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[PR] Ch 1 – Today, [PR] Ch2 – Network Effects, G3 (IBS 107212043 彭竑愷 Josha…
[PR] Ch 1 – Today
THE PLATFORM REVOLUTION
AND THE SHAPE OF CHANGE
Platforms beat pipelines because platforms unlock new sources of value creation and supply
hotel industry
compare
Airbnb
platform is used to hotel business
takes a 9-15%(avg 11%) transaction fee for every rental arranged
doesn’t own any rooms
allows individual participants to provide the rooms directly to consumers
Hilton or Marriott
add additional rooms to sell through their existing brands using sophisticated back-office reservation and payments systems
spending large sums to maintain, upgrade, expand, and improve
investing in existing properties or building new ones
scouting the real estate markets for promising territories
platform is growing faster than traditional hotel company
growth is no longer constrained by the ability to deploy capital and manage physical assets
sign up users can rent spare rooms
compare
new organizational platforms
run on not-even-mine inventory
traditional businesses
run on just-in-time inventory
sharing economy
build on
brought spare capacity to market through the assistance of the platform
Platforms beat pipelines by using data-based tools to create community feedback loops
compare
Platforms
rely on
community feedback loops
Products that receive overwhelmingly negative feedback usually disappear from the platform
it's easy to find the product that suits your need
traditional pipeline firms
rely on
editors, managers,supervisors
ensure quality and shape market interactions
costly & inefficient
Platforms beat pipelines because platforms scale more efficiently by eliminating gatekeepers
Pipeline structure to the platform structure
Eliminating gatekeepers
People who may play both roles at various times
Relationship changing in producers and consumers
Platform operates in differently way
They were create different value and product
People has more freedom to select products
Platforms invert the firm
internal activities ➞ external activities
information technology systems
evolve from
back-office ERP
front-office CRM
Finance
shareholder value and discounted cash flows
of assets owned by the firm
shift
stakeholder value and the role of interactions
Operations management
optimizing the firm’s inventory and supply chain systems
shift
managing external assets the firm doesn’t directly control
attribute to
community
Strategy
controlling unique internal resources and erecting competitive barriers
shift
orchestrating external resources and engaging vibrant communities
Innovation
no longer the province of in-house experts and research and development labs
shift
crowdsourcing and the contribution of ideas by independent participants
platform firms
emphasize ecosystem governance more than product optimization
persuasion of outside partners more than control of internal employees
External resources don’t completely replace internal resources—more often they serve as a complement
THE PLATFORM REVOLUTION:
HOW WILL YOU RESPOND?
General Electric
Xbox
Communication & Networking
Twitter, Instagram
Travel
TripAdvisor
Agriculture
John Deere
Energy & Heavy Industry
General Electric
they all exist to create matches and facilitate
interactions among producers and consumers
the rise of the platform
affects
strategy, operations, marketing, production, research and development, and human resources
platform expertise is important for many business leaders
Preface
Welcome to the Platform Revolution
Airbnb
Founders
Brian Chesky, Gebbia and Nathan Blecharczyk
Awards
Industrial Designers Society of America
International Congress of Societies of Industrial Design (ICSID)
others
Uber
Alibaba
Facebook
History
For some designer move to SF couldn’t afford the rent
Power of the platform
Use technology to connect
Organization
Interactive ecosystem
Create business value
People
Resource
Platform changing business model and society a lot
An opportunity for new business upstart by a few months
People choose media or platform
Supply and Demand
Market trends
Price fluctuations
Business supply information
Digital technology that barriers of time and space disappeared
[PR] Ch2 – Network Effects
4 kinds of Network Effect
2 sided network
same-side effects
consumers to consumers
producers to producers
cross-side effects
consumers to producers
producers to consumers
4 kinds of Network Effect
positive same-side effects
consumer side
the positive benefits received by users when the number of the same kind increase.
ex: Xbox MMOG
ex: Bell Telephone
producer side
ex: Adobe's all-but-universal image production and sharing platform & PDF
negative same-side effects
too much suppliers for appropriate providers and consumers to find one another
positive cross-side effects
pro: produce win-win results
ex:Visa
cons:not necessarily symmetrical
negative cross-side effects
the growing complexity and expense
the annoying proliferation of messages
negative feedback loop
ex: Uber
2 effects
positive
negative
Structural Change: Net Work Effect Turn Firm Inside Out
causes
being valuable due to the communities participate the plateform
relying on demand-side economies of scale
the accountants factor the value of conmunities into the value of the firms
ex: Deloitte
4 categories of companies
Assert building
2.0
develop physical assert that they are used to deliver physic goods
Ford
Walmark
Service providers
employee workers to provides service to customers
United Healthcare
Accenture
2.6
Technology creators
develop and sell the intellectual property
Microsoft
Amgen
4.8
network orchestrators
develop network in which people and companies create value together
the platforms
8.2
results
the focus of organizational attention shift from inside to outside
ex:the management of human resource: from employees to crowds
ex: innovation: from in-house R&D to open innovation
ex:the primary venue for activities in which value is crated by participants: from internal production department to a collection of external producers and consumers
in the world of network effects, ecosystems of the user are the new resources of competitive advantages and market dominance
the chief locus of wealth creation is now outside rather than inside the roganization
Growth of a company comes from functional integration and network orchestration
finance and accounting: focus on assets you can own to communities and you can influence are
management of externalities : become a key leadership skill
create the giant of the 21st century
Google
Facebook
UBER
Investor pointed 1.2 billion
Estimated 17 valuation
NYU professor Damodaran
Estimated
Global taxi market
Uber’s prospective market share
Risk-adjusted cash flow
Only 5.2 billion
Revenues to yield
How Net Effect work in uber
Word of mouth
Riders told their friends about service
Driver told their friends about the work
Virtuous cycle
Supplies and demands grow
Uber’s napkin sketch
Value of Uber grow when more people use it
Faster pickups
More demand
More drivers
More geographic
More coverage
More saturation
Faster pickups
Less driver downtime
Lower price
1 more item...
Result
Three times growth of taxi and limousine market
Due to Net effect
Network effect
What is net effect
Users of a platform
Value created for each other
Positive effect
Large ability
Produce significant value for each user
Well-manages platform community
Negativity effect
Poorly-managed platform community
Reduce value produced for each other
How net effect works?
New buyer enter market
Attract other friends
Leads to market expansion
Supply economic of scale
Who
Giant monopolies
Driven by
Product efficiencies
Reduce the unit cost of creating products or service
Characteristics
Give largest company in an industry a cost advantage
Extremely difficult for competitors to overcome
EX.
Cut cost from £40 to £7
Barrow Hematite Steel Company became the largest steel mill
With they operating 85ton Bessemer blast furnaces
Derailed by
Government intervention
Disruptive technological change which rendered the old economies obsolete
Demand economies of scale
Take advantage of technological improvements on the demand side and the production side
Driven by
Efficiencies in social networks
Demand aggregation
App development
Advantage
Give the largest company a platform market a network effect advantage which extremely difficult for competitors to overcome
Fundamental source of positive network effects
Chief drivers of economic value
Two-sided network effects
Market A growth related market B growth
Market B must overweight the losses incurred in market B
Ex.Ladies’s Night
Discounted drinks are offered to female customers
Women show up,man appear
Man buy the drinks at full price
NETWORK EFFECTS VS. GROWTH-BUILDING TOOLS
GROWTH-BUILDING TOOLS
Brand effects
Virality
attracting people who are off the platform
enticing them to join the platform
Price effects
NETWORK EFFECTS
leading to the building of a longlasting network of users
increasing value among people on-platform
SCALING NETWORK EFFECTS
A scalable business model
Frictionless entry
a key factor
Side switching
NEGATIVE NETWORK EFFECTS
Curation
the obvious issue of matching compatible interests
the question of comparative attractiveness
data-driven network effects
the larger your network grows, the better your curation can become
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