1. Platform Strategy &
Ecosystems
SVForum: Apps to Ecosystems
February 20th 2014

2. Warming Up

3. Let’s take a look at the 5-year predictable horizon

4. The world will be faster, more connected, with a billion more participants in the
global economy.
A rising middle class in Brazil, India, China, and Indonesia will adopt devices first and
computers second, leaping the digital divide.
Gen-Y consumers and employees will be in their 30s, defining the conventions for work
and play styles.
4G wireless will be broadly available and 5G will be in limited deployment.
Carrier networks will be optimized for traffic against specific services and media types.
Consumer devices will be dominant, but small devices for data sensing and processing
will make up a significant percentage of mobile and Internet traffic.

5. Most commerce will be initiated via mobile devices and completed on a range of platforms.
Most transactions, when executed, will be multi-party: between the app and the underlying
services.
Social media with effective partitions and channels will be the dominant mode of
communication.
User attention will continue to fragment, alternately directing and being directed by a range
of apps.
Data will be a unit of value and a mechanism of lock-in.
Industries will be platform-shaped, with a dominant player occupying the highmargin platform position and pushing others to supporting roles.

6. What is a Platform Business Model?

7. Product to Platform

8. Product to Platform

9. Product to Platform

10. A platform business model is defined as follows:
It is a business model which builds value for multiple sides in a
given market by consolidating customers, simplifying marketwide processes, and rewarding each player in the value
network between the value network and the customers.

11. There are many examples of platform business models
in action today.

12. Eisenmann, Parker, Van Alstyne (2006),“Strategies for Two-Sided
Markets,” SSRN.com.

13. There are many examples of digital platform business models
in action today.

14. 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Desktop OS: Unix, Mac, Windows
PDAs: Palm, Psion, Newton
Game Consoles: Wii, Xbox, PlayStation
Network Switches: Cisco, IBM, HP
Multimedia: Adobe/Flash, MS/Silverlight, Google-Apple/HTML5
Payment Systems: PayPal, Google Checkout, Visa, Apple, Mobile Felica
Mobile Devices: iPhone, Android, Symbian, Blackberry
Enterprise Systems: Salesforce, Oracle, i2, IBM, SAP
Social Networks: Facebook, MySpace, LinkedIn, Monster, Twitter
Batteries: Sony, Panasonic, Sanyo, A123
Web Search: Google, Bing+Yahoo!, Baidu
eBooks: Amazon, iPad, Nook, Sony
Smart Grids: IBM etc.
Health Care: Microsoft, WebMD, IBM etc.
Eisenmann, Parker, Van Alstyne (2011), “Platform Envelopment,”
Strategic Management Journal.

15. Platform businesses are built on network effects.
The more network effects, the stronger the platform.

16. Usr
Usr
Book
Usr
Gam
Mus
Kindle
Zune
Amazon
User
PSP
Sony
Microsoft
User
Calls
Music
MP3
TV
Video
Games
Dvpr
Web
HTML
Publi
eBooks
Apple
Eisenmann, Parker, Van Alstyne (2011), “Platform Envelopment,”
Strategic Management Journal.

17. Openness is a critical element of all platform businesses.

18. Eisenmann, Parker, Van Alstyne (2011), “Platform Envelopment,”
Strategic Management Journal.

19. Platform sponsor gives away
platform value.
Partners build apps for installed
base, adding new layers of value.
Price
V4
V3
V2
V1
Platform sponsor benefits from
increased sales & royalties.
p1
q1
Partners benefit from cost savings
and installed base.
Quantity
Parker, Van Alstyne (2011), “Innovation, Openness & Platform
Control,” SSRN.com.

20. Platform models generate profit through
first and third party usage.

21. Most firms can only
concentrate on most
valuable apps
Profits increase when
others add to platform’s
“Long Tail”
Parker, Van Alstyne (2011), “Innovation, Openness & Platform
Control,” SSRN.com.

22. Platform models build digital ecosystems
through virtuous cycles.

23. “
We view Digital Ecosystems to be the digital counterparts of biological ecosystems,
exploiting the self-organising properties of biological ecosystems, which are
considered to be robust, self-organising and scalable architectures that can
automatically solve complex, dynamic problems. Digital Ecosystems are a novel
optimisation technique where the optimisation works at two levels: a first optimisation,
migration of agents (representing services) which are distributed in a decentralised
peer-to-peer network, operating continuously in time; this process feeds a second
optimisation based on evolutionary computing that operates locally on single peers and
is aimed at finding solutions to satisfy locally relevant constraints.
G. Briscoe, P. DeWilde
IEEE Conference on BIONETICS (2006)

24. “
A digital ecosystem is a distributed, adaptive, open socio-technical
system with properties of self-organization, scalability and
sustainability inspired from natural ecosystems.
Digital ecosystem models are informed by knowledge of natural
ecosystems, especially for aspects related to competition and
collaboration among diverse entities.
Various authors
Wikipedia: Digital Ecosystem

25. [Ecosystem Competition]
Kishore S. Swaminathan (2009), Chief Scientist, Accenture

26. There are three main types of platform business models.
They have differentiated power to generate digital
ecosystems.

27. Boudreau and Lakhani (2009), “How to Manage Outside
Innovation”,
MIT Sloan Management Review

28. Given current abundance of choices and
scarcity of user attention,
compelling experiences
must deliver platform capabilities and content to users.
Without such experiences, an ecosystem fails to thrive.

29. Weill & Woerner (2013), “Optimizing Your Digital Business Model,”
MIT Sloan Management Review

30. What is a Technology Platform?

31. A technology platform is defined as follows:
It supports a platform business model by adding a digital layer
to interactions in the value chain. This makes it possible to
interact with the business from any app or device, and makes
it possible for the enterprise to analyze the interactions that
make up the activity along the value chain. Through the
technology platform, each player in the value network
becomes part of a digital ecosystem.

32. Amazon’s pace of innovation is blistering

34. Amazon’s baseline is
sharing by default.

35. “
All teams will henceforth expose their data and functionality through service interfaces.
Teams must communicate with each other through these interfaces. There will be no other
form of inter-process communication allowed: no direct linking, no direct reads of another
team’s data store, no shared-memory model, no back-doors whatsoever.
The only communication allowed is via service interface calls over the network.
It doesn’t matter what technology they use.
All service interfaces, without exception, must be designed from the ground up to be
externalizable. That is to say, the team must plan and design to be able to expose the
interface to developers in the outside world. No exceptions.
Anyone who doesn’t do this will be fired. Thank you; have a nice day!
Jeff Bezos
CEO, Amazon

37. “Information about package is as
valuable as the package.”
All assets instrumented and connected
Innovations on customer access to
information
Architect for low cost interactions in the
ecosystem

38. “
Information about the package helps us run our business better. That
comes from a digital operating model where all our assets are
connected and surface information to increase overall value to us and
the customer.
David Zanca, SVP IT, Customer Access, and Revenue
Systems
Federal Express
Not only do our customers want more information about the packages,
but they also now want more interaction with FedEx and expect us to
react to changes and resolve problems if they occur.
Thomas Wicinski, VP Digital Access Marketing
Federal Express

40. The new baseline is
sharing by default.

41. This approach of common platforms
and shared incentives
is the path to digital ecosystem success.

42. Thank you
Please send questions and comments to:
@sramji
sramji@apigee.com