July 22, 2015
Reflections on the Boston Platform Strategy Summits
By Peter C. Evans, VP, Center for Global Enterprise
Boston has emerged as the go-to place in the emerging field of platform strategy. While much takes place throughout the year, the apex is the two-back-to-back summits that take place in July.
The Platform Strategy Research Symposium held at Boston University’s Questrom School of Business brings together the world’s top platform scholars. This year, 58 scholars, including the Nobel Laureate Jean Tirole — the world’s most highly cited platform scholar — gathered to discuss the latest in platform research. Then there is the MIT Platform Strategy Summit held at the MIT Media Lab. As in prior years, this second meeting attracted over 140 CEOs, CIOs and other practitioners. Participants in this meeting are focused on sharing best practices associated with launching and sustaining platform businesses.
Linking the academic and the business summits is the innovation of Geoffrey Parker and Marshall Van Alstyne, who chair the two events. It is unusual to have leading scholarship and cutting edge business conferences organized consecutively. Typically, each is seen as a separate community and target audience. But for those focused on platform strategy the linkage works by advancing both theory and practice.
There were many vibrant discussions over the two days, but here are five core themes that emerged:
Speed and Scale
Both academic and business practitioners highlighted the dramatic growth of platform companies over the past decade. This is true in terms of overall numbers of platforms, the diverse sectors in which they operate and the scale they have achieved through harnessing powerful network effects, which make these platforms increasingly valuable as they grow in size.
Malcolm Frank, the Chief Strategy Officer of Cognizant, made a compelling case that we are at the beginning of a boom in the coming years that will both spawn new platforms and disrupt more industries. Paul Daugherty, Chief Technology Officer for Accenture, echoed this sentiment, describing platforms as the new competitive playing field.
Consider these numbers:
- $3 trillion–the market capitalization of public platform companies worldwide.*
- 1 million–people now working directly for publically traded platforms. That doesn’t count Uber drivers or Airbnb hosts, or third party developers building applications for companies like SAP, Apple or Salesforce.
- 70 percent—of so-called “unicorn” companies (startups with valuations of $1 billion or more) are platform companies.
There were fascinating presentations on platform dynamics in Africa (Olayinka David-West), China (Weiru Chen), India (Sangeet Chaudary), and Europe (Annabelle Gawer). As these presentations revealed, platform concepts are finding their way to entrepreneurs around the world.
At the same time, there has been dramatic international expansion of major platform companies, mostly U.S. companies. CGE’s research reveals that most countries are receiving “platform services” from American providers. The need to search the web is one example of a platform service. Indeed, platform service provision has been expanding from social media, search, travel and e-commerce into transportation, healthcare, education, financial payments and freelance work.
Participants in both conferences pointed to the need for analysis not only of potential negative effects caused by platforms, but also the positive spillover effects.
One paper that generated considerable buzz, was an analysis that showed the market entry of Uber X drove down motor vehicle homicide rates by 3.6% -5.6% in California. According to the authors, Brad Greenwood and Sunil Wattal, if these results are scaled to the entire country, then Uber X could create a public welfare benefit of over $1.3 billion to taxpayers and save approximately 500 lives annually.**
Luis von Ahn, founder and CEO of Duolino, an ad-free language learning platform, provided another example. The platform generates revenue by marketing work done by volunteers. Individuals who have passed lessons on the platform can sharpen their skills by translating content for Dualino customers CNN, BuzzFeed and other organizations that need translation services. In this way learning can be productive not only for the individual student but for those who are in need of Duolino’s translation service. Duolino’s platform combines both education and useful work, creating value on both sides of the platform.
Platforms are changing the nature and definition of competition. But conference participants warned that government regulators have dated views of market competition that could hinder growth of the emerging platform economy.
In his keynote address, Jean Tirole noted that double sided markets are problematic for traditional antitrust regulators because monopoly pricing or below cost pricing may be part and parcel of competitive platform markets. He stressed that regulators will need better guidance, especially when looking at platform mergers.
Annabelle Gawer noted that competitive concerns can arise between countries. For example, an analysis of unicorn companies indicates that Europe dramatically lags the U.S. as the birthplace of these startups, despite being of comparable aggregate GDP as the US and having a large and active platform user base. Europe’s 13 unicorn platform companies have a valuation of $28.6 billion compared to the America’s 42, which have a current valuation of $191 billion. As a result, Gawer said that is one reason Europe is now exhibiting signs of what she called “platform anxiety” as evidenced by recent EU antitrust moves concerning dominant market position held by service U.S. platform companies.
Nearly all the presenters pointed to how platforms require different management skills from traditional firms. Platforms are more about managing ecosystems than traditional corporate hierarchies. This is creating huge managerial challenges. Platforms are causing changes in almost all management areas including marketing, finance, innovation, operations and strategy. Executives running these companies/ecosystems are charting new territory and traditional MBAs programs have not caught up.
Summit participants agreed that there are significant opportunities to better codify platform management practices and for business schools to develop programs for their MBA and career programs to serve these growing needs.
In short, the conferences highlighted rapidly changing platform landscape and the need for both academics and practitioners to share their equally valuable views on platform strategy. Read the press release here.
*Center for Global Enterprise, Global Platform Database, 2015.
**Brad Greenwood and Sunil Wattal, “Show Me the Way to Go Home: An Empirical Investigation of Ride Sharing and Alcohol Related Motor Vehicle Homicide.” Fox School of Business, Temple University, July 2015