In the following post, D’Amore-McKim School of Business Jean C. Tempel Professor of Entrepreneurship and Innovation Fernando Suarez examines the history and future of technological platforms and their impact on the business sector.
The last 10 years could well be called the decade of platforms in the business world. Platform firms and platform business models have emerged left and right, spread rapidly, and today they represent a significant share of the employment, capitalization and growth in our global economy. A platform can be broadly defined as a good or system that provides a technological architecture that allows different types of users and complementary business partners (often called “complementors”) to connect and benefit from the platform’s base functionality. This broad definition encompasses very different firms and systems such as Amazon, Uber, Google, Apple-iTunes, Airbnb, and Facebook.
The “early” platforms (those that started in the mid-late 1990s to early 2000s) connected different stakeholders who wanted to find, buy, sell, or advertise physical products, intangibles, or services. Good examples of this are Amazon and Facebook. These platforms served as a nexus for a dispersed array of players that, without the platform, would have had a hard time connecting to interact or exchange. As platform businesses have become more established, other special types of platforms have begun to emerge, bringing with them their own buzzwords or category labels. For instance, the so-called “sharing economy” can be considered a specialized form of platform business by which the system that interconnects the different users and complementors is aimed at sharing (renting, most of the time) different types of underutilized assets that were not part of the formal economy before the platform. Airbnb, for instance, allows house dwellers to rent part of their house or flat (e.g. a room) to people that need a place to stay in that location.
One of the newest kids on the platform block is IoT, or the “Internet of Things.” What is interesting about IoT is the fact that, unlike the other platform examples above, the “stakeholders” being connected are actually not only people or organizations, but also technology objects. With the mass-deployment of artificial intelligence embedded in these objects (smart-thermostats, smart-lights, smart-you-name-it), you can bet on these new tech stakeholders to make more and more decisions without human intervention. For instance, Google’s Nest has already endowed their smart devices with intelligence and power for the smart-thermostat to shut down your boiler if the smart-CO2-sensor detects high levels of CO2. By the way, Google Nest is today in a major competition against Apple Homekit, Amazon’s Alexa Smart Home, and other major players and startups for the control of the platform what will reign in your house. I am currently investigating the evolution of this emerging market space together with a post-doctoral fellow at Northeastern University. Another research project, with a doctoral student, focuses on a different platform: the Apple iOS app store. Our goal with these projects is to develop a deeper and more nuanced understanding of the competitive dynamics that take place in the platform-driven industries that are becoming ubiquitous in our business landscape.
For many people, these changes can sound scary. However, history has shown that technological change often brings fear in people who are less prepared to embrace change in their routines or approaches. More important for our readers here is that technological change also brings opportunities for those players who can visualize where the trends are taking us and make the right decisions and investments today to be in a better position tomorrow. I have taught seminars for many established companies that are trying to figure out the implications of these platform-driven changes for their own firms. It is fascinating to help them discover that even established businesses can often be “platformized” to some degree by strategically selecting which platform elements to incorporate in their business models. For instance, Northeastern’s D’Amore-McKim School of Business recently formed a partnership with CIO to respond to these evolving business needs through executive education. The resulting programs feature curriculum designed specifically to help tech leaders gain the business knowledge needed to propel companies forward during this time of technological business disruption.
Learn more about this strategic partnership, which includes two new executive education programs for technology executives: MBA Fundamentals for Tech Professionals and Beyond the MBA Insights for Tech Executives, here.
There is little doubt that platforms and their associated business models are here to stay, at least for the foreseeable future. The question is, what is your company, or what are you as an individual for that matter, doing about it?