The Refresher Programme talk by associate professor Esteve Almirall, (Phd 10) on October 5th examined why platforms are so competitive and how they can be incorporated into companies and traditional channels.
To put his analysis into context, Almirall gave several examples of platforms – Uber, Facebook, Alibaba and Airbnb – which are successful but have no product of their own. Uber has no taxis, Facebook does not create any content, Alibaba has no stock and Airbnb does not have a single room.
The world of platforms is completely different from the traditional business world, it operates and thinks along different rules. But how do platforms compete and grow and work? What is different about their strategy? These were the questions that Almirall aimed to answer.
How platforms compete
Business schools usually use value chain analysis to determine the value created by companies, but the value of platforms is created not inside but outside them, and the ones who add no value are the third parties. ''Logistics and production processes are different in the digital environment. The cost of making a new digital copy is zero and there are no intermediaries, so scalability is quick and easy. One of the problems of scaling up is how to mobilise new resources. If you can mobilise resources that already exist, your only hurdle is your ability to convince the people they belong to,'' he said.
Innovation is different too because platforms use the reputation of users to get innovation moving without needing to make any investment. ''Users choose what works best, so because we want third parties to provide the best possible service, we must incentivise user reputations by thinking about how to achieve a social impact in order to go further,'' added Almirall.
How platforms grow
In a short space of time, enormous companies have become small compared with new platforms due to the vast scalability of the latter.
Companies used to grow by launching marketing campaigns and spending vast amounts of money, giving the impression that everything costs a lot until a point where the product takes off. ''We are used to thinking about costs linearly, which gives the impression that from a certain point onwards everything is very easy. But in the case of platforms, the product not only causes value to increase when it has more users, it also increases value for third parties. This is the indirect fallout which, for example, Google creates for advertisers, markets, operators and sometimes even competitors. Likewise, in the case of Facebook, more users means more content, more fan pages, more apps, more games and more events but also an indirect increase in the network effect,'' he explained.
So demand is directly or indirectly driven by the network effect with new services for both users and providers, enabling platforms to access new market niches at zero cost.
Insisting on the importance of zero cost, Almirall added that the market is a matter of matching products or services to their buyers or users, but in the case of platforms, matching can be achieved by software. ''This matching is not done by vendors, so the marginal cost is almost zero, and creating value at almost zero cost allows us scale up as fast as we like, at speeds never seen before and which are getting faster and faster,'' said the speaker.
ESADE Alumni invites you to a talk in the Refresher Programme entitled ''Platforms vs traditional pipelines. Who wins and why?'' by associate professor Esteve Almirall (PhD 10).
In recent years we have seen how platform-based industries are dominating entire sectors and becoming the most valuable companies in the world. The largest hotel chain is now Airbnb, the top retailer is Amazon or Alibaba, the largest car hire company is Uber…
This talk will take an in-depth look at what makes platforms so competitive and how regular businesses, pipelines, can incorporate these features. It will also consider whether there are limits or boundaries that prevent platforms from succeeding in certain sectors and what traditional sectors can do to out-perform them.
Esteve Almirall holds a PhD in Management Science (ESADE), MRes in Management Science, MCIS, DEA and MRes in Artificial Intelligence (UPC). Most of his career has focussed on information technologies, particularly in consulting, banking and finance where he worked for more than 20 years at executive and board level positions in IS, Organization and Marketing. As an entrepreneur he has actively participated in and founded several start-ups in this field. Esteve also has an MBA, PDD (IESE), Diploma in Marketing (UC Berkeley) and GCPCL Diploma (Harvard B.S.).
Esteve is passionate about the crossroad between technology and innovation and how IT is changing the way we innovate from the individual inventor to ecosystems, from owing and buying innovations to benefiting from innovations created by others by aligning incentives and motivations. As a result he is very active in fields such as smart cities, innovation ecosystems, innovation in the public sector and user innovation (particularly living labs). He has coordinated several large EU competitive projects and been head researcher in more than ten of them. He often works on and organises workshops, open data challenges and conferences in these areas.
Esteve is a well-known speaker in fields such as open innovation in the public sector, smart cities and living labs in Europe, the US and Asia. He also serves as a World Bank consultant and is a council member of the European Network of Living Labs, a member of the Open Innovation Policy and Strategy Group of the European Commission, and is an expert for several organizations, cities and the European Commission.
Esteve has more than 30 publications in journals and conference proceedings, including top-level journals and well-known magazines such as the Harvard Business Review. He has been an advisor for several PhD and Master dissertations.
Specialist areas: Open innovation. Innovation. Innovation policy
User-driven innovation. Living labs
Innovation management. Innovation & strategy
Artificial intelligence. Recommender systems. Profiling
Innovation markets. Innovation jams. Crowdsourcing
Strategic management of information technologies
Business models. Information Technology & Innovation
For further information:
For members only!
Presentation used by Esteve Almirall