Platform Strategy & Ecosystems

Warming Up
Let’s take a look at the 5-year predictable horizon
The world will be faster, more connected, with a billion more
participants in the global economy.
A rising middle class in Brazil, India, China, and Indonesia will adopt devices first
and computers second, leaping the digital divide.
Gen-Y consumers and employees will be in their 30s, defining the conventions
for work and play styles.
4G wireless will be broadly available and
5G will be in limited deployment.
Carrier networks will be optimized for traffic
against specific services and media types.
Consumer devices will be dominant, but small devices for data sensing and
processing will make up a significant percentage of mobile and Internet traffic.
Most commerce will be initiated via mobile devices and completed on a range of
platforms.
Most transactions, when executed, will be multi-party:
between the app and the underlying services.
Social media with effective partitions and channels will be the dominant mode of
communication.
User attention will continue to fragment, alternately directing and being directed
by a range of apps.
Data will be a unit of value and a mechanism of lock-in.
Industries will be platform-shaped,
with a few dominant players owning the high-margin platforms
and pushing others to supporting roles.
What is a Platform Business Model?
Product to Platform
Product to Platform
Product to Platform
Platform Business Models
Platform businesses are built on network effects.

The more network effects, the stronger the platform.

Usr Book Usr Gam Usr Mus

Kindle PSP Zune

Amazon Sony Microsoft

Musi
User User TV Dvpr HTML Publi
c

Calls MP3 Video Games Web eBooks

Apple
Eisenmann, Parker, Van Alstyne (2011),
“Platform Envelopment,” Strategic Management Journal.
Openness is a critical element of all platform businesses.
 Eisenmann, Parker, Van Alstyne (2011),
“Platform Envelopment,” Strategic Management Journal.
 Platform sponsor gives away platform value.
V4
V3 Partners build apps for installed base, adding new
V2 layers of value.
Price

V1
Platform sponsor benefits from increased sales &
p1 royalties.
Partners benefit from cost savings and installed base.
q1

Quantity

Parker, Van Alstyne (2011),

“Innovation, Openness & Platform Control,” SSRN.com.
Platform models generate profit through
first and third party usage.
 Most firms can only Profits increase when
concentrate on most others add to platform’s
valuable apps “Long Tail”

Parker, Van Alstyne (2011),

“Innovation, Openness & Platform Control,” SSRN.com.
Platform models build digital ecosystems
through virtuous cycles.
“ We view Digital Ecosystems to be the digital counterparts of biological ecosystems, exploiting
the self-organising properties of biological ecosystems, which are considered to be robust, self-
organising and scalable architectures that can automatically solve complex, dynamic problems.
Digital Ecosystems are a novel optimisation technique where the optimisation works at two
levels: a first optimisation, migration of agents (representing services) which are distributed in a
decentralised peer-to-peer network, operating continuously in time; this process feeds a second
optimisation based on evolutionary computing that operates locally on single peers and is aimed
at finding solutions to satisfy locally relevant constraints.

G. Briscoe, P. DeWilde
IEEE Conference on BIONETICS (2006)
“ A digital ecosystem is a distributed, adaptive, open
socio-technical system with properties of self-organization,
scalability and sustainability inspired from natural ecosystems.

Digital ecosystem models are informed by knowledge of natural ecosystems,

especially for aspects related to competition and collaboration among
diverse entities.

Various authors
Wikipedia: Digital Ecosystem
[Ecosystem Competition]

Kishore S. Swaminathan (2009), Chief Scientist, Accenture

What is a Technology Platform?
A technology platform is defined as follows:

It supports a platform business model by adding a digital layer to

interactions in the value chain. This makes it possible to interact with
the business from any app or device, and makes it possible for the
enterprise to analyze the interactions that make up the activity along
the value chain. Through the technology platform, each player in the
value network becomes part of a digital ecosystem.
Amazon’s pace of innovation is blistering
Amazon’s baseline is
sharing by default.
“
All teams will henceforth expose their data and functionality through service interfaces.
Teams must communicate with each other through these interfaces. There will be no other form
of inter-process communication allowed: no direct linking, no direct reads of another team’s data
store, no shared-memory model, no back-doors whatsoever.
The only communication allowed is via service interface calls over the network.
It doesn’t matter what technology they use.
All service interfaces, without exception, must be designed from the ground up to be
externalizable. That is to say, the team must plan and design to be able to expose the interface to
developers in the outside world. No exceptions.
Anyone who doesn’t do this will be fired. Thank you; have a nice day!
Jeff Bezos
CEO, Amazon
“Information about package is as valuable
as the package.”

All assets instrumented and connected

Innovations on customer access to

information

Architect for low cost interactions in the

ecosystem
“ Information about the package helps us run our business better. That comes
from a digital operating model where all our assets are connected and surface
information to increase overall value to us and the customer.
David Zanca, SVP IT, Customer Access, and Revenue Systems
Federal Express

Not only do our customers want more information about the packages, but
they also now want more interaction with FedEx and expect us to react to
changes and resolve problems if they occur.
Thomas Wicinski, VP Digital Access Marketing
Federal Express
The new baseline is
sharing by default.
 “An architecture to move at the pace of change.”
Key pillar of innovation strategy
Future proofs existing assets
Makes AT&T network into a platform and addressable
by other innovators
Creates permeability

“[The API program] is an architectural choice one makes for speed.”

John Donovan, Sr. EVP, Technology and Network Ops, AT&T
“
If you have infrastructure assets and are going to operate at a pace at which
the external market is moving, you have to take capabilities—industry-specific
or not—and make platforms from them.
John Donovan, Sr. EVP, Technology and Network Ops
AT&T

We’re pivoting toward architecting everything we do in an API-centric way.

Jacob Feinstein, Sr. Director, Core IT
AT&T
The new baseline is
sharing by default.
This approach of common platforms

and shared incentives

is the path to digital ecosystem success.

One Last Thought
Given current abundance of choices and
scarcity of user attention,
compelling experiences
must deliver platform capabilities and content to users.

Without such experiences, an ecosystem fails to thrive.

 Weill & Woerner (2013),
“Optimizing Your Digital Business Model,” MIT Sloan Management Review
Thank you
Please send questions and comments to:
@sramji
sramji@apigee.com