Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You QUOTES

1 " Because the bulk of a platform's value is created by its community of users, the platform business must shift its focus from internal activities to external activities. In the process the firm inverts-it turns inside out, with functions from marketing to information technology to operations to strategy all increasingly centering on people, resources, and functions that exist outside the business, complementing or replacing those that exists inside a traditional business. "

― Geoffrey G. Parker, , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

2 " In today’s hypercompetitive environment enabled by technology, ownership of infrastructure no longer provides a defensible advantage. Instead, flexibility provides the crucial competitive edge, competition is perpetual motion, and advantage is evanescent. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

3 " De-linking assets from value. The most familiar platform examples—Airbnb, Uber, Amazon—come from the business-to-consumer (B2C) arena. How do you convert a product to a platform in the business-to-
business (B2B) arena? Many corporations own massive fixed assets like power generation plants, magnetic resonance imaging (MRI) machines, or tracts of farmland. How do you build platforms around those? The answer: you de-link ownership of the physical asset from the value it creates. This allows the use of the asset to be independently traded and applied to its best use—that is, the use that creates the greatest economic value—rather than being restricted to uses specific to the owner. As a result, efficiency and value rise dramatically. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

4 " The derisive term bloatware has been coined to describe software systems that have become complicated, slow, and inefficient through thoughtless accretion of features. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

5 " The participants. There are fundamentally two participants in any core interaction: the producer, who creates value, and the consumer, who consumes value. When defining the core interaction, both roles need to be explicitly described and understood. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

6 " However, simplicity is a virtue when developing metrics for your platform business. Overcomplex metrics make management less effective by introducing noise, discouraging frequent analysis, and distracting from the handful of data points that are most significant. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

7 " The value unit. As we’ve noted, every interaction starts with an exchange of information that has value to the participants. Thus, in virtually every case, the core interaction starts with the creation of a value unit by the producer. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

8 " The filter. The value unit is delivered to selected consumers based on filters. A filter is an algorithmic, software-based tool used by the platform to enable the exchange of appropriate value units between users. A well-designed filter ensures that platform users receive only value units that are relevant and valuable to them; a poorly-designed filter (or no filter at all) means users may be flooded with units they find irrelevant and valueless, which may drive them to abandon the platform. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

9 " every successful platform must address the challenge of effective curation. We’ll "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

10 " When designing a platform, your first and most important job is to decide what your core interaction will be, and then to define the participants, the value units, and the filters to make such core interactions possible. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

11 " The crucial role of the value unit. As this description of the core interaction shows, value units play a crucial role in the workings of any platform. Yet, in most cases, platforms don’t create value units; instead, they are created by the producers who participate in the platform. Thus, platforms are “information factories” that have no control over inventory. They create the “factory floor” (that is, they build the platform infrastructure within which value units are produced). They can foster a culture of quality control (by taking steps to encourage producers to create value units that are accurate, useful, relevant, and interesting to consumers). They develop filters that are designed to deliver valuable units while blocking others. But they have no direct control over the production process itself—a striking difference from the traditional pipeline business. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

12 " In recent years, more and more businesses are shifting from the pipeline structure to the platform structure. In this shift, the simple pipeline arrangement is transformed into a complex relationship in which producers, consumers, and the platform itself enter into a variable set of relationships. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

13 " Platforms must perform three key functions in order to encourage a high volume of valuable core interactions, which we summarize as pull, facilitate, and match. The platform must pull the producers and consumers to the platform, which enables interactions among them. It must facilitate their interactions by providing them with tools and rules that make it easy for them to connect and that encourage valuable exchanges (while discouraging others). And it must match producers and consumers effectively by using information about each to connect them in ways they will find mutually rewarding. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

14 " In some cases, the growth of a platform can be facilitated by an effect we call side switching. This occurs when users of one side of the platform join the opposite side—for example, when those who consume goods or services begin to produce goods and services for others to consume. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

15 " One kind of feedback loop is the single-user feedback loop. This involves an algorithm built into the platform infrastructure that analyzes user activity, draws conclusions about the user’s interests, preferences, and needs, and recommends new value units and connections that the user is likely to find valuable. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

16 " In a multi-user feedback loop, activity from a producer is delivered to relevant consumers, whose activity in turn is fed back to the producer. When effective, this creates a virtuous cycle, encouraging activity on both sides and ultimately strengthening network effects. Facebook’s news feed is a classic multiuser feedback loop. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

17 " Author Steve Denning has highlighted the weakness of Porter’s assumption that the purpose of strategy is to avoid competition. Denning pointed instead to management guru Peter Drucker’s dictum that the purpose of business is “to create a customer. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

18 " Having studied both the possible risks and the likely rewards, the Guardian’s managers decided both to “open in” the website, by bringing in more data and applications from the outside, and to “open out” the site, by enabling partners to create products using Guardian content and services on other digital platforms. To work toward the “open out” goal, the Guardian created a set of APIs that made its content easily available to external parties. These interfaces include three different levels of access. The lowest access tier, which the paper calls Keyless, allows anyone to use Guardian headlines, metadata, and information architecture (that is, the software and design elements that structure Guardian data and make it easier to access, analyze, and use) without requesting permission and without any requirement to share revenues that might be generated. The second access tier, Approved, allows registered developers to reprint entire Guardian articles, with certain time and usage restrictions. Advertising revenues are shared between the newspaper and the developers. The third and highest access tier, Bespoke, is a customized support package that provides unlimited use of Guardian content—for a fee. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

19 " Other factors strengthen or weaken a platform’s ability to pull users. One is the value of the currency available for exchange on the platform. As we’ve discussed, some platform exchanges are paid for in intangible forms of currency: attention, popularity, influence, and so on. Thus, one form of network effect is the increased attractiveness of the currency available on a platform that is growing in size. Because Twitter has achieved such an enormous user base, a successful tweet is likely to attract far more currency in the form of attention than the same message disseminated on some other platform. So Twitter’s huge size enlarges its pull, encouraging still more participant activity and making a competitive challenge to the platform increasingly unlikely. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You

20 " Yet all are operating businesses that share the fundamental platform DNA—they all exist to create matches and facilitate interactions among producers and consumers, whatever the goods being exchanged may be. "

― , Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You