility service provision for providers and a new source of value for outsourcing buyers. ”  This HfS definition of the approach emphasizes a drive toward efficient process standardization through IT and other mechanisms, but does not emphasize properties of aggregation and network effects (which I think can often be present in such models).

In the past, these approaches have sometimes been referred to as “Platform BPO.”  In my recent working paper/taxonomy– posted at “Platform “Language Games” –  a working paper on how we understand platform“–I discussed “Platform BPO” as a kind of sub-category/special instance of “Enterprise Platforms” as follows:

Certainly, there is some overlap in what is encompassed by the definitions of “enterprise platforms,” “domain/function platforms,” and “technology platforms.” However, I would argue that there is little or no overlap of the categories “enterprise platforms” and “product platforms,” unless, as we shall see, the enterprise and its platform are geared toward providing (information or other) services, not products (and in this case, the “enterprise platform” does indeed become analogous to a “product platform” to the extent that the platform becomes the means for developing and supporting derivative and new service offerings, while maintaining high levels of standardization and efficiency). One good example of such a case is the phenomenon of “Platform BPO” (see: http://www.outsourcing-center.com/2011-08-how-amcor-achieved-it-business-transformation-by-standardizing-processes-in-10-countries-using-sap-and-a-local-provider-article-45050.html , http://www.outsourcing-center.com/2011-02-business-process-as-a-service-the-next-wave-of-bpo-delivery-article-42948.html ). However, many other examples, of different kinds, could be cited.

In other words, “Platform BPO” (or what HfS calls a “Business Platform” BPO), as a special kind of “enterprise platform” in the service sector domain, has properties that are similar to a traditional “product platform” (to the extent that the platform becomes the means for developing and supporting derivative and new service offerings, while maintaining high levels of standardization and efficiency).  At the same time, this kind of platform remains very much within the definition of an “enterprise platform” (albeit specialized).   But — at least as defined  by HfS as a “Business Platform” — it is significantly different from what I and others have referred to as “Platform Businesses” (see: Part 1: “Modern Platforms” and “Service Science:” New Ways of Understanding “Platform” Mechanisms, Interests, and Outcomes or The Age of the Platform: Phil Simon Serves An Epic Feast To Business Readers), a new kind of business model structure embodied in companies like Apple, Amazon, etc. and their customer and partner ecosystems.  However, I do believe a closer look at some of these emerging “Platform BPO” businesses will reveal additional properties of the more complex and extensive “Platform Business” model (especially in the areas of service aggregation, supply chain intermediation, network effects, and customer experience management).

 

Part 1: “Modern Platforms” and “Service Science:” New Ways of Understanding “Platform” Mechanisms, Interests, and Outcomes

Part 1: “Modern Platforms” and “Service Science:” New Ways of Understanding “Platform” Mechanisms, Interests, and Outcomes is the first of two parts in which I explore the relevance of Service Science to understanding “modern platforms” and, with this backdrop, attempt to comment meaningfully on some of the less-discussed mechanisms, interests, and outcomes associated with such platforms.

Part 1 focuses on how Service Science, and its concepts of “service-dominant logic,” “value co-creation,” “service systems,” “value-creation networks,” et al, can provide a framework through which we can illuminate and better understand the new and still emerging phenomena of “modern platforms.” Part 2 will be focused on some of the less-discussed operant mechanisms in “modern platforms,” on the diverse interests that can come into play, and on some potential outcomes, both positive and negative.

In Part 1, I have suggested that Service Science offers a perspective and conceptual framework that can illuminate and enhance our understanding of “modern platforms.” I have further suggested that what we observe today in the real world (and refer to as “modern platforms)” are “artificial” constructs or entities which consist of certain protocols, mechanisms, rules, regulations, etc. that define and govern interactions among “service systems” (organizations and individuals) within “value-creation networks.”  I believe that, in this context, there is much, much more that we can study and learn about what we are calling “platforms,” how they can arise, how they can function, and how they may spawn different outcomes overall in aggregate across a realized “value-creation network” as well as for the different, specific, networked “service systems.”

Link to PDF: Part 1: “Modern Platforms” and “Service Science:” New Ways of Understanding “Platform” Mechanisms, Interests, and Outcomes

The Age of the Platform: Phil Simon Serves An Epic Feast To Business Readers

Phil Simon’s recent book, The Age of the Platform: How Amazon, Apple, Facebook, and Google Have Redefined Business, is an excellent, much-needed — almost epic — overview of (what I would term) “modern platform businesses,” with particular focus on four of the largest and most well-known.

I would highly recommend this book for business people and students of business and economics who are new to understanding this modern form of business that continues to evolve and take shape.

Simon asserts that while “platforms” of different kinds have been exploited for business purposes for a very long time, it is only recently that (a) a new generation of platforms has emerged from a confluence of information technology and other trends/factors and (b) a new generation of businesses have and are emerging/evolving by leveraging these new platforms in radical and often extraordinarily successful ways.

The examples of Amazon, Apple, Facebook, and Google (the “Gang of Four”) are held up as archetypes, and their courses thoroughly charted. Some less successful modern platforms (for example, Yahoo) are also cited and commented on here and there, and a set of potential “up and comers” (for example, Foursquare) are catalogued.

I particularly like Simon’s differentiation of the platforms themselves and the businesses that have developed and steered them to their business advantage. This is perhaps one of the essential points that define what makes “modern platform businesses” unique and different from traditional businesses (i.e., the openness to/enablement of integration and interactions with customers/users and a range of ecosystem collaborators, the varying degrees of ownership and control of the business over “platform assets: and what is created out of them, etc.).

Simon offers a very robust, comprehensive, general definition of this entity, called a platform, which modern businesses are establishing and leveraging (and which, at best, is barely separable from the ecosystems they engender):

This text defines a platform as an extremely valuable and powerful ecosystem that […] scales, morphs, and incorporates new features (called planks in this book), users, customers, vendors, and partners. Today, the most powerful platforms are rooted in equally powerful technologies—and their intelligent usage. In other words, they differ from traditional platforms in that they are not predicated on physical assets, land, and natural resources.
 
The most vibrant platforms embrace third-party collaboration. The companies behind these platforms seek to foster symbiotic and mutually beneficial relationships with users, customers, partners, vendors, developers, and the community at large.
 
Even though a great deal of potential commercial appeal and applications inhere in them, platforms do not exist simply as a means of vendors to hawk their wares. At their core, platforms today are primarily about consumer utility and communications.
[…]
Platforms comprise individual components, features, products, and services—collectively referred to in this book as planks. Put simply, without planks, there are no platforms. […] First, useful and popular planks give platforms their power. Second, today a company’s platform need not consist of only its own tools, applications, and innovations. On the contrary, platforms can easily and quickly integrate extremely powerful planks from the outside—that is, developers, partners, prosumers, and other third parties. (Simon, The Age of the Platform, pgs. 22-23)
 

Modern platforms and the businesses (companies) that succeed at mastering them are a different species from what has gone before, not just an evolutionary extension. Simon addresses this subject of “modern platform businesses” without entanglement in the earlier literature of product platforms, etc..

On the one hand, I think the book could have been stronger had it drawn selectively on the platform research within economics and management science over the past decade. But on the other hand, by not doing so, it is able to present a perspective on “modern platform businesses” in a clear and “bracketed” way that allows readers to contemplate this phenomenon, without distraction from past generations of concepts and from academic theories and ideas that may be obtuse for business readers.

The book dissects its vast subject matter in a series of rapier stokes — reducing it to a set of concatenated, bite-sized tableaus, each treating some aspect or facet of this complex, evolving business phenomenon. And this approach and lively style is, I think, well-tuned for business readers.

Phil Simon has set the table well and offers an expansive, small-plate feast for business readers who are newly developing a taste and sensibility for modern platform businesses. His book brings into focus a significant transformation in business models that is now happening and which we will try to understand for years to come.

Bon Appetit!