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CDPSG3[PR] Ch4 – Disruption, CDPSG3[PR] Ch10 – Strategy, G3 (IBS 107212043…
CDPS
G3
[PR] Ch4 – Disruption
PIPELINES BECOMING PLATFORMS
NIKE
Traditional scaled
owning and integrating a greater length of the value-creation-and-delivery pipeline
buying upstream suppliers or downstream distributors
horizontal integration-widening the pipeline to push more value through it
consumer goods companies grow by creating new products and brands
Example
Nike brought out a wearable technology device, the FuelBand
Nike’s FuelBand-connected shoes and mobile apps
interact, providing users with information and advice about their athletic performance
to track user fitness activities, including steps walked and calories burned.
Nike is building an ecosystem of users using the data
When multiple products and services connect and interact using data, pipelines can start behaving like platforms
If the firm can use either information or community to add value to what it sells, then there is potential for creating a viable platform.
How Platforms Conquer and Transform Traditional Industries
Create a place where
producers and consumers can come together
Uber
Future & Development
decrease in demand for parking places
reduce the pollution
self-driving car
Combining the platform model and technology
some industry disappear
auto insurance
parking
car finance
brought benefits to both consumers and producers
A CAPSULE HISTORY OF DIGITAL DISRUPTION
Efficient pipelines ate inefficient pipelines
the next impacts is Retail and mail order shopping
the first impact is traditional media
marginal costs
printing, shipping, retailing, deliver
HOW PLATFORMS EAT PIPELINES
THE IMPACTS OF PLATFORM DISRUPTION
Reconfiguring value creation
Definition
platform removes a hurdle that makes the participation of producers more difficult
minimize the barriers
reconfigured sources
Example
Wikipedia
every one can update the knowledge on the website
YouTube
video camera or smartphone can upload video
Reconfiguring value consumption
Definition
disrupting traditional consumer behavior
Trust-building
by platform businesses
Example
Uber
take strangers’ cars
Airbnb
living strangers 'home
by enabling new forms of consumer behavior
Reconfiguring quality control
Definition
fail to offer the quality and reliability
traditional competitors have experts to edit
Example
YouTube
Airbnb
Creation infrastructure and a coordination mechanism
Physical and the digital are combining very fast
Example
Airbnb
Near-zero marginal costs
Network effect
Expanding very quickly
STRUCTURAL IMPACTS OF PLATFORM DISRUPTION
De-linking assets from value
Definition
de-linked ownership of the physical from the value it creates
asset independently traded to it best use
efficiency and value rise
creates the greatest value
won't be restricted by asset owner
Example
Australian farmers
water trading platform
increase the efficiency of water use
farmers can sells their water to each other or water authority.
separating land ownership from water rights.
Re-intermediation
Definition
create a new intermediation on the platform market
online、automated tools and system
replaced non-scalable and inefficient agent intermedation
offer value for both sides of platform(demand&supply)
why platform became efficient intermedation
rely on algorithms and social feedback
allows platform to scale
gather data over time and use it to make system more intelligent
Example
scouting for talent on platform such like Youtube rather than using A&R to appeal talent
create a new layer of reputation information
through social feedback about producers
Platform likes TripAdvisor、Yelp certifying the quality and service providers
driving some traditional industry certifies out of business
Market aggregation
Definition
platforms creating new value by aggregating unorganized markets
platforms provide centralized markets
serve widely dispersed individual and organization
provide platform users information and power
because former user interactions in a haphazard fashion
without access to reliable or up-to-date market data
Example
Transportation in India
Many different types of bus exist 、pricing variable
RedBus aggregating information from all India bus
operate a central plug-and-play infrastructure
consumers can make quicker、easier、cheaper decision
a healthier transportation market
CDPS
G3
[PR] Ch10 – Strategy
PREVENTING MULTIHOMING
definition of multihoming
users engage in similar types of interactions on more than one platform
example
Alibaba
They created technological barriers that
prevented Baidu from searching their website
potential profit from selling advertising
result
Alibaba displaced Baidu as the most valuable online advertising platform in China
prevention method
limiting platform access
Platforms seek exclusive access to essential assets
LEVERAGING THE VALUE OF DATA
compare
Monster
only targeted the active job seekers, it captured no information concerning users’ broader social networks
result
when job search interaction was completed, both employer and employee would leave the platform
LinkedIn
targeted the social networks of all professionals, it captured data from interactions among professionals interacting with one another as well as with recruiters
result
began emphasizing content creation and sharing by its users to
foster additional reasons for them to spend time on the platform
Definition
use data to improve competitive performance
Strategic data
tracking who else is creating, controlling, and siphoning value both on and off the platform and studying the nature of their activities
example
Facebook used data to observe and spot its potential competitors
Tactical data
A/B testing
optimize particular tools or features of the platform
example
Amazon used data to determine buy-it-now button placement
Data analytics
guide investments in product design and in customer and partner success, reinforcing the platform’s network effects
can augment significantly the capabilities of both the platform company and its ecosystem partners
HOW PLATFORMS CHANGE COMPETITION
the types of competition
dramatic disruption produced by the advent of platform business in traditional marketplace
the very nature of competitive battle
dramatic competitive battles being waged within the world of platform, between platform company
Example
Allibaba Groups
2014: the largest IPO history
STRATEGY IN THE TWENTIETH CENTURY: A CAPSULE HISTORY
[A] main : Five forces by Michael Porter
Assumption
five forces that affect the strategic position of a particular business
the threat of substitute products or service
the barging power of customers
the intensity of competitive rivalry in the industry
the threat of new entrants to the market
the goals of strategy
to control this 5 forces
to build a moat around the business
to render the moat unassailable
[B] supply: 1984: “the resource-based view of the firm” by Birger Wernerfelt
a particularly effective barrier to entry is control of an indispensable and inimitable resource
Example
Debeer
[C] challenge: nimble firms are using new technologies to ford the moats established by control of scarce resources
1994:Richard D'Aveni
in an age of "hypercompetition", sustainable advantage is illusory by technological advantage and connecting across the Internet
2013:Rita Gunther McGrath
in his book "The end of competition", the way how the Internet era has created radically new tools and techniques with which to attack incumbent firms
flexibility provides the crucial competitive edge, competition is perpetual motion, and advantage is evanescent
[D] Objection: Steven Denning
Peter Drucker: "the purpose of business is to create customers "
a company's relationship with customers are the only lasting source of value
the weakness of Potter's 5 Forces：the purpose of strategy is avoiding competition
the contributing elements in the Alibaba saga
strategic insights of CEO Jack Ma
the explosive growth of Chinese's middle class
government-imposed restrictions on foreign companies operating in China
a function of the new realities of platform competition
Explosive network effects and strong economies of scale enable this relatively new company to expand so rapidly on the stage of international commerce.
near-frictionless cross-border trading that connects thousands of merchants and millions of customers
the ability to seamlessly incorporate the resources and connections of outside partners into the activities and capabilities of the platform
to invest the offers to expand its ability to offer its U.S goods to China and to enable Alibaba to ship American products to customers in China in 2 days
THREE-DIMENSIONAL CHESS: THE NEW COMPLEXITIES OF COMPETITION IN THE WORLD
2 new realities are now shaking up the world of strategy
firms that understand how platforms work can now internationally manipulate network effects to
remake markets
, not just respond to them
platform business often
grow the pie
rather than divide it
platform
turn business inside out
, moving managerial influence from inside to outside the firm's boundaries
pursuing the best opportunities while helping ecosystem partners seize the others, with all partners sharing the value they jointly create
within the ecosystem, the lead firm negotiates dynamic tradeoffs involving competition at 3 levels
1st level: one platform competes with another
strategic advantages is based on the power of entire ecosystem
Example
Sony:play Station & Microsoft: Xbox
2nd level: a platform competes with its partner
Example
Microsoft or Amazon
Pros & Cons
Pro
Strengthen the platform
Con
at the expense of weakening partners: a short term gain that can lead to the painful long-term consequence
3rd level: 2 unrelated platform partners compete for positions within the platform ecosystem
Example
2 game app developers strive to attract the same consumers on the same console
the specific impacts on traditional views of strategy
the crucial factor is no longer ownership but opportunity, while the chief tool is no longer dictation but persuasion
treating buyers and suppliers as value-creating partners to be wooded, celebrated, and encouraged to multiple players
the nature of the inimitable resource shift from the physical assets to access to customer-producer networks and the interactions that result
REDEFINING MERGERS AND ACQUISITIONS
benefit
claiming a portion of the value created by a platform partner is far less risky than buying that partner
Facebook
not buying Zynga let others to compete it
keeping a partnership at arm’s length reduces the platform’s technological complexity
the target company creates value for a user base that significantly overlaps with the one they are currently serving
FOSTERING INNOVATION,
THEN CAPTURING ITS VALUE
Definition
first, giving partners frictionless opportunities to innovate, then capturing some or all of the value created by acquisition or duplication
keep a careful watch on new features or apps that appear on the platform
absorb the function of the innovative partner and the value it creates by acquisition
example
Facebook succeeded in acquiring Instagram
seek to weaken the startup by promoting competitors
example
Facebook assembled its games to weaken Zynga’s individual bargaining power
resource-based theory
A platform business need not own all the inimitable resources in its ecosystem, but it should seek to own the resources whose value is greatest
control key resources
PLATFORM ENVELOPMENT
definition
one platform effectively absorbs the functions—and the user base—of an adjacent platform
example
realnetworks vs microsoft
using Windows to cover streaming audio
ENHANCED PLATFORM DESIGN
definition
many traditional businesses that coexist with a market-dominating rival
by identifying a specialized niche and creating a higher-end product designed to cater to that audience
superior platform design enables a platform to dramatically outcompete a preexisting rival
ADVANTAGE IS SUSTAINABLE
supply economies of scale
strong network effects
high multihoming or switching costs
winner-take-all markets
lack of niche specialization
G3
IBS 107212043 彭竑愷 Josha
IBS 107212013 蔡亞諠 Jasmine
FIN 106214040 朱娩賢 Megan
IBS 108212505 葉尊瑩 Clare
PHD2 108245907 李少彤 Elixir