Platform Business Model

Week 1

Business models articulate how a business creates, delivers and captures value. While business models help firms distinguish their activities from their direct competitors, strategy discusses how firms retain competitive advantage.

Traditional vs Platform

• Complementarity, Compatibility, and Standards.
• Consumption Externalities.
• Costs of Switching - Switching Costs and Lock In
• Economies of Scale in production.

Role of Platform

• Infrastructure
• Information
• Rule & standards

Challenges

• Information asymmetry
• Moral Hazard
• Averse selection Platforms help decrease inefficiencies in the market by addressing information asymmetry, governing against moral hazards and reducing transaction costs.

Types

• Single sided platform: eg: automotive platform is a base on which multiple variants are developed
• Multi sided platform: multi-sided platforms bring together multiple user groups. eg: an aggregator, or an e-commerce marketplace

Week 2 : Network Effects: url

• What is network effects : url

  • The strength and direction of network effects are the basis on which platform firms make decisions around pricing, growth, and sustainability of the platform.

• ‘Cold-start problem’ or ‘A penguin problem’: url

  • The penguin problem or the chicken-egg problem arises when no user is willing to join a platform unless others do, thereby postponing platform adoption.

The penguin problem can be solved across two dimensions: users & resources. Network mobilization strategies that a platform can adopt across two dimensions: users and resources.

1. Solving penguin problem A) USERS : solution

• The quality of users on the demand side will get high-quality users on the supply side when there are cross-side network effects. When there are same-side network effects, quality of users on the same side matter. There are three strategies to get high-quality users in large numbers:
  • Strategy number one platforms can port users from another platform.
  • Strategy number two is to be able to attract new users, at least on one side.
  • Strategy number three is to target market users, find those superstars, those superstars who will bring you users on the other side

2. Solving penguin problem B) RESOURCES : solution
   • cz

• Nine Network Mobilization Strategies: url1 Url2
  1. customer experience
  2. crowd puller
  3. leverage the brand
  4. mobilize the network using the ecosystem
  5. leveraging partnerships
  6. building open architecture
  7. solving core problems
  8. building communities
  9. solve that core problem for a small niche and then make sure everyone else does it.

Network mobilization strategies need to take into account how to port new users, attract new users, target marquee users and; leverage existing resources, develop new resources, leverage resources from the ecosystem.

In some cases, the most straightforward strategy is to simply provide subsidies until the network effects kick in and further strategies can be adopted.

• When to Subsides ? url

Week 3 : Pricing : url

• Introduction: url
  • User segmentation
• Money and subsidy: url
• Criteria to monetise/subsides: url
  1. First, we should be able to kick in across the network effects.
  2. the right pricing model should encourage positive same-side network effects, not just cross-side network effects.
  3. as much as we want to encourage positive same-side network effects, we should also prevent negative same-side network effects. In P2B markets, for instance, supplier-finding platforms.
  4. subsidize the side that is more price-sensitive than the side that is less price-sensitive.
  5. quality sensitivity is also an indicator of how easy it is to switch and how low loyalty is to the platform.
  6. assetspecific investments should be subsidized,
• Negative Pricing : url eg: android licence + ad revenue share
• Permanent Subsidies : url eg: Maps
• Monetise both side : url eg: Matrimonial platform
• Interview must watch

Week 4 : Platform Architecture

• Overview: [url] (https://youtu.be/ziWKkzomVmI)
  • As one sets up a platform there are 6 key decisions that define how platforms are designed and what value they add to the users and other ecosystem partners?
    1. What are the specific utilities provided by the platform to the users?
    2. How do they combine these utilities and create, deliver, and capture value?
    3. How do platforms defined their core and how do they leverage the same?
    4. How do they compete with other platform competitors?
    5. What are the implications of designing an open platform? Lastly,
    6. What are the trade-offs of sharing control of the platform dynamics with other ecosystem partners?
  • these decisions around platform architecture and their implications for platform growth, profitability, and ecosystem value addition.
• Interview: url
  • 4 primary utilities:
    1. Discovery eg: google
    2. Matching eg: dating platform
    3. Transaction eg: uber
    4. Evalution eg: hyper-local (ratings, review, Recco, feedbacks{for the service}) same side network effect + cross side network effect (more user+ more business partners)
• Airbnb provides all 4 utilities
• Platform architecture Descision among 4 utilities categories : url
  1. value creation
  2. value delivery
  3. value capture