In advance of the upcoming 2017 Platform Strategy Summit taking place Friday, July 14 at MIT, IDE Editorial and Content Manager, Paula Klein, asked Summit co-chairs to offer a snapshot of the platform market today, and to share some highlights of the new research they will be presenting. What follows are composite responses from co-chairs Geoffrey Parker (pictured), Peter Evans, Marshall Van Alstyne, and Sangeet Paul Choudary.
Q. How far along are industries currently in terms of platform design and implementation? How extensive is the ‘age of platforms’ compared with a year or two ago?
A: We are very far along. As we (Parker, Van Alstyne, and Choudary) described in our 2016 book, Platform Revolution, platforms are no longer the primary domain of retail or high tech, and the trend is accelerating. So many industries are realizing the importance of moving to platforms that there are few exceptions. For example:
- Significant competition is heating up in heavy industry (Siemens, GE, Schnieder, ABB, Legrand, GE, Rockwell, Emerson, Dassault). An emerging ecosystem, likely with players such as IBM Watson and Microsoft Azure, is providing the backbone.
- Infrastructural shifts are becoming more common in banking and fin-tech, with many companies investing in Ethereum and other open-source, blockchain-based technologies. Firms such as Deutsche Bank are making major efforts to transform traditional business models, while others, such as Quantopian, are crowdsourcing trading algorithms and running funds.
- The insurance industry is moving toward new value-creation models leveraging an environment that’s based on wellness instead of monetizing illness. Mass Mutual is among those making significant strides in its platform efforts. In addition, there is an increasing willingness to cross-sell competitor’s products to build and maintain customer relationships.
- Digitization of global trade is creating huge opportunities across global supply chains. These include: supplier ecosystems; container shipping; logistics; trading, and ports. Most transportation players also are moving to platform models.
- Healthcare is seeing a fragmented ecosystem landscape emerge as well, with equally fragmented regulation regarding patient-data ownership. The Affordable Care Act had the paradoxical effect of moving EMR (electronic medical records) deployment forward, but possibly locking in older technologies.There will be increasing pressure to move away from traditional enterprise implementations toward cloud-based platform solutions.
- Fast Moving Consumer Goods (FMCG) companies, such as Unilever, Procter & Gamble, and GSK are moving downstream to establish direct links with consumers to serve them through an ecosystem. For example, food producer, McCormick, has worked to establish a digital layer around its spice product line.
- Research from IDE Fellow Marshall Van Alstyne and IDE post-doc Seth Benzell shows that, on average, firms that open their APIs see a 4% rise in market capitalization. Those that open developer portals see a reduction in R&D costs at the same time they see an increase in sales.
Q: What does the future platform ecosystem look like? How do big data and AI factor in and create business value and revenue?
A: AI will become increasingly important, not just for major ecosystem owners like Amazon and Google, but also for interoperability players like MS Azure and IBM Watson. There is a growing connection between platforms and AI and machine learning for at least three reasons: Platforms have shown a strong ability to innovate and quickly learn and apply new technology; platforms are typically data rich, which is complementary with AI and machine learning; and platforms tend to have talent that can successfully frame and deploy AI and machine learning programs.
Also in the future, voice and vision will become important interfaces. Voice may play a key role in the smart home and in mobility; vision may become critical in mobility and heavy industry.
In addition, platforms are continuing to fuel innovation. Data compiled by Platform Summit co-chair Peter Evans from the KPMG Top 300 Patent Owners, shows platform companies growing significantly since 2011. Patents issued to the top platform companies have grown to 13,941 in 2016 up from 5,591 in 2011. KPMG also finds that the top 50 platform companies now have a market capitalization of nearly $5 trillion.
Q. What are the next steps and what are you seeing in regards to global regulatory actions and governance?
A: We are seeing a fragmented regulatory landscape which will create a new geography of platforms. For instance, drone experimentation is happening more in Australia and New Zealand, while autonomous driving is being welcomed in China. One implication is that the next generation of platforms may not evolve in the U.S.
Additionally, new platform governance models are surfacing. Tokens, for instance, are being considered as a model for fin-tech platforms. Cooperative ownership is an option for platforms with geographically local network effects.
There are still open questions around the regulation of platforms that act like Internet utilities, such as AWS. We are seeing some of this playing out in the U.S. debate over net neutrality.
**************
Register now for the 2017 Platform Strategy Summit on July 14 to hear these and other experts. Join a global community of executives and academics to explore the economics and management of platform-centered markets and to discuss their implications for managers, industry, and governmental policy.
Additional Resources:
- Read more about How Digital Platforms are Revolutionizing Markets in the book Platform Revolution and the article “Pipelines, Platforms, and the New Rules of Strategy.”
- New research discusses how developers and platforms invert the firm.
- The Platform Imperative Goes Mainstream
- Six Reasons Platforms Fail
And read the new blog on Sloan Management Review here.