Digital Platforms Strategies - Session 4
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Digital Platforms Strategies - Session 4

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Questions and Answers

What is a key characteristic of platforms in the sharing economy?

  • They prioritize physical storefronts over online presence.
  • They do not require user interaction for transactions.
  • They leverage a positive network effect to increase growth. (correct)
  • They rely solely on traditional marketing techniques.

    • Which strategic response involves collaborating with other businesses in the face of platform disruption?

  • Strengthen business as usual
  • Step out and partner (correct)
  • Hybrid and expand
  • Invest learn-act

    • What are incumbent companies advised to do to deal with the threat of platforms?

  • Adopt a flexible strategy and adapt to changes. (correct)
  • Completely abandon traditional business models.
  • Focus solely on online transactions.
  • Increase investment in physical assets.

    • What is an important aspect of creating a successful platform?

    <p>Establishing a network effect by developing both sides of the platform.</p> Signup and view all the answers

    Which of the following is a challenge faced by platforms in the sharing economy?

    <p>Need for setting rules to manage access and activities.</p> Signup and view all the answers

    What defines a platform in a business context?

    <p>A business that creates value by facilitating interactions between distinct types of customers.</p> Signup and view all the answers

    Which characteristic is NOT true about the stakeholders involved in a platform?

    <p>They receive the same types of value.</p> Signup and view all the answers

    What is a common strategic response of incumbent companies to the threats posed by sharing economy platforms?

    <p>Creating their own platforms or collaborating with existing ones.</p> Signup and view all the answers

    How does the network effect enhance a platform's value?

    <p>By increasing the number of participants, which enhances interaction and value creation.</p> Signup and view all the answers

    In the case study of Udemy, who are considered the main producers?

    <p>The instructors providing courses.</p> Signup and view all the answers

    What key resource is highlighted in the Udemy platform?

    <p>The network of producers and consumers.</p> Signup and view all the answers

    What disruptive role do platforms typically play in established markets?

    <p>They create new market dynamics that challenge incumbents.</p> Signup and view all the answers

    According to the platform definition, what must occur for value to be created?

    <p>Direct interactions between different parties must be facilitated.</p> Signup and view all the answers

    What is the primary reason the network effect is important for platforms?

    <p>It creates more value as more participants join.</p> Signup and view all the answers

    Which of the following statements best describes the competitive advantage of platforms like Udemy?

    <p>They are highly scalable with low marginal costs.</p> Signup and view all the answers

    Which shift is NOT mentioned as part of the move to platforms?

    <p>The shift towards minimalist user interfaces.</p> Signup and view all the answers

    What role do governance mechanisms serve within a platform?

    <p>They standardize the service and guide participant conduct.</p> Signup and view all the answers

    Which of the following is NOT an example of a hub firm?

    <p>Netflix</p> Signup and view all the answers

    What does the term 'winner take all' market refer to?

    <p>The emergence of a single firm that captures the majority share.</p> Signup and view all the answers

    How do platforms create value for both consumers and producers?

    <p>By orchestrating relationships between them.</p> Signup and view all the answers

    What is a key characteristic of platform businesses compared to traditional businesses?

    <p>They are generally lighter in assets and have higher margins.</p> Signup and view all the answers

    What is one effect of having a larger network on a platform?

    <p>It enables better matches between consumers and producers.</p> Signup and view all the answers

    What is a key characteristic of sharing economy platforms?

    <p>They facilitate peer-to-peer rental or sharing services.</p> Signup and view all the answers

    Which scenario best illustrates fierce competition among platforms?

    <p>Uber and Lyft both entering the ride-sharing market.</p> Signup and view all the answers

    What strategic approach does Udemy use to manage the risk of high customer turnover?

    <p>Developing engaging platform features for students.</p> Signup and view all the answers

    What is an example of a network effect within platform-based sharing economies?

    <p>A growing number of users attracting more users.</p> Signup and view all the answers

    How did the hybrid business model enable Udemy to cope with the risk of high development costs?

    <p>By leveraging a network of individual customers alongside business clients.</p> Signup and view all the answers

    Which challenge might arise from the relationships within participants of a platform?

    <p>Changes in power dynamics and platform ownership.</p> Signup and view all the answers

    What is a potential consequence of fierce competition among platforms?

    <p>Increased likelihood of market exit for weaker platforms.</p> Signup and view all the answers

    How can sharing economy platforms be described in terms of their interaction style?

    <p>They primarily facilitate transactions between individuals.</p> Signup and view all the answers

    What risk does lower control over service quality pose for platforms like Udemy?

    <p>A decrease in user engagement and satisfaction.</p> Signup and view all the answers

    What was a primary strategy used by platforms to achieve economic efficiency?

    <p>Encouraging competition and network effects.</p> Signup and view all the answers

    Study Notes

    Session 4: Digital Platforms Strategies

    • Digital Business - Two-year MSc
    • Course coordinator: Nabila BOUKEF Ph.D
    • Associate Professor in Information Systems and digital transformation
    • SKEMA Business School

    Course Schedule

    • Session 1: Rethinking strategy in the digital era
    • Session 2: Digital strategy formulation
    • Session 3: Strategy approaches and ambidexterity strategy
    • Session 4: Digital platforms strategies
    • Session 5: Differentiation strategies and competition in the sharing economy
    • Session 6: Digital strategy and Business process transformation
    • Session 7: Building digital capabilities and creating digital leadership
    • Session 8: Digital strategy execution in practice: Fostering innovation in the digital era

    Questions Addressed During This Session

    • What are the disrupting effects of platforms?
    • What are the characteristics of digital platforms?
    • How do incumbent companies deal with the threat of the sharing economy platforms?

    Part 2

    • Why? Analyzing the new rules of the game and opportunities enabled by digital technologies
    • What? Creating a competitive advantage with digital technologies
    • How? Digital capabilities, transforming processes, digital leadership, transforming the organization, managing the ecosystem.

    Digital Platforms Strategies

    • Session 4
    • Session 5: Differentiation
    • Network effect
    • Governance

    Outline for This Session

    • Platforms characteristics
    • The disrupting role of the platforms
    • Incumbent companies strategic response to Sharing economy platforms
    • Conclusion

    Reading

    • Zhang et al., 2018, "Established Companies' Strategic Responses to Sharing Economy Threats," MISQ executive, (17,1), pp. 24-25.
    • Täucher K. and Kietzmann, (2017)" learning from failures in the Sharing economy", MISQ executive, (16:4), pp. 253-256 (not mandatory)
    • Chassin et al., 2018, “Reasons for failure of sharing economy business," MISQ executive, (17: 3), pp. 185-199 (not mandatory)

    Platforms Characteristics

    • A platform is a business that creates value by facilitating direct interactions between two or more distinct types of customers (Rogers, 2016, p.56).
    • Different stakeholders are involved - they have different roles and contribute/receive different kinds of value.
    • Direct interactions between different parties facilitated by the platform.

    The Players in a Platform Ecosystem

    • A platform provides infrastructure and rules for a marketplace bringing together producers and consumers.
    • Creators of the platform's offerings, producers, providers, consumers.
    • Interfaces for the platform, owner, controller of platform IP, arbiter of participation.

    The Disrupting Role of Platforms

    • Case Study: Udemy

    Teamwork (Part 1)

    • What are the key resources of Udemy?
    • How does Udemy create value?
    • How does a digital platform like Udemy shape competition?

    How Does Udemy Create Value?

    • Network effect (more people = more value)
    • Orchestrating relationships between producers and consumers
    • Creating value for both consumers (learners) and producers (instructors)

    Key Competitive Advantages of a Platform like Udemy

    • Highly scalable business model (low marginal cost)
    • Speedy evolution to new markets (hybrid business model)

    The Move to Platforms Involves Three Key Shifts

    • Network of producers and consumers (community and resources)
    • Orchestrating relationships between external producers and consumers (access and governance)
    • Maximizing total ecosystem value (focus on new metrics).

    The Network Effect

    • Larger network = more value for participants
    • More people = more new people joining
    • Better consumer-producer matches

    The Winner Take-All Market

    • Small number of hub firms dominating the market
    • Examples: Alibaba, Google, Amazon, Apple, Facebook, Microsoft

    Access and Governance

    • Need to control access and participant activities
    • Need to maximize positive network effect (each new participant creates value to the network)
    • Different governance mechanisms (standardization of the service, incentives to comply)

    Platform Strategy is Different

    • Light assets, higher margins, and fast growth
    • Winner takes all markets
    • Economic efficiency
    • Higher competition between platforms

    Challenges Faced by Platforms

    • Relationships evolve (Example: Zynga)
    • Fierce competition for network effects (Example: Sidecar vs Uber & Lyft)

    Focus on the Specific Case of Platform-Based Sharing Economy

    Characteristics of the Sharing Economy Platforms

    • Two-sided or multi-sided platforms
    • Do not enable the selling and buying of goods
    • Facilitate peer-to-peer rental/sharing of resources/services (temporary access)

    Case Study Udemy: Analyzing the Risks

    Teamwork (Part 2)

    • Identify risks faced by Udemy.
    • How did the company manage these risks?
    • How did the hybrid business model enable Udemy to manage these risks better?

    Risks Faced by Udemy and How Udemy Coped

    • Higher costs of developing both market sides: development of learning content and the network of expert first
    • Lower customer lock-in: development of features that enable student engagement (learning library with interactions)
    • Imposing detailed design guidelines for instructors
    • Low control over service quality
    • Higher Competition: Development of a hybrid business model

    Main Risks Sharing Economy Platforms Face

    • Customer lock-in
    • Control over service quality
    • High competition for resources
    • Low transaction frequency
    • High cost of developing both market sides
    • Unexpected changes in legal environments

    Examples of Platform Failure

    • Homejoy, Carpooling.com, Sidecar, Stayzilla, Beepi
    • Different Countries/Industries

    Common Reasons of Failure in the Sharing Economy

    • Lack of providers
    • Insufficient market analysis
    • Trust and safety issues
    • Hidden resource requirements
    • Non-scalable technical designs
    • Unclear legal environment
    • Business termination

    Different Strategic Response Options

    • Strengthen business as usual
    • Invest learn-act
    • Step out and partner
    • Hybrid
    • Expand and compete

    Strengthen Business as Usual

    • Maintain current business model & improve products/services
    • Focus on markets where sharing economy isn't intense.

    Invest-Learn-Act

    • Invest in sharing economy to learn about business models/customer preferences
    • Improve products/services to meet customer expectations

    Step-out and Partner

    • Partner with a sharing platform from another industry to attract new customers and create value
    • Access a large scale sharing ecosystem

    Hybrid

    • Integrate platform-based sharing economy models into traditional business models

    Expand and Compete

    • Reinforce existing business models to compete with sharing economy disruptors.
    • Example, Wyndham reinforcing timeshare business model to be aligned with sharing economy aspects.

    Conclusion

    • Platform disruption
    • Positive network effects
    • Facing challenges (controlling access and activities in the platform)
    • Strategic responses
    • Strengthen business as usual
    • Invest-learn-act
    • Step out and partner
    • Hybrid
    • Expand and compete

    Takeaways

    • Positive Network effects
    • Platform challenges
    • Adapting strategies

    Competing in the Sharing Economy

    • Create a network effect (both sides of the platform)
    • Control access and governance mechanisms
    • Differentiation strategy

    What is Next?

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    Related Documents

    Session 4: Digital Platforms Strategies PDF

    Description

    Test your understanding of digital platform strategies covered in Session 4 of the Digital Business MSc program. Dive into the characteristics of digital platforms and the disruption they cause, as well as how companies can respond to the sharing economy. This quiz will challenge your knowledge of key concepts discussed in class.

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