Presentation 1: Business models: from pipelines to platforms

Designing digital platforms ecosystems

Explain traditional value chain (pipeline) businesses.

• value creation through a linear process (inside pipelines) → Growth Value chain is linear

• one firm controls most stages of production and delivery (production, distribution, marketing, transaction and customer relationship)

  • creates the supply

  • controls the flow

• User: consume, not create

• e.g. Coca-Cola, Dell

→ Pipeline = Company makes the value

Explain value chain in platform systems.

• Platform businesses create

  • an infrastructure:

    • enables interactions between different user groups by provideing tools, rules, and systems to make exchange easy and mutually rewarding (für beide Seiten lohnend)

  • enable external participants to create and exchange value (platform creates value outside the pipeline by user/complementors)

  • shifting the role of firm from producer to ecosystem orchestrator

• e.g. Airbnb, Uber

→ Platform = company enablles others to make the value

Why can business models overlap?

• companies can create and capture value in multiple ways simultaneously (gleichzeitig)

• firms often operate both pipeline and platform business models to create value

• e.g. Apple, Amazon

→ Company makes products AND runs a platform

What are the three principles of Pipe Design?

1. Define the value unit

2. Design the process that adds value and delivers this unit to the customer

3. Design the pipe (Value chain) that controls and optimizes this process

What does the value creation of platforms depend on?

• value creation hinges on the “core interaction” of platforms

  • “core interaction” = main activity that creates value on a platform

    • concerns: value units, participants, filter (= building blocks of a platform)

What three actions are necessary to optimize the platform?

Core interactions concerns:

1. Defining the value unit

2. Design the interaction of participants

3. Built filter to enable mutually rewarding (für beide Seiten lohnend) interaction between participants

What is a value unit? Give six examples of different companys´value units.

= fundamental item, information, or service created by participants and exchanged on the platform

• Airbnb: Unique stays & local travel experiences, services

• Twitter: Tweets

• Youtube: Video content distribution & audience reach

• KickStarter: Projects

• SAP: Services

• App Store: App discovery distribution & monetization

What are participants?

= users who interact within a platform by taking on different roles such as creating, curating and consuming

How can the interaction of participants be designed?

• Platform: Controls the IP and the rules of the platform

  • goal of Platforms: enabling interactions

→ acts as an indermediary between producer and consumer

• Participants: Producer/Complementor + Consumers

• Producer/Complementor: creates or provides content, products, or services

→ creates value unit for the platform (e.g. producing content on YouTube)

• Consumers: consume complements of the producers on the platform (e.g. consuming YouTube videos)

  • 
    

→ views, subscriptions, watch time etc generated by the user creates additional value (not the original value unit)

How can Filter be built to enable mutually rewarding interaction between participants?

• complete exchange includes information, goods/services and currency (Währung)

• Purpose of filter:

  • to ensure only the most relevant value units reach each potential audience

  • maximizing impact and engagement

1. Input: all available content (e.g. Video, Article, Audio)

2. Filtering: Finding the right content for the audience

• right content, right audience, right time

3. Output: Delivered content (Value unit)

• Audience A sees the right content, at the right time
  
  

→ Platform filters the complements of complementors and show user only the most relevant complements at the right time (who should see which value unit and when)

What three architectural design choices in Platform Ecosystems exist?

1. PULL participants: Network

2. FACILITATE interactions: Tools

3. MATCH participants: DATA

Explain the three architectural design choices that exist in Platform Ecosystems.

1. PULL participants: Network

• Design the network → get both participants onboard → enable their interaction

• e.g. Feedback Loop

2. FACILITATE interactions: Tools

• Platform has no control on value creation → provide participants tools to interact and exchange values → Tools make participation easy, scalable, and safe

• e.g. Decomposition, Modularity, Design Rules

3. MATCH participants: DATA

• Data collection → Algorithmic processing → Ultimate match between producers and consumers

• Network effects

→ Design choices can optimize platform value creation and interactions between participants

→ Platforms should have a architectural design to support a network, tools and data

When is a platform called asset-light?

• when platforms do not own the physical assets they used to create value

Give five examples for Asset Lightness in Platforms.

• Uber: owns no vehicles

• Facebook: creates no content

• Alibaba: has no inventory

• Airbnb: owns no own accommondation

• Spotify: does´nt produce musice

Define vertical integration.

= Company expands into another stage of the value chain.

= platform context: platforms that performing activities that were previously (vorher) performed by complementors

• e.g. amazon sells products of complementors and also became a producer

Say reasons for verticle integration and owner entry of a platform.

Reasons for verticle Integration:

• capture more value

• improve quality control

• reduce dependency on complementors

• get advantageous position due to internal governance

Reasons for Owner-Entry:

• platform owners entry markets where their own complementors operate

  • conflict: platforms depend on complementors at first but may compete with them later

How can a platform owner reduce conflicts from owner-entry?

• publishing a Roadmap

  • complementors know what the platform owner will build next

  • ao coplementors can focus on whitespaces instead of developing someting the platform owner will later offer itsself

Define the concept of owner entry.

= Platform owner enters a market in which its complementors already compete

What is the difference between verticle integration and owner-entry?

Owner entry is one way of archieving verticle integration in platform ecosystems.

Name and explain the three types of enterprises (Unternehmen) that exist.

1. Asset Heavy

• firms that create value by owning key physical assets (pipeline)

• e.g. BMW, Bosch

2. Asset Mixed

• firms that create value by providing a platform AND owning key physical assets (ofthen through verticle integration)

→ combining a platform business with a pipeline business

• e.g. Apple, Amazon

3. Asset Light

• firms that create value by providing a platform rather than owning the key physical assets used to create the value

• e.g. Uber, Airbnb