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. (A)</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. (C)</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. (C)</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. (C)</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. (C)</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. (D)</p> Signup and view all the answers

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

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

What key resource is highlighted in the Udemy platform?

<p>The network of producers and consumers. (C)</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. (B)</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. (A)</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. (C)</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. (A)</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. (A)</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. (B)</p> Signup and view all the answers

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

<p>Netflix (D)</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. (D)</p> Signup and view all the answers

How do platforms create value for both consumers and producers?

<p>By orchestrating relationships between them. (A)</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. (B)</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. (C)</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. (A)</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. (D)</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. (D)</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. (A)</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. (C)</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. (A)</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. (A)</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. (B)</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. (B)</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. (C)</p> Signup and view all the answers

Flashcards

Platform Definition

A business facilitating direct interactions between distinct customer types; involving different stakeholders with varying roles and value exchanges, enabled by platform-facilitated transactions.

Platform Characteristics

Platforms connect varied stakeholders who exchange value; interactions happen through platform and couldn't occur without it.

Disrupting Role of Platforms

Platforms reshape competition by connecting producers and consumers in a novel way.

Udemy as a Platform

Udemy is an example where instructors and learners interact using a digital platform to provide and receive valuable learning content.

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Platform Resources

Resources are the assets that enable platform operation and value creation.

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Platform Value Creation

A platform's value comes from enabling interactions among different stakeholders, which creates new processes.

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Network Effect

A platform's value increases as more participants join, creating a positive feedback loop.

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Platform Governance

Rules and regulations governing how a platform operates, ensuring smooth interactions. This element is critical for platform viability.

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Sharing Economy Disruption

New platforms are changing how businesses operate, often by connecting consumers and providers directly.

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Platform Strategic Response

Companies facing disruption from sharing platforms need to adjust their strategies to survive and compete.

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Network Effect

The value of a platform increases as more people use it, creating a positive feedback loop.

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Platform Governance

The rules and policies to manage platform activity, ensuring a fair and smooth experience for all users.

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Differentiation Strategy

A strategy to offer unique or special features to make the platform stand out from competitors.

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Network Effect

Larger networks create more value for users, as more users attract further users, leading to a virtuous cycle of growth.

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Platform Orchestration

Managing relationships between producers (e.g., instructors) and consumers (e.g., learners) on a platform to maximize value for both.

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Scalable Business Model

A business model where the cost of adding more customers is relatively low, allowing for significant growth.

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Platform Competitive Advantage

Advantages gained from the network effect, creating value for both producers and consumers using a platform.

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Hub Firm

A firm that dominates a market through its network effect, attracting substantial users to its platform.

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Platform Asset Light

A platform strategy needing few physical assets, often allowing for higher profitability compared to traditional businesses.

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Network as Asset

The community and resources of platform members are its primary value source, driven by network effects.

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Access Control

Managing who joins and participates on a platform to maintain the positive network effect.

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Platform Governance

The rules and policies a platform uses to manage participants' actions and ensure quality for everyone.

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Platform Value Maximization

The need for platforms to focus on increasing the overall benefit for all users in the ecosystem.

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Platform Growth

Platforms can rapidly increase in size and influence.

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Winner-Takes-All Market

A market structure where one dominant player secures a significant market share, marginalizing competitors.

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Platform Competition

Intense rivalry among platforms for users and market share.

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Sharing Economy Platform

A platform connecting individuals to share resources or services temporarily.

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Two-Sided Platform

A platform connecting two distinct groups, like buyers and sellers.

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Udemy Risk

Potential dangers associated an online education platform.

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Hybrid Business Model

A business model combining elements of different models.

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Customer Lock-in

Making it difficult for customers to switch or stop using a platform.

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Network Effect

The value of a platform grows as more users join.

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Service Quality

The level of excellence of support and services provided by platform.

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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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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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