Platform Revolution
 |
Description
Book Introduction
“The protagonists of the Fourth Industrial Revolution will be those who build or utilize platforms!”
Everyone is shouting about the 4th industrial revolution.
The government continues to lead the way and companies are endlessly repeating it like a refrain here and there.
Books about the Fourth Industrial Revolution have been long-term bestsellers in bookstores, and most books predicting the future emphasize their connection to the Fourth Industrial Revolution.
Of course, the Fourth Industrial Revolution is important.
However, what the Fourth Industrial Revolution pursues is not just new technologies such as artificial intelligence (AI), the Internet of Things (IoT), cloud computing, big data, mobile, 3D printing, robotics, biotechnology, and nanotechnology.
The Fourth Industrial Revolution is a revolution in which these technologies are combined to make things intelligent by connecting all products and services to a network, achieving hyperconnectivity and superintelligence, and based on this, it will have a wider scope, faster speed, and greater impact than previous industrial revolutions.
The first introductory book and study case book on platform businesses that will dominate the era of the Fourth Industrial Revolution.
Co-authored by world-renowned authorities and scholars Marshall Van Alstyne, Professor at Boston University; Sangeet Paul Choudhury, Founder of Platform Thinking Labs; and Jeffrey Parker, Professor at Dartmouth College.
Starting with why platforms have come to dominate the world and why even global corporations are being pushed out by platform companies, it specifically explains how platforms should be designed, what response methods existing companies have, how they should be launched, when and where to generate profits, how wide the scope of openness should be, whether democratic or liberal management is better, how management indicators and management strategies differ from those of general businesses, how regulations should be effective, and which industries are more likely to become victims of platform companies, through cases of success and failure of platform companies.
If you're thinking about building a platform or interested in transforming an existing company into a platform company, you'll find a lot of inspiration.
Everyone is shouting about the 4th industrial revolution.
The government continues to lead the way and companies are endlessly repeating it like a refrain here and there.
Books about the Fourth Industrial Revolution have been long-term bestsellers in bookstores, and most books predicting the future emphasize their connection to the Fourth Industrial Revolution.
Of course, the Fourth Industrial Revolution is important.
However, what the Fourth Industrial Revolution pursues is not just new technologies such as artificial intelligence (AI), the Internet of Things (IoT), cloud computing, big data, mobile, 3D printing, robotics, biotechnology, and nanotechnology.
The Fourth Industrial Revolution is a revolution in which these technologies are combined to make things intelligent by connecting all products and services to a network, achieving hyperconnectivity and superintelligence, and based on this, it will have a wider scope, faster speed, and greater impact than previous industrial revolutions.
The first introductory book and study case book on platform businesses that will dominate the era of the Fourth Industrial Revolution.
Co-authored by world-renowned authorities and scholars Marshall Van Alstyne, Professor at Boston University; Sangeet Paul Choudhury, Founder of Platform Thinking Labs; and Jeffrey Parker, Professor at Dartmouth College.
Starting with why platforms have come to dominate the world and why even global corporations are being pushed out by platform companies, it specifically explains how platforms should be designed, what response methods existing companies have, how they should be launched, when and where to generate profits, how wide the scope of openness should be, whether democratic or liberal management is better, how management indicators and management strategies differ from those of general businesses, how regulations should be effective, and which industries are more likely to become victims of platform companies, through cases of success and failure of platform companies.
If you're thinking about building a platform or interested in transforming an existing company into a platform company, you'll find a lot of inspiration.
- You can preview some of the book's contents.
Preview
index
Preface to the Korean Edition: Concerns About Korea's Platform Competitiveness
Preface: Platforms Are Already Changing the World
Chapter 1: Right Now - The Market Is Already Dominated by Platforms
The unimaginable power of platforms / What are platforms changing and how? / Companies that don't understand platforms have no future.
Chapter 2: The Power of Platforms - Why Big Companies Are Being Pushed by Platforms
The Source of Platform Business Competitiveness / Economies of Scale Are Being Realized in Demand / Two-Sided Network Effects Are Being Applied / Price, Brand, and Word-of-Mouth Have Their Limits / What Maximizes Network Effects / Strategies to Prevent Negative Network Effects / Strengths and Weaknesses of Four Network Effects / Now We Must Look Outward, Not Inward
Chapter 3 Architecture - How to Design a Platform
Focus on the essence of the platform / Design of core interactions that determine the success or failure of the platform / Design a platform that attracts, promotes, and matches / Design to create new interactions / Design principle 1: End-to-End / Design principle 2: Modularity / Design principle 3: Re-Architecting / The best platform design is sometimes anti-design.
Chapter 4: Disruptive Innovation - How Platforms Conquered Traditional Industries
The changes brought about by platforms are just the beginning / The history of digital-driven disruptive innovation / How platforms are devouring pipelines / New methods of value creation, consumption, and quality management / Platforms are causing tectonic shifts in the business environment / How are giant pipeline companies responding?
Chapter 5: Launching - 8 Ways to Successfully Launch Your Platform
How to Acquire New Customers / 'Pull' is More Important Than 'Push' in Word-of-Mouth Spreading / Are Latecomers Really at a Disadvantage in Platform Competition? / There Are Various Ways to Launch a Platform / 8 Strategies to Solve the Chicken-or-the-Egg Problem / Word-of-Mouth: A Growth Mechanism That Spreads from User to User
Chapter 6: Monetization - When, Where, and How Should Platforms Generate Revenue?
Don't let profit blind you and discourage platform entry / Network effects and monetization are separate issues / The number of visitors does not necessarily lead to monetization / Monetization method 1: Charge transaction fees / Monetization method 2: Charge fees for community access / Monetization method 3: Charge fees for enhanced accessibility / Monetization method 4: Charge fees for enhanced curation / Who to charge / What to keep in mind when switching from free to paid
Chapter 7: Openness - Open vs. Closed: Which Platform is Right for You?
Lessons from Wikipedia: The Dilemma of Open Platforms / How open should we go and where should we close ourselves off? / There are many options between openness and closure. / Four models based on the level of participation of administrators and sponsors. / It also depends on the extent of participation allowed for developers. / What to open and what to own. / Good intentions do not necessarily lead to good results. / Similar platforms can compete by differentiating the level of openness. / The advantages and disadvantages of gradual opening.
Chapter 8: Governance - Control and Autonomy: What's Right for a Platform?
Three Basic Rules of Good Governance / Why Governance Issues Emerge on Platforms / Market Failures Repeatedly on Platforms / How to Use the Four Tools of Governance: Law, Regulations, Architecture, and Markets / Principles of Smart Self-Regulation for Platforms
Chapter 9 Management Metrics - What are the key checkpoints for platform managers?
Management indicators of traditional pipeline companies / Management indicators of companies and platform management indicators are different / Platform management indicators vary depending on the life cycle / Startup stage: Liquidity, matching quality, and reliability are key factors / Growth stage: Normal operation of the two-sided network is key / Maturity stage: Innovation-driven, signal and noise, and resource allocation are key factors / Key questions that smart platform management indicators must answer
Chapter 10: Management Strategy - How Platforms Have Changed the Competitive Landscape
The nature of competition changes in the platform world / A brief history of 20th-century corporate management strategies for competitive advantage / A new competitive environment facing platforms: three-dimensional chess / Platform strategy 1: Alibaba and Apple's prevention of multi-homing / Platform strategy 2: SAP, MS, and Facebook's fence-in style / Platform strategy 3: Amazon and LinkedIn's strengthening of data tools / Platform strategy 4: Avoidance of mergers and acquisitions / Platform strategy 5: MS's absorption of browsers and RealAudio / Platform strategy 6: Airbnb's strengthening of user convenience / When does a winner-take-all market become created on a platform?
Chapter 11 Regulatory Policy - Different Regulatory Policies Appropriate for Different Platforms
Do Platforms Really Benefit Citizens? / Platform Regulation: Refining Old Rules for a New World / The Dark Shadows of the Platform Revolution / The Arguments and Basis of Platform Regulation Opponents / Seven Issues Surrounding Platform Regulation / It's Time to Move into the Era of Regulation 2.0 / Our Recommendations for Regulators
Chapter 12: The Future - The Platform Revolution of Tomorrow
What we need to know as we prepare for the future / Which industries will fall victim to the platform revolution / Education: Creating a global classroom / Healthcare: Fragmented data is an obstacle / Energy: From smart grids to multidirectional platforms / Finance: Everyone is moving to platforms / Logistics and transportation: From movement to supply and demand adjustments / Labor and professional services: Work is being redefined / Government as a platform: How far should we open it? / Internet of Things: The platform of platforms around the world / What kind of society will we build with platforms?
Acknowledgements
Glossary of Terms
main
Search
Preface: Platforms Are Already Changing the World
Chapter 1: Right Now - The Market Is Already Dominated by Platforms
The unimaginable power of platforms / What are platforms changing and how? / Companies that don't understand platforms have no future.
Chapter 2: The Power of Platforms - Why Big Companies Are Being Pushed by Platforms
The Source of Platform Business Competitiveness / Economies of Scale Are Being Realized in Demand / Two-Sided Network Effects Are Being Applied / Price, Brand, and Word-of-Mouth Have Their Limits / What Maximizes Network Effects / Strategies to Prevent Negative Network Effects / Strengths and Weaknesses of Four Network Effects / Now We Must Look Outward, Not Inward
Chapter 3 Architecture - How to Design a Platform
Focus on the essence of the platform / Design of core interactions that determine the success or failure of the platform / Design a platform that attracts, promotes, and matches / Design to create new interactions / Design principle 1: End-to-End / Design principle 2: Modularity / Design principle 3: Re-Architecting / The best platform design is sometimes anti-design.
Chapter 4: Disruptive Innovation - How Platforms Conquered Traditional Industries
The changes brought about by platforms are just the beginning / The history of digital-driven disruptive innovation / How platforms are devouring pipelines / New methods of value creation, consumption, and quality management / Platforms are causing tectonic shifts in the business environment / How are giant pipeline companies responding?
Chapter 5: Launching - 8 Ways to Successfully Launch Your Platform
How to Acquire New Customers / 'Pull' is More Important Than 'Push' in Word-of-Mouth Spreading / Are Latecomers Really at a Disadvantage in Platform Competition? / There Are Various Ways to Launch a Platform / 8 Strategies to Solve the Chicken-or-the-Egg Problem / Word-of-Mouth: A Growth Mechanism That Spreads from User to User
Chapter 6: Monetization - When, Where, and How Should Platforms Generate Revenue?
Don't let profit blind you and discourage platform entry / Network effects and monetization are separate issues / The number of visitors does not necessarily lead to monetization / Monetization method 1: Charge transaction fees / Monetization method 2: Charge fees for community access / Monetization method 3: Charge fees for enhanced accessibility / Monetization method 4: Charge fees for enhanced curation / Who to charge / What to keep in mind when switching from free to paid
Chapter 7: Openness - Open vs. Closed: Which Platform is Right for You?
Lessons from Wikipedia: The Dilemma of Open Platforms / How open should we go and where should we close ourselves off? / There are many options between openness and closure. / Four models based on the level of participation of administrators and sponsors. / It also depends on the extent of participation allowed for developers. / What to open and what to own. / Good intentions do not necessarily lead to good results. / Similar platforms can compete by differentiating the level of openness. / The advantages and disadvantages of gradual opening.
Chapter 8: Governance - Control and Autonomy: What's Right for a Platform?
Three Basic Rules of Good Governance / Why Governance Issues Emerge on Platforms / Market Failures Repeatedly on Platforms / How to Use the Four Tools of Governance: Law, Regulations, Architecture, and Markets / Principles of Smart Self-Regulation for Platforms
Chapter 9 Management Metrics - What are the key checkpoints for platform managers?
Management indicators of traditional pipeline companies / Management indicators of companies and platform management indicators are different / Platform management indicators vary depending on the life cycle / Startup stage: Liquidity, matching quality, and reliability are key factors / Growth stage: Normal operation of the two-sided network is key / Maturity stage: Innovation-driven, signal and noise, and resource allocation are key factors / Key questions that smart platform management indicators must answer
Chapter 10: Management Strategy - How Platforms Have Changed the Competitive Landscape
The nature of competition changes in the platform world / A brief history of 20th-century corporate management strategies for competitive advantage / A new competitive environment facing platforms: three-dimensional chess / Platform strategy 1: Alibaba and Apple's prevention of multi-homing / Platform strategy 2: SAP, MS, and Facebook's fence-in style / Platform strategy 3: Amazon and LinkedIn's strengthening of data tools / Platform strategy 4: Avoidance of mergers and acquisitions / Platform strategy 5: MS's absorption of browsers and RealAudio / Platform strategy 6: Airbnb's strengthening of user convenience / When does a winner-take-all market become created on a platform?
Chapter 11 Regulatory Policy - Different Regulatory Policies Appropriate for Different Platforms
Do Platforms Really Benefit Citizens? / Platform Regulation: Refining Old Rules for a New World / The Dark Shadows of the Platform Revolution / The Arguments and Basis of Platform Regulation Opponents / Seven Issues Surrounding Platform Regulation / It's Time to Move into the Era of Regulation 2.0 / Our Recommendations for Regulators
Chapter 12: The Future - The Platform Revolution of Tomorrow
What we need to know as we prepare for the future / Which industries will fall victim to the platform revolution / Education: Creating a global classroom / Healthcare: Fragmented data is an obstacle / Energy: From smart grids to multidirectional platforms / Finance: Everyone is moving to platforms / Logistics and transportation: From movement to supply and demand adjustments / Labor and professional services: Work is being redefined / Government as a platform: How far should we open it? / Internet of Things: The platform of platforms around the world / What kind of society will we build with platforms?
Acknowledgements
Glossary of Terms
main
Search
Into the book
It was Brian Chesky and Joe Gebbia who proposed 'networking in your pajamas'.
It wasn't until these two moved to San Francisco as new designers that they realized the rent for the apartment they were planning to live in together was too expensive for them.
Running out of money, the two decided to improvise and offer part-time tour guide services and air mattresses to convention attendees.
Chesky and Gebbia had three guests stay for the weekend and earned $1,000, enough to pay the next month's rent.
Their impromptu apartment-sharing experience would revolutionize what is now considered the world's largest industry.
--- p.
29
James Irwin, who lives in Des Moines, Iowa, is a software manual writer and history buff.
One afternoon, while browsing Reddit, a community-based news platform, I came across a question someone posted.
What would happen if the modern U.S. Marines had faced the ancient Roman Empire? James's response here garnered a passionate following, and within weeks, a film deal was signed to adapt the story.
Erwin has now quit his original job and is focusing on screenwriting.
--- p.
35
Tom Goodwin, senior vice president of strategy at advertising firm Havas Media, describes this shift as: “Uber, the world’s largest taxi company, doesn’t own a single car; Facebook, the world’s largest media company, doesn’t produce content; Alibaba, the world’s most valuable retailer, doesn’t have inventory.
“Airbnb, the world’s largest accommodation company, also doesn’t own any real estate,” he explains succinctly.
It is the community that provides these resources.
--- p.
45
It was purely by accident that Threadless came up with this business model.
Originally, the founders planned to start a web services business.
They planned to provide consulting services to companies that needed websites.
However, web consulting services did not expand into sales.
Each project had to be negotiated individually and had to have a dedicated staff member.
And even after the project was finished, the cases that had been worked on could not be resold as is.
The company's founders launched a T-shirt contest website as a side project to showcase their capabilities.
In fact, this website was simply an online version of an offline contest that one of the founders had supported.
As this experimental venture gained explosive popularity, the enormous scalability benefits of this business became abundantly clear.
--- p.
67
Social dating platform OKCupid discovered that poorly managed scalability could lead to network collapse.
According to OKCupid CEO Christian Rudder, as dating websites gain more users, men on the platform will naturally flock to the most beautiful women.
As these men's activities increase, problems arise.
Because the majority of men who approach the most attractive women will find them very unattractive.
In short, for most men, that woman becomes an 'untouchable object'.
When "B-list men" (a term used by Christian Rudder, not the authors of this book!) ask "A-list women" out on dates like this, no one likes it.
Beautiful women may feel frustrated and leave the site because of the unfiltered attention from men.
Meanwhile, B-class men also feel dissatisfied.
Because the woman he chose doesn't show any reaction.
And even the few attractive men who could get along well with the most beautiful women feel dissatisfied.
Because the women they want have left the platform.
--- p.
69
Until recently, if a Facebook user wanted to share a photo with their friends, they had to first take a picture with their camera, then transfer the picture to their computer, then edit it with Photoshop or some other software before finally being able to upload it to Facebook.
Instagram, on the other hand, allows users to take, edit, and share a photo with just three clicks, all from one device.
Lowering the barrier to use in this way helps to encourage interaction and increase activity on the platform.
--- p.
100
Separating value from assets allows for more efficient use of expensive medical devices, such as MRI machines (which cost $3 million to $5 million each).
The operating rate of MRI equipment in a single hospital is only 40-50%.
The solution is simple.
It creates a market where other hospitals and small clinics that cannot afford expensive equipment can pay by the hour to use it.
Separating the value and assets a device creates can increase device utilization rates from 70% to 90%, potentially leading to increased revenue for device owners.
--- p.
135
In January 2012, Nike announced a wearable device called the FuelBand.
It is a device that measures the user's exercise volume and informs them of the number of steps taken, calories burned, etc.
Like other companies, Nike has been developing apps, mostly sports and health-related ones.
On the surface, it appears to be an attempt to expand the traditional product line with the goal of horizontal integration.
But in reality
Nike was testing whether this attempt, if successful, would lead to new forms of growth.
This is a test of whether Nike can achieve the success achieved by platform companies like Apple.
--- p.
141
The piggyback strategy is a typical method used by many successful platforms when they first start out.
As discussed earlier, PayPal also used the strategy of piggybacking on eBay's online auction platform.
Justdial is India's largest online marketplace, facilitating transactions between consumers and over 4 million small businesses.
JustDial initially built its database by borrowing information from existing industry-specific phone books and hiring personnel to go out and collect company information one by one.
And with the data collected in this way, we started a phone book service.
If a consumer wanted to find a service provider, say a caterer for a wedding banquet, they would call JustDial.
JustDial then connects you with the producer.
For example, it introduces appropriate food businesses in the area where the consumer is located.
Some service providers who are grateful for this will join JustDial.
To further encourage participation from local merchants who have not yet registered online, JustDial offers a variety of ways to sign up, including in person, over the phone, and via email, making it easier for them to join the platform.
--- p.
166
The viral diffusion cycle? A growth cycle impossible in a pipeline- and product-centric industrial economy? This explains how so many other platform startups have succeeded.
Airbnb encouraged users (hosts) who had rooms to rent to list their rooms (units of value) on Craigslist (an external network).
People who see a room listed on Craigslist and decide to rent it (recipients) become Airbnb users.
And Airbnb's growth was fueled by many people starting to rent out their rooms later on.
Similarly, OpenTable allows guests (hosts) to share their restaurant reservations (value units) with friends or colleagues (recipients) via email or Facebook (external networks).
Write down your goals and post them in a place where you can see them every day, turning them into "action blocks."
--- p.
180
Despite this backlash, however, Meetup's strategy was effective.
Although the number of meetings posted on the Meetup site has decreased dramatically, the quality and level of interaction of the meetings has improved significantly.
Five years later, Hyperman said in an interview:
“By the way, there was a lot of talk about going from free to paid.
Yes, that's right.
95% of the activities that were happening at the meetup at the time disappeared.
But now there is much more activity than before.
Moreover, half of the meetings held at Meetup today are successful.
“Before, it was only 1-2%.”
--- p.
203
Sangeet Choudhary, an advisory board member at the education platform Skillshare, helped shift its monetization model from a transaction fee model to a service fee model.
It has forced us to shift to a model that offers better value if you pay a fee.
Originally, Skillshare charged students for each course they took.
However, after allowing platform managers to curate a significant number of high-quality courses, they began allowing students to take a variety of courses for a monthly fee.
Instructors are paid 'royalties' based on the number of paying subscribers who sign up for their courses.
As the number of paying subscribers increases, the value per course increases, allowing the platform to generate sustainable revenue.
--- p.
195
The British daily newspaper The Guardian took the opposite path.
The newspaper's website boasted a significant global readership and was always open to readers, allowing them to read articles written and edited by the newspaper's staff for free.
However, previously, the Guardian site was closed to extension developers.
Executives, recognizing the value of The Guardian's vast information and ideas, as well as the potential benefits of transitioning the newspaper's website to an open platform, spent months debating, analyzing, and developing a strategy.
After reviewing the risks and rewards of moving to an open platform, management decided to pursue a simultaneous strategy of "open in"—opening up the website by attracting more data and applications from outside—and "open out"—allowing partners to create products using The Guardian's content and services and put them on other digital platforms.
--- p.
245
To combat this, Keurig has incorporated a scanning device into its newly released Keurig 2.0 that prevents the use of capsules that do not bear its registered trademark.
Consumers were outraged.
Many users have fiercely criticized Keurig on shopping sites.
Thousands of people have watched YouTube videos showing how to hack a Keurig system to use non-officially certified capsule coffee.
Shoppers lamented what they called "outrageous corporate greed" and lamented that Amazon's rating system didn't allow them to give the new Keurig a zero rating.
Green Mountain's attempt to maximize profits from its coffee maker platform angered its customer community and resulted in a significant decline in profits. The "King of Coffee" had violated three fundamental rules of good governance.
--- p.
266
There are exceptions to the principle of transparency, however, where specifying rules might actually encourage bad behavior.
Dating sites have found this out the hard way.
As dating sites quickly adopted laws to punish stalkers for bad behavior, stalkers quickly learned how to avoid behavior that would trigger reports.
Instead, if dating platforms delay this negative feedback, stalkers will spend a lot of time figuring out how to avoid being caught, which becomes a powerful and permanent disincentive to bad behavior.
--- p.
279
All of these may have been factors in the failure of Branch Out.
But BranchOut's biggest mistake was focusing on the wrong things? The wrong metrics?
During those fateful months of mid-2012, when investment money was pouring in and a huge number of "active users" were signing up, BranchOut focused all its efforts on growing its membership.
BranchOut offered incentives for users to invite as many friends as possible, making it easy for Facebook members to invite all their friends to BranchOut.
BranchOut's membership exploded as hundreds of millions of friend invitations flooded the cyberspace.
--- p.
308
In his essay "On Flash," Jobs argued that Flash was closed, technologically inferior to other options, consumed too much energy, and underperformed on mobile devices.
Jobs argued that eliminating Flash on the iPhone would preserve the quality of the Apple user experience.
But in reality, there was a much deeper and more strategic reason.
Adobe designed tools for Flash developers to port content and programs from Apple iOS to Google Android and other web platforms.
In short, apps developed in Flash eliminated the iPhone's unique characteristics by enabling multi-homing.
Additionally, Adobe has even announced extensions that can be purchased in the app.
Flash freed developers from having to interact with the iTunes platform, reducing Apple's interaction with developers by 30% and reducing Apple's control over usage data.
Usage data provides Apple with valuable insights into market trends.
--- p.
348
No matter what anyone says, Monster was able to win the competition for dominance among job introduction platforms.
In the job placement market, Monster quickly established a leading position and created powerful network effects in the two-sided market where employers and employees find each other.
However, the data collected by the monster had inherent limitations.
Because Monster was only interested in active job seekers, it did not collect information about users' broader social networks.
So once the job search interaction ends, both the employer and employee leave the platform, and the flow of data stops there.
Conversely, LinkedIn is interested in the social networks of all professionals, not just active job seekers.
This has led to more sustained engagement, and we've even collected data on those who are satisfied with their current jobs but are willing to actively seek new opportunities.
This way, LinkedIn was able to significantly expand its user base.
--- p.
355
Some platform companies have actually closed down due to concerns about negative externalities.
Consider the MonkeyParking app.
Launched in San Francisco in January 2014, the app allowed drivers to auction off their vacated parking spaces to other users, sharing the profits with drivers.
Most critics viewed monkey parking as unfair because it forced the privatization of a public good—parking space—and monetization, thereby impacting the openness and accessibility of the public transportation system that countless individuals and businesses rely on.
Monkey Parking also negatively impacted owners who had purchased private parking lots, anticipating demand for similar services. As criticism grew, regulators shut down the Monkey Parking platform in June 2014.
--- p.
376
Students find MOOCs—especially the many online courses focused on specific job skills like software engineering, design, marketing, and film editing—appealing, and they seem more interested in honing real-world skills than in earning traditional symbols of achievement like academic transcripts or degree certificates.
Someone who ranks high on TopCoder, a platform that hosts programming competitions, will likely land a developer job at Facebook or Google as quickly as someone who earned a computer science degree from Carnegie Mellon University, Caltech, or MIT.
--- p.
425
Improved products such as compact fluorescent lamps and light-emitting diodes (LEDs) have not only made lighting technology more efficient but also more profitable.
But when home lighting systems become connected to the Internet of Things, the original purpose of light bulbs changes.
Lights can be programmed to alert you to the presence of an intruder.
If a baby who has just started walking wanders around stairs or near a fireplace, you can use a light to alert parents.
You can even make the light blink to let grandma know it's time to take her medicine.
Lights equipped with wireless connectivity could track the energy consumption of other appliances, enabling light bulb retailers to offer energy management services to homeowners and power companies.
Suddenly, a light bulb manufacturer could be giving away $40 LED bulbs for free and demanding a cut of the revenue generated by its network connection services in return.
It wasn't until these two moved to San Francisco as new designers that they realized the rent for the apartment they were planning to live in together was too expensive for them.
Running out of money, the two decided to improvise and offer part-time tour guide services and air mattresses to convention attendees.
Chesky and Gebbia had three guests stay for the weekend and earned $1,000, enough to pay the next month's rent.
Their impromptu apartment-sharing experience would revolutionize what is now considered the world's largest industry.
--- p.
29
James Irwin, who lives in Des Moines, Iowa, is a software manual writer and history buff.
One afternoon, while browsing Reddit, a community-based news platform, I came across a question someone posted.
What would happen if the modern U.S. Marines had faced the ancient Roman Empire? James's response here garnered a passionate following, and within weeks, a film deal was signed to adapt the story.
Erwin has now quit his original job and is focusing on screenwriting.
--- p.
35
Tom Goodwin, senior vice president of strategy at advertising firm Havas Media, describes this shift as: “Uber, the world’s largest taxi company, doesn’t own a single car; Facebook, the world’s largest media company, doesn’t produce content; Alibaba, the world’s most valuable retailer, doesn’t have inventory.
“Airbnb, the world’s largest accommodation company, also doesn’t own any real estate,” he explains succinctly.
It is the community that provides these resources.
--- p.
45
It was purely by accident that Threadless came up with this business model.
Originally, the founders planned to start a web services business.
They planned to provide consulting services to companies that needed websites.
However, web consulting services did not expand into sales.
Each project had to be negotiated individually and had to have a dedicated staff member.
And even after the project was finished, the cases that had been worked on could not be resold as is.
The company's founders launched a T-shirt contest website as a side project to showcase their capabilities.
In fact, this website was simply an online version of an offline contest that one of the founders had supported.
As this experimental venture gained explosive popularity, the enormous scalability benefits of this business became abundantly clear.
--- p.
67
Social dating platform OKCupid discovered that poorly managed scalability could lead to network collapse.
According to OKCupid CEO Christian Rudder, as dating websites gain more users, men on the platform will naturally flock to the most beautiful women.
As these men's activities increase, problems arise.
Because the majority of men who approach the most attractive women will find them very unattractive.
In short, for most men, that woman becomes an 'untouchable object'.
When "B-list men" (a term used by Christian Rudder, not the authors of this book!) ask "A-list women" out on dates like this, no one likes it.
Beautiful women may feel frustrated and leave the site because of the unfiltered attention from men.
Meanwhile, B-class men also feel dissatisfied.
Because the woman he chose doesn't show any reaction.
And even the few attractive men who could get along well with the most beautiful women feel dissatisfied.
Because the women they want have left the platform.
--- p.
69
Until recently, if a Facebook user wanted to share a photo with their friends, they had to first take a picture with their camera, then transfer the picture to their computer, then edit it with Photoshop or some other software before finally being able to upload it to Facebook.
Instagram, on the other hand, allows users to take, edit, and share a photo with just three clicks, all from one device.
Lowering the barrier to use in this way helps to encourage interaction and increase activity on the platform.
--- p.
100
Separating value from assets allows for more efficient use of expensive medical devices, such as MRI machines (which cost $3 million to $5 million each).
The operating rate of MRI equipment in a single hospital is only 40-50%.
The solution is simple.
It creates a market where other hospitals and small clinics that cannot afford expensive equipment can pay by the hour to use it.
Separating the value and assets a device creates can increase device utilization rates from 70% to 90%, potentially leading to increased revenue for device owners.
--- p.
135
In January 2012, Nike announced a wearable device called the FuelBand.
It is a device that measures the user's exercise volume and informs them of the number of steps taken, calories burned, etc.
Like other companies, Nike has been developing apps, mostly sports and health-related ones.
On the surface, it appears to be an attempt to expand the traditional product line with the goal of horizontal integration.
But in reality
Nike was testing whether this attempt, if successful, would lead to new forms of growth.
This is a test of whether Nike can achieve the success achieved by platform companies like Apple.
--- p.
141
The piggyback strategy is a typical method used by many successful platforms when they first start out.
As discussed earlier, PayPal also used the strategy of piggybacking on eBay's online auction platform.
Justdial is India's largest online marketplace, facilitating transactions between consumers and over 4 million small businesses.
JustDial initially built its database by borrowing information from existing industry-specific phone books and hiring personnel to go out and collect company information one by one.
And with the data collected in this way, we started a phone book service.
If a consumer wanted to find a service provider, say a caterer for a wedding banquet, they would call JustDial.
JustDial then connects you with the producer.
For example, it introduces appropriate food businesses in the area where the consumer is located.
Some service providers who are grateful for this will join JustDial.
To further encourage participation from local merchants who have not yet registered online, JustDial offers a variety of ways to sign up, including in person, over the phone, and via email, making it easier for them to join the platform.
--- p.
166
The viral diffusion cycle? A growth cycle impossible in a pipeline- and product-centric industrial economy? This explains how so many other platform startups have succeeded.
Airbnb encouraged users (hosts) who had rooms to rent to list their rooms (units of value) on Craigslist (an external network).
People who see a room listed on Craigslist and decide to rent it (recipients) become Airbnb users.
And Airbnb's growth was fueled by many people starting to rent out their rooms later on.
Similarly, OpenTable allows guests (hosts) to share their restaurant reservations (value units) with friends or colleagues (recipients) via email or Facebook (external networks).
Write down your goals and post them in a place where you can see them every day, turning them into "action blocks."
--- p.
180
Despite this backlash, however, Meetup's strategy was effective.
Although the number of meetings posted on the Meetup site has decreased dramatically, the quality and level of interaction of the meetings has improved significantly.
Five years later, Hyperman said in an interview:
“By the way, there was a lot of talk about going from free to paid.
Yes, that's right.
95% of the activities that were happening at the meetup at the time disappeared.
But now there is much more activity than before.
Moreover, half of the meetings held at Meetup today are successful.
“Before, it was only 1-2%.”
--- p.
203
Sangeet Choudhary, an advisory board member at the education platform Skillshare, helped shift its monetization model from a transaction fee model to a service fee model.
It has forced us to shift to a model that offers better value if you pay a fee.
Originally, Skillshare charged students for each course they took.
However, after allowing platform managers to curate a significant number of high-quality courses, they began allowing students to take a variety of courses for a monthly fee.
Instructors are paid 'royalties' based on the number of paying subscribers who sign up for their courses.
As the number of paying subscribers increases, the value per course increases, allowing the platform to generate sustainable revenue.
--- p.
195
The British daily newspaper The Guardian took the opposite path.
The newspaper's website boasted a significant global readership and was always open to readers, allowing them to read articles written and edited by the newspaper's staff for free.
However, previously, the Guardian site was closed to extension developers.
Executives, recognizing the value of The Guardian's vast information and ideas, as well as the potential benefits of transitioning the newspaper's website to an open platform, spent months debating, analyzing, and developing a strategy.
After reviewing the risks and rewards of moving to an open platform, management decided to pursue a simultaneous strategy of "open in"—opening up the website by attracting more data and applications from outside—and "open out"—allowing partners to create products using The Guardian's content and services and put them on other digital platforms.
--- p.
245
To combat this, Keurig has incorporated a scanning device into its newly released Keurig 2.0 that prevents the use of capsules that do not bear its registered trademark.
Consumers were outraged.
Many users have fiercely criticized Keurig on shopping sites.
Thousands of people have watched YouTube videos showing how to hack a Keurig system to use non-officially certified capsule coffee.
Shoppers lamented what they called "outrageous corporate greed" and lamented that Amazon's rating system didn't allow them to give the new Keurig a zero rating.
Green Mountain's attempt to maximize profits from its coffee maker platform angered its customer community and resulted in a significant decline in profits. The "King of Coffee" had violated three fundamental rules of good governance.
--- p.
266
There are exceptions to the principle of transparency, however, where specifying rules might actually encourage bad behavior.
Dating sites have found this out the hard way.
As dating sites quickly adopted laws to punish stalkers for bad behavior, stalkers quickly learned how to avoid behavior that would trigger reports.
Instead, if dating platforms delay this negative feedback, stalkers will spend a lot of time figuring out how to avoid being caught, which becomes a powerful and permanent disincentive to bad behavior.
--- p.
279
All of these may have been factors in the failure of Branch Out.
But BranchOut's biggest mistake was focusing on the wrong things? The wrong metrics?
During those fateful months of mid-2012, when investment money was pouring in and a huge number of "active users" were signing up, BranchOut focused all its efforts on growing its membership.
BranchOut offered incentives for users to invite as many friends as possible, making it easy for Facebook members to invite all their friends to BranchOut.
BranchOut's membership exploded as hundreds of millions of friend invitations flooded the cyberspace.
--- p.
308
In his essay "On Flash," Jobs argued that Flash was closed, technologically inferior to other options, consumed too much energy, and underperformed on mobile devices.
Jobs argued that eliminating Flash on the iPhone would preserve the quality of the Apple user experience.
But in reality, there was a much deeper and more strategic reason.
Adobe designed tools for Flash developers to port content and programs from Apple iOS to Google Android and other web platforms.
In short, apps developed in Flash eliminated the iPhone's unique characteristics by enabling multi-homing.
Additionally, Adobe has even announced extensions that can be purchased in the app.
Flash freed developers from having to interact with the iTunes platform, reducing Apple's interaction with developers by 30% and reducing Apple's control over usage data.
Usage data provides Apple with valuable insights into market trends.
--- p.
348
No matter what anyone says, Monster was able to win the competition for dominance among job introduction platforms.
In the job placement market, Monster quickly established a leading position and created powerful network effects in the two-sided market where employers and employees find each other.
However, the data collected by the monster had inherent limitations.
Because Monster was only interested in active job seekers, it did not collect information about users' broader social networks.
So once the job search interaction ends, both the employer and employee leave the platform, and the flow of data stops there.
Conversely, LinkedIn is interested in the social networks of all professionals, not just active job seekers.
This has led to more sustained engagement, and we've even collected data on those who are satisfied with their current jobs but are willing to actively seek new opportunities.
This way, LinkedIn was able to significantly expand its user base.
--- p.
355
Some platform companies have actually closed down due to concerns about negative externalities.
Consider the MonkeyParking app.
Launched in San Francisco in January 2014, the app allowed drivers to auction off their vacated parking spaces to other users, sharing the profits with drivers.
Most critics viewed monkey parking as unfair because it forced the privatization of a public good—parking space—and monetization, thereby impacting the openness and accessibility of the public transportation system that countless individuals and businesses rely on.
Monkey Parking also negatively impacted owners who had purchased private parking lots, anticipating demand for similar services. As criticism grew, regulators shut down the Monkey Parking platform in June 2014.
--- p.
376
Students find MOOCs—especially the many online courses focused on specific job skills like software engineering, design, marketing, and film editing—appealing, and they seem more interested in honing real-world skills than in earning traditional symbols of achievement like academic transcripts or degree certificates.
Someone who ranks high on TopCoder, a platform that hosts programming competitions, will likely land a developer job at Facebook or Google as quickly as someone who earned a computer science degree from Carnegie Mellon University, Caltech, or MIT.
--- p.
425
Improved products such as compact fluorescent lamps and light-emitting diodes (LEDs) have not only made lighting technology more efficient but also more profitable.
But when home lighting systems become connected to the Internet of Things, the original purpose of light bulbs changes.
Lights can be programmed to alert you to the presence of an intruder.
If a baby who has just started walking wanders around stairs or near a fireplace, you can use a light to alert parents.
You can even make the light blink to let grandma know it's time to take her medicine.
Lights equipped with wireless connectivity could track the energy consumption of other appliances, enabling light bulb retailers to offer energy management services to homeowners and power companies.
Suddenly, a light bulb manufacturer could be giving away $40 LED bulbs for free and demanding a cut of the revenue generated by its network connection services in return.
--- p.
448
448
Publisher's Review
A Platform Business Guide Written by World-Class Scholars
Forbes Book of the Year / '800 CEO Leads' Bestseller
The Fourth Industrial Revolution: Ultimately, Platforms Are the Key
Everyone is shouting about the 4th industrial revolution.
The government continues to lead the way and companies are endlessly repeating it like a refrain here and there.
Books about the Fourth Industrial Revolution have been long-term bestsellers in bookstores, and most books predicting the future emphasize their connection to the Fourth Industrial Revolution.
Of course, the Fourth Industrial Revolution is important.
However, what the Fourth Industrial Revolution pursues is not just new technologies such as artificial intelligence (AI), the Internet of Things (IoT), cloud computing, big data, mobile, 3D printing, robotics, biotechnology, and nanotechnology.
The Fourth Industrial Revolution is a revolution in which these technologies are combined to make things intelligent by connecting all products and services to a network, achieving hyperconnectivity and superintelligence, and based on this, it will have a wider scope, faster speed, and greater impact than previous industrial revolutions.
But who is responsible for this hyperconnectivity? Who utilizes this hyperintelligence? Ultimately, it's the platform.
Global companies such as General Electric (GE), Sony, Microsoft, Haier, Disney, Walmart, Nike, and Under Armour, as well as large agricultural machinery manufacturer John Deere and 126-year-old spice and seasoning retailer McCormick Foods, are all desperately trying to introduce platform methods to their businesses in various ways (pp. 34, 143-144, 430). That is why Sangeet Paul Choudary, co-author of this book, founder of Platform Thinking Labs, visiting entrepreneur at INSEAD Business School, and selected for the Thinkers50 Radar, a ranking of global management thinkers in 2016, advises, “The protagonists of the Fourth Industrial Revolution will be those who build or utilize platforms.”
There is no platform for Korea's Fourth Industrial Revolution.
On the other hand, Korea makes no mention of the platform.
Marshall W., two authors who have studied platform businesses for over 20 years since the dot-com bubble burst in the late 1990s, are recognized as the world's leading experts in the field of information economics, having played a key role in the development of network effects and two-sided network theories, which are now considered essential courses in MBA programs around the world.
Van Alstyne and Jeffrey G.
To the extent that Parker expressed concern about Korea's competitiveness in the platform ecosystem (pp. 17-18).
The authors cautiously cite Chinese examples in this regard.
Line, developed by Naver and the first major messaging platform to emerge in Asia, was quickly overtaken by WeChat.
WeChat's growth doesn't stop there.
WeChat is no longer just a mobile app; it's an ecosystem.
It includes group chats, videos, photos, and even shopping payments on SNS.
In fact, it provides various apps like Google Android or Apple iOS.
Moreover, China's Tencent and Alibaba have achieved rapid growth, reaching the 12th and 15th largest market capitalizations in 2016, respectively. This is truly remarkable, considering that it took decades for American companies to catch up with British and German competitors in industries like steel and heavy machinery, and 30 years for Japanese upstarts after World War II to seize control of the American-dominated automobile and electronics markets.
The business landscape itself has changed since the advent of platforms.
Platform companies have long attracted global attention simply for their rapid growth.
As recently as 2006, Microsoft was the only platform company among the world's top 10 companies by market capitalization.
However, in 2016, 10 years later, Apple, Google, and Microsoft ranked 1st to 3rd, while Amazon and Facebook ranked 6th and 7th.
In the past 10 years, platform companies have taken over half of the world's top 10 companies.
The units of wealth created in the process are of a different dimension.
Instagram, with only 13 employees, was sold to Facebook for $1 billion.
WhatsApp is more.
It had 50 employees and was sold to Facebook for $19 billion.
Naturally, people and companies have no choice but to use 'platform' and 'platform'.
But there is another reason why the platform is important.
First, the platform is changing the business landscape itself (pp. 159-160).
For example, before the emergence of platforms, existing large corporations had an absolute advantage in business.
This is because they have abundant talent, enormous resources, and a loyal customer base.
But now these things are becoming obstacles.
In traditional business environments dominated by products and pipelines, there was time to observe and adapt to emerging external competitors, allowing large companies to adapt to relatively slow change through a leisurely process of strategic planning, goal setting, self-evaluation, and course correction on an annual, or at best, quarterly, basis.
But in a world of platforms dominated by networks that interact in rapid and unpredictable ways, markets change rapidly, and customer expectations change even faster.
Therefore, the management system must also change accordingly.
In that process, the advantages created by a company's size, experience, and resources are no longer important.
Now, startups are realizing that the rules of the game have shifted from a battle for resources to a battle for networks, and that their flexibility and ability to pivot quickly actually give them an advantage.
People's lifestyles have changed dramatically.
The emergence of the platform world has also brought about dramatic changes in consumer behavior.
Millions of users now use products and services in ways unimaginable just a few years ago, as journalist Jason Tanz puts it (pp. 130-131):
We ride in strangers' cars (Lyft, Sidecar, Uber), host strangers in our spare rooms (Airbnb), leave our dogs in strangers' homes (DogBaby, Rover), and eat at strangers' tables (Pistly).
We also lend them our cars (RelayRise, Getaround), boats (BoatBound), houses (HomeAway) and various tools we use (Zillock).
We entrust our precious possessions, our personal experiences, and even our very lives to complete strangers.
Until recently, this behavior would have been considered either very dangerous or very strange.
But these days, it is an all too familiar practice.
Building on this foundation, a number of new platform companies that now call themselves the “Uber of X” are working hard to change consumer behavior in their respective fields.
The reason why platforms are so scary is…
But what makes the platform truly scary lies elsewhere.
In Uber's case, the changes it has already brought about are enormous.
The president of a San Francisco taxi company predicts the entire taxi industry will soon collapse, a prediction echoed by taxi company presidents in major cities around the world.
The price of a New York City taxi license, which was over $1.2 million, fell to nearly $300,000 in just one year (pp. 122-123).
In this context, Uber co-founder and CEO Travis Kalanick says, “We want to get to a point where using Uber becomes cheaper than owning a car.”
Ultimately, it promises a 'transportation method that can be used like water when turned on'.
This will bring about a huge change in the entire transportation industry.
Emerging technologies, such as autonomous vehicles, which are rapidly moving from the design phase to the product stage, combined with the platform model will further enhance Uber's already impressive economic model and create a cascading effect that extends beyond the taxi industry.
First, the automobile market will shrink, and as a result, ancillary businesses related to automobiles, such as insurance, loans, and parking lots, will also be affected.
Moreover, because driverless cars will be in virtually constant use, the demand for parking will decrease dramatically, freeing up millions of acres of real estate for development, freeing up roads in almost every city, and dramatically reducing pollution and congestion caused by drivers searching for parking.
This alone is huge, but Uber wants more.
Consider Kalanick's words: "If we can deliver a car to a customer in five minutes, we can deliver anything in that time frame." (p. 124)
This not only allows Uber to become a logistics and distribution company, but it also allows Uber to go one step further and become the world's largest advertising company (p. 421).
Uber, which uses rider data to gather unique insights about where users work, how and when they commute, and other behavioral aspects of their riders, can leverage this data to connect users with local businesses.
Platform Business: It's Not Too Late
Despite this situation, Korea has not even mentioned anything about the platform.
Is it because you think it's already too late? Or is it because there seems to be no room to interfere?
That could be the case.
By region, the platform is dominated by the United States, with Europe and China challenging it.
By sector, Google dominates search, Facebook with Instagram and WhatsApp dominates social media, YouTube under Google dominates video, and Amazon and eBay dominate e-commerce.
This reality is also true in finance, energy and heavy industry, agriculture, healthcare, logistics and delivery, media, retail, transportation, travel, and so on.
However, the authors of this book argue that there are still many opportunities in the platform market, as evidenced by the cases of Cohealo, Waterfind, Red Bus, and Open Table (pp. 135-136, 172-173).
Moreover, as is often the case in business, there are niche markets and cases where latecomers catch up with the leaders.
Platform business is not that different from general business.
It starts with the word platform.
The platform can be thought of simply as a marketplace – a traditional open-air market found in countless towns and cities from Africa to Europe.
How can a marketplace run smoothly? First, people need to come together.
You need to create a network.
Also, there should be active trading among the people gathered like this.
This is the network effect.
The transaction itself must be a mutually satisfactory transaction - a positive network effect.
If there are a lot of unfair transactions or negative network effects, users will leave.
Here, the latest information economics orders one more thing.
This is what is called a two-sided network.
The words are complex, but the content is simple.
In a market, producers/sellers and consumers selling products/goods should gather in an appropriate ratio.
If there are too many producers/sellers and not enough consumers, the producers/sellers will become dissatisfied and leave, and if there are too few producers/sellers and too many consumers, the consumers will become dissatisfied and leave.
Therefore, the two-sided network effect is created when the two sides, producers/sellers and consumers, increase in an appropriate proportion and in a balanced manner.
This is the core contribution of the authors of this book to information economics, and it is now taught almost compulsorily in MBA programs around the world.
The question is whether we understand digital.
However, there is a crucial difference between these marketplaces and modern platforms.
The modern platform is based on the exchange of digital data through the Internet, which is based on digital technology.
However, this digital technology greatly expands the scope, speed, convenience, and efficiency of the platform (p. 121).
A representative example is Metcalfe's law.
According to this, as the number of network participants increases, the value of the network increases exponentially.
For example, in a telephone network, if there is only one subscriber in the network, the value of that phone is zero.
Because you can't call anyone with just one phone.
An MIT professor's joke that the "Greatest Salesman in History" award should go to the person who sold the first telephone is no joke.
But the more people buy phones, the more valuable the phone becomes.
Two phones can make one connection, four phones can make six connections, 12 phones can make 66 connections, and 100 phones can make 4,950 connections.
This type of increase is called nonlinear growth or convex growth (pp. 59-60).
This is the growth pattern we see in companies like Microsoft in the 1990s, Apple and Facebook today, and Uber tomorrow.
If you don't understand this, you won't be able to understand why platform companies can achieve such tremendous growth and why their valuations are so high.
Once economies of scale are achieved…
So let's say that some platform here has built a positive two-sided network on a large enough scale to realize Metcalf's Law.
In that case, it can be said that the platform has entered a full-fledged growth trajectory.
And when this kind of growth continues, it leads to what Google Chief Economist Hal Varian and business professor Carl Shapiro, two experts who popularized the concept of network effects, call "demand economics of scale."
Once economies of scale are reached, it's extremely difficult for competitors to catch up. The platform market itself offers network effect advantages to the largest companies, driven by the efficiency of social media, demand aggregation, app development, and other phenomena where larger networks deliver greater value to users.
This was also true for the giant corporations of the industrial age.
During the industrial age, companies grew into giant corporations by achieving supply economies of scale.
However, supply economies of scale are much weaker than demand economies of scale.
For example, if a hotel chain like Hilton or Sheraton wants to expand its business, it must add more rooms and hire thousands of employees.
Conversely, Airbnb expands its business at near-zero marginal costs.
And as more freelancers join Upwork, the platform becomes more attractive to hiring companies.
Conversely, as more companies hire people through Upwork, more freelancers will turn to it (pp. 127-128).
This positive feedback loop starts accelerating platform growth at minimal cost.
Then, the platform can leverage network effects to build an open electronic ecosystem.
Here, the platform embraces hundreds, thousands, even millions of remote participants.
These ecosystems are much larger than most pipeline-based organizations and have access to more resources than traditional pipeline companies can manage.
As a result, the value created in the platform ecosystem is far greater than that created by traditional pipelines.
Therefore, companies based on internal resources are finding it increasingly difficult to compete with platform companies (pp. 128-129).
A case study book and manual for those who dream of building a platform.
"Platform Revolution" takes the form of a typical introductory book.
It starts with how platforms rule the world (Chapter 1), why large corporations are being pushed out by platform companies (Chapter 2), and then moves on to platform architecture (Chapter 3), how existing companies are responding (Chapter 4), launching (Chapter 5), revenue generation (Chapter 6), openness (Chapter 7), governance (Chapter 8), management indicators (Chapter 9), management strategy (Chapter 10), regulatory policy (Chapter 11), and the future (Chapter 12).
However, this is only to systematically convey everything about the platform. What the authors really want is to convey what difficulties platform companies must overcome to reach demand economies of scale and achieve success, and how many platform companies that have succeeded or failed so far have tried to solve those difficulties and what results they produced.
In that sense, "Platform Revolution" can be said to be a platform case study book and platform manual for those who dream of building a platform or anyone involved in platforms.
It will be up to the reader to decide how useful it is.
But just think about a few of the cases presented below.
Ultimately, you'll have a sense of how to start a platform business, how to platformize an existing business, and how to leverage the platform as a business opportunity.
There is only one thing to keep in mind during the process: YouTube appears 22 times throughout the book.
Because it covers related issues by topic.
Therefore, if you are interested in a specific platform, you have no choice but to search for it and check it out one by one. This is an inevitable part of the structure, but the authors must feel very sorry for the readers.
· Chapter 3 Architecture: The fact that Yahoo, once the leader in the search market, was pushed out by Google, which was launched four years later, is actually due to architectural weaknesses (pp. 65-66).
On the other hand, the reason Microsoft is doing well even after releasing the architectural flop that is Vista (pp. 108-109) is probably because of the power of Windows and Office.
· Chapter 4: Disruptive Innovation: After the advent of the Internet, the prevailing expectation was that intermediaries would disappear.
However, the emergence of platforms has created a new business called re-brokerage or re-brokerage (pp. 136-138).
The platform is also integrating the market itself.
Red Bus would be a representative example (pp. 139, 173).
· Chapter 5 Launch Related: In Uber's case, based on the position that producers can only be created when there are consumers, the company focused all of the money it received as initial investment on giving away $30 free rides (page 61).
Swiss Post has distributed iPads en masse to transform itself into a digital messaging platform (pp. 61-65).
· Chapter 6: Monetization: Dribble does not charge any money except when using the Dribble recruiting site, due to concerns that this could weaken the network effect (pp. 208-210).
Facebook has come under fire for changing its policy to limit the reach of all brands on its platform, except those that pay extra for access to more users.
Nevertheless, Facebook was able to endure thanks to its enormous scale and powerful network effects (p. 213).
· Chapter 7 Openness: Facebook was still lagging behind MySpace until 2006.
However, by opening the Facebook platform to developers in 2007 and building a developer ecosystem, Facebook was able to secure a clear advantage over MySpace (pp. 229-231).
Apple, on the other hand, kicked out Google Maps from its mobile platform and launched its own map (p. 251).
· Chapter 8 Governance: Stack Overflow, the most popular programming Q&A community, increases users' contributions by awarding points based on their contributions and providing voting rights or the right to see fewer ads based on the points earned (page 278).
On the other hand, on dating platforms, explicitly stating wrongdoing actually encourages wrongdoing, so feedback on wrongdoing is sometimes intentionally delayed (p. 279).
· Chapter 9 Management Metrics: Fiber, a graphics and design platform, measures the number of interactions.
Airbnb tracks the number of nights booked.
Upwork measures interactions based on the number of hours worked by a specific freelancer, while Clarity, a consulting platform, measures interactions based on the number of phone calls between experts and information requesters (p. 319).
· Chapter 10: Management Strategy: Apple prevented platform multi-homing by blocking Adobe Flash compatibility.
Alibaba drove advertisers to Alibaba by making it impossible to search on Baidu (pp. 348-351).
Forbes Book of the Year / '800 CEO Leads' Bestseller
The Fourth Industrial Revolution: Ultimately, Platforms Are the Key
Everyone is shouting about the 4th industrial revolution.
The government continues to lead the way and companies are endlessly repeating it like a refrain here and there.
Books about the Fourth Industrial Revolution have been long-term bestsellers in bookstores, and most books predicting the future emphasize their connection to the Fourth Industrial Revolution.
Of course, the Fourth Industrial Revolution is important.
However, what the Fourth Industrial Revolution pursues is not just new technologies such as artificial intelligence (AI), the Internet of Things (IoT), cloud computing, big data, mobile, 3D printing, robotics, biotechnology, and nanotechnology.
The Fourth Industrial Revolution is a revolution in which these technologies are combined to make things intelligent by connecting all products and services to a network, achieving hyperconnectivity and superintelligence, and based on this, it will have a wider scope, faster speed, and greater impact than previous industrial revolutions.
But who is responsible for this hyperconnectivity? Who utilizes this hyperintelligence? Ultimately, it's the platform.
Global companies such as General Electric (GE), Sony, Microsoft, Haier, Disney, Walmart, Nike, and Under Armour, as well as large agricultural machinery manufacturer John Deere and 126-year-old spice and seasoning retailer McCormick Foods, are all desperately trying to introduce platform methods to their businesses in various ways (pp. 34, 143-144, 430). That is why Sangeet Paul Choudary, co-author of this book, founder of Platform Thinking Labs, visiting entrepreneur at INSEAD Business School, and selected for the Thinkers50 Radar, a ranking of global management thinkers in 2016, advises, “The protagonists of the Fourth Industrial Revolution will be those who build or utilize platforms.”
There is no platform for Korea's Fourth Industrial Revolution.
On the other hand, Korea makes no mention of the platform.
Marshall W., two authors who have studied platform businesses for over 20 years since the dot-com bubble burst in the late 1990s, are recognized as the world's leading experts in the field of information economics, having played a key role in the development of network effects and two-sided network theories, which are now considered essential courses in MBA programs around the world.
Van Alstyne and Jeffrey G.
To the extent that Parker expressed concern about Korea's competitiveness in the platform ecosystem (pp. 17-18).
The authors cautiously cite Chinese examples in this regard.
Line, developed by Naver and the first major messaging platform to emerge in Asia, was quickly overtaken by WeChat.
WeChat's growth doesn't stop there.
WeChat is no longer just a mobile app; it's an ecosystem.
It includes group chats, videos, photos, and even shopping payments on SNS.
In fact, it provides various apps like Google Android or Apple iOS.
Moreover, China's Tencent and Alibaba have achieved rapid growth, reaching the 12th and 15th largest market capitalizations in 2016, respectively. This is truly remarkable, considering that it took decades for American companies to catch up with British and German competitors in industries like steel and heavy machinery, and 30 years for Japanese upstarts after World War II to seize control of the American-dominated automobile and electronics markets.
The business landscape itself has changed since the advent of platforms.
Platform companies have long attracted global attention simply for their rapid growth.
As recently as 2006, Microsoft was the only platform company among the world's top 10 companies by market capitalization.
However, in 2016, 10 years later, Apple, Google, and Microsoft ranked 1st to 3rd, while Amazon and Facebook ranked 6th and 7th.
In the past 10 years, platform companies have taken over half of the world's top 10 companies.
The units of wealth created in the process are of a different dimension.
Instagram, with only 13 employees, was sold to Facebook for $1 billion.
WhatsApp is more.
It had 50 employees and was sold to Facebook for $19 billion.
Naturally, people and companies have no choice but to use 'platform' and 'platform'.
But there is another reason why the platform is important.
First, the platform is changing the business landscape itself (pp. 159-160).
For example, before the emergence of platforms, existing large corporations had an absolute advantage in business.
This is because they have abundant talent, enormous resources, and a loyal customer base.
But now these things are becoming obstacles.
In traditional business environments dominated by products and pipelines, there was time to observe and adapt to emerging external competitors, allowing large companies to adapt to relatively slow change through a leisurely process of strategic planning, goal setting, self-evaluation, and course correction on an annual, or at best, quarterly, basis.
But in a world of platforms dominated by networks that interact in rapid and unpredictable ways, markets change rapidly, and customer expectations change even faster.
Therefore, the management system must also change accordingly.
In that process, the advantages created by a company's size, experience, and resources are no longer important.
Now, startups are realizing that the rules of the game have shifted from a battle for resources to a battle for networks, and that their flexibility and ability to pivot quickly actually give them an advantage.
People's lifestyles have changed dramatically.
The emergence of the platform world has also brought about dramatic changes in consumer behavior.
Millions of users now use products and services in ways unimaginable just a few years ago, as journalist Jason Tanz puts it (pp. 130-131):
We ride in strangers' cars (Lyft, Sidecar, Uber), host strangers in our spare rooms (Airbnb), leave our dogs in strangers' homes (DogBaby, Rover), and eat at strangers' tables (Pistly).
We also lend them our cars (RelayRise, Getaround), boats (BoatBound), houses (HomeAway) and various tools we use (Zillock).
We entrust our precious possessions, our personal experiences, and even our very lives to complete strangers.
Until recently, this behavior would have been considered either very dangerous or very strange.
But these days, it is an all too familiar practice.
Building on this foundation, a number of new platform companies that now call themselves the “Uber of X” are working hard to change consumer behavior in their respective fields.
The reason why platforms are so scary is…
But what makes the platform truly scary lies elsewhere.
In Uber's case, the changes it has already brought about are enormous.
The president of a San Francisco taxi company predicts the entire taxi industry will soon collapse, a prediction echoed by taxi company presidents in major cities around the world.
The price of a New York City taxi license, which was over $1.2 million, fell to nearly $300,000 in just one year (pp. 122-123).
In this context, Uber co-founder and CEO Travis Kalanick says, “We want to get to a point where using Uber becomes cheaper than owning a car.”
Ultimately, it promises a 'transportation method that can be used like water when turned on'.
This will bring about a huge change in the entire transportation industry.
Emerging technologies, such as autonomous vehicles, which are rapidly moving from the design phase to the product stage, combined with the platform model will further enhance Uber's already impressive economic model and create a cascading effect that extends beyond the taxi industry.
First, the automobile market will shrink, and as a result, ancillary businesses related to automobiles, such as insurance, loans, and parking lots, will also be affected.
Moreover, because driverless cars will be in virtually constant use, the demand for parking will decrease dramatically, freeing up millions of acres of real estate for development, freeing up roads in almost every city, and dramatically reducing pollution and congestion caused by drivers searching for parking.
This alone is huge, but Uber wants more.
Consider Kalanick's words: "If we can deliver a car to a customer in five minutes, we can deliver anything in that time frame." (p. 124)
This not only allows Uber to become a logistics and distribution company, but it also allows Uber to go one step further and become the world's largest advertising company (p. 421).
Uber, which uses rider data to gather unique insights about where users work, how and when they commute, and other behavioral aspects of their riders, can leverage this data to connect users with local businesses.
Platform Business: It's Not Too Late
Despite this situation, Korea has not even mentioned anything about the platform.
Is it because you think it's already too late? Or is it because there seems to be no room to interfere?
That could be the case.
By region, the platform is dominated by the United States, with Europe and China challenging it.
By sector, Google dominates search, Facebook with Instagram and WhatsApp dominates social media, YouTube under Google dominates video, and Amazon and eBay dominate e-commerce.
This reality is also true in finance, energy and heavy industry, agriculture, healthcare, logistics and delivery, media, retail, transportation, travel, and so on.
However, the authors of this book argue that there are still many opportunities in the platform market, as evidenced by the cases of Cohealo, Waterfind, Red Bus, and Open Table (pp. 135-136, 172-173).
Moreover, as is often the case in business, there are niche markets and cases where latecomers catch up with the leaders.
Platform business is not that different from general business.
It starts with the word platform.
The platform can be thought of simply as a marketplace – a traditional open-air market found in countless towns and cities from Africa to Europe.
How can a marketplace run smoothly? First, people need to come together.
You need to create a network.
Also, there should be active trading among the people gathered like this.
This is the network effect.
The transaction itself must be a mutually satisfactory transaction - a positive network effect.
If there are a lot of unfair transactions or negative network effects, users will leave.
Here, the latest information economics orders one more thing.
This is what is called a two-sided network.
The words are complex, but the content is simple.
In a market, producers/sellers and consumers selling products/goods should gather in an appropriate ratio.
If there are too many producers/sellers and not enough consumers, the producers/sellers will become dissatisfied and leave, and if there are too few producers/sellers and too many consumers, the consumers will become dissatisfied and leave.
Therefore, the two-sided network effect is created when the two sides, producers/sellers and consumers, increase in an appropriate proportion and in a balanced manner.
This is the core contribution of the authors of this book to information economics, and it is now taught almost compulsorily in MBA programs around the world.
The question is whether we understand digital.
However, there is a crucial difference between these marketplaces and modern platforms.
The modern platform is based on the exchange of digital data through the Internet, which is based on digital technology.
However, this digital technology greatly expands the scope, speed, convenience, and efficiency of the platform (p. 121).
A representative example is Metcalfe's law.
According to this, as the number of network participants increases, the value of the network increases exponentially.
For example, in a telephone network, if there is only one subscriber in the network, the value of that phone is zero.
Because you can't call anyone with just one phone.
An MIT professor's joke that the "Greatest Salesman in History" award should go to the person who sold the first telephone is no joke.
But the more people buy phones, the more valuable the phone becomes.
Two phones can make one connection, four phones can make six connections, 12 phones can make 66 connections, and 100 phones can make 4,950 connections.
This type of increase is called nonlinear growth or convex growth (pp. 59-60).
This is the growth pattern we see in companies like Microsoft in the 1990s, Apple and Facebook today, and Uber tomorrow.
If you don't understand this, you won't be able to understand why platform companies can achieve such tremendous growth and why their valuations are so high.
Once economies of scale are achieved…
So let's say that some platform here has built a positive two-sided network on a large enough scale to realize Metcalf's Law.
In that case, it can be said that the platform has entered a full-fledged growth trajectory.
And when this kind of growth continues, it leads to what Google Chief Economist Hal Varian and business professor Carl Shapiro, two experts who popularized the concept of network effects, call "demand economics of scale."
Once economies of scale are reached, it's extremely difficult for competitors to catch up. The platform market itself offers network effect advantages to the largest companies, driven by the efficiency of social media, demand aggregation, app development, and other phenomena where larger networks deliver greater value to users.
This was also true for the giant corporations of the industrial age.
During the industrial age, companies grew into giant corporations by achieving supply economies of scale.
However, supply economies of scale are much weaker than demand economies of scale.
For example, if a hotel chain like Hilton or Sheraton wants to expand its business, it must add more rooms and hire thousands of employees.
Conversely, Airbnb expands its business at near-zero marginal costs.
And as more freelancers join Upwork, the platform becomes more attractive to hiring companies.
Conversely, as more companies hire people through Upwork, more freelancers will turn to it (pp. 127-128).
This positive feedback loop starts accelerating platform growth at minimal cost.
Then, the platform can leverage network effects to build an open electronic ecosystem.
Here, the platform embraces hundreds, thousands, even millions of remote participants.
These ecosystems are much larger than most pipeline-based organizations and have access to more resources than traditional pipeline companies can manage.
As a result, the value created in the platform ecosystem is far greater than that created by traditional pipelines.
Therefore, companies based on internal resources are finding it increasingly difficult to compete with platform companies (pp. 128-129).
A case study book and manual for those who dream of building a platform.
"Platform Revolution" takes the form of a typical introductory book.
It starts with how platforms rule the world (Chapter 1), why large corporations are being pushed out by platform companies (Chapter 2), and then moves on to platform architecture (Chapter 3), how existing companies are responding (Chapter 4), launching (Chapter 5), revenue generation (Chapter 6), openness (Chapter 7), governance (Chapter 8), management indicators (Chapter 9), management strategy (Chapter 10), regulatory policy (Chapter 11), and the future (Chapter 12).
However, this is only to systematically convey everything about the platform. What the authors really want is to convey what difficulties platform companies must overcome to reach demand economies of scale and achieve success, and how many platform companies that have succeeded or failed so far have tried to solve those difficulties and what results they produced.
In that sense, "Platform Revolution" can be said to be a platform case study book and platform manual for those who dream of building a platform or anyone involved in platforms.
It will be up to the reader to decide how useful it is.
But just think about a few of the cases presented below.
Ultimately, you'll have a sense of how to start a platform business, how to platformize an existing business, and how to leverage the platform as a business opportunity.
There is only one thing to keep in mind during the process: YouTube appears 22 times throughout the book.
Because it covers related issues by topic.
Therefore, if you are interested in a specific platform, you have no choice but to search for it and check it out one by one. This is an inevitable part of the structure, but the authors must feel very sorry for the readers.
· Chapter 3 Architecture: The fact that Yahoo, once the leader in the search market, was pushed out by Google, which was launched four years later, is actually due to architectural weaknesses (pp. 65-66).
On the other hand, the reason Microsoft is doing well even after releasing the architectural flop that is Vista (pp. 108-109) is probably because of the power of Windows and Office.
· Chapter 4: Disruptive Innovation: After the advent of the Internet, the prevailing expectation was that intermediaries would disappear.
However, the emergence of platforms has created a new business called re-brokerage or re-brokerage (pp. 136-138).
The platform is also integrating the market itself.
Red Bus would be a representative example (pp. 139, 173).
· Chapter 5 Launch Related: In Uber's case, based on the position that producers can only be created when there are consumers, the company focused all of the money it received as initial investment on giving away $30 free rides (page 61).
Swiss Post has distributed iPads en masse to transform itself into a digital messaging platform (pp. 61-65).
· Chapter 6: Monetization: Dribble does not charge any money except when using the Dribble recruiting site, due to concerns that this could weaken the network effect (pp. 208-210).
Facebook has come under fire for changing its policy to limit the reach of all brands on its platform, except those that pay extra for access to more users.
Nevertheless, Facebook was able to endure thanks to its enormous scale and powerful network effects (p. 213).
· Chapter 7 Openness: Facebook was still lagging behind MySpace until 2006.
However, by opening the Facebook platform to developers in 2007 and building a developer ecosystem, Facebook was able to secure a clear advantage over MySpace (pp. 229-231).
Apple, on the other hand, kicked out Google Maps from its mobile platform and launched its own map (p. 251).
· Chapter 8 Governance: Stack Overflow, the most popular programming Q&A community, increases users' contributions by awarding points based on their contributions and providing voting rights or the right to see fewer ads based on the points earned (page 278).
On the other hand, on dating platforms, explicitly stating wrongdoing actually encourages wrongdoing, so feedback on wrongdoing is sometimes intentionally delayed (p. 279).
· Chapter 9 Management Metrics: Fiber, a graphics and design platform, measures the number of interactions.
Airbnb tracks the number of nights booked.
Upwork measures interactions based on the number of hours worked by a specific freelancer, while Clarity, a consulting platform, measures interactions based on the number of phone calls between experts and information requesters (p. 319).
· Chapter 10: Management Strategy: Apple prevented platform multi-homing by blocking Adobe Flash compatibility.
Alibaba drove advertisers to Alibaba by making it impossible to search on Baidu (pp. 348-351).
GOODS SPECIFICS
- Date of issue: June 9, 2017
- Page count, weight, size: 512 pages | 590g | 148*217*35mm
- ISBN13: 9788960515987
- ISBN10: 8960515981
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