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Platform Revolution: How Networked Markets Are Transforming the Economy--And How to Make Them Work for You Hardcover – March 28, 2016
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“Thorough and often provocative.” (Jeremy G. Philips - The Wall Street Journal)
“An authoritative guide to the role of online platforms: what they are, how they work, and what they mean for business and economics. Platform Revolution demystifies the concept by providing clear prose, insightful examples, and practical lessons.” (Hal Varian, chief economist, Google, and author of Information Rules)
“Platforms have transformed the economy over the last two decades, but the biggest effects are yet to come. Platform Revolution provides the first comprehensive framework for platform strategy and for predicting the winners and losers of future disruptions.” (Susan C. Athey, Stanford University, former chief economist, Microsoft)
“Platform Revolution is a manual for the disruption of your industry. You can either read it or try to keep it out of the hands of your competitors―present and future. I think it’s an easy call.” (Andrew McAfee, principal research scientist at MIT, coauthor of The Second Machine Age)
“Platform Revolution provides an exceptional synthesis of cutting-edge research that makes it must-reading for my MBA students. A key insight is that platform strategies can benefit all participants when they understand the underlying economics. Read the book and share it with your business partners. You’ll be glad you did.” (Erik Brynjolfsson, MIT Sloan School, coauthor of The Second Machine Age)
“In a very cohesive and comprehensive way, the authors provide deep conceptual insights and rich practical advice on platforms, the most important business organizations of our time.” (Ming Zeng, chief strategy officer, Alibaba)
“In the digital economy, platforms are transforming industries at high speed. Platform Revolution is an inspiring guide for business leaders to transform existing businesses to platform businesses.” (Jim Hagemann-Snabe, former CEO of SAP)
About the Author
Geoffrey Parker is a professor of engineering at Dartmouth College and a visiting scholar and research fellow at the MIT Initiative for the Digital Economy. Before joining academia, he held positions in engineering and finance at General Electric. He has made significant contributions to the economics of network effects as co-developer of the theory of two-sided networks. Parker's work has been supported by the Department of Energy, the National Science Foundation, and numerous corporations. Parker advises senior leaders in government and business and is a frequent speaker at conferences and industry events. He received his BS from Princeton and his MS and PhD from MIT.
Marshall W. Van Alstyne is a professor at Boston University and a visiting scholar and research fellow at the MIT Initiative on the Digital Economy. Van Alstyne is a world expert on information economics and has made fundamental contributions to IT productivity and to theories of network effects. His coauthored work on two-sided networks is taught in business schools worldwide. In addition, he holds patents in information privacy protection and on spam prevention methods. Van Alstyne has been honored with six best paper awards and National Science Foundation IOC, SGER, iCORPS, SBIR and Career Awards. He is an adviser to leading executives, a frequent keynote speaker, a former entrepreneur, and a consultant to startups and to Global 100 companies. He received his BA from Yale and his MS and PhD from MIT.
Sangeet Paul Choudary is a C-level advisor to executives globally on platform business models. He is an Entrepeneur-in-Residence at the INSEAD Business School and a Fellow at the Centre for Global Enterprise. He has been ranked among the top 30 emerging business thinkers globally by Thinkers 50. Sangeet writes the popular blog Platformed (platformed.info), and his work has been featured on leading journals and media, including the Harvard Business Review, MIT Technology Review, Sloan Management Review, the Wall Street Journal and The Economist. He is a frequent keynote speaker at leading conferences, including the G20 World Summit 2014 and the World Economic Forum events.
Top Customer Reviews
Platform Revolution has many strong points.It explains the feedback loops and network effects (positive and negative) that drive platform business dynamics, the chapter on monetization is excellent and the chapter on governance is a must read (I think I will send a copy to Vancouver's mayor). The book even has a short section on data ownership, which is likely to emerge as a major social issue over the next decade (ask yourself, why does the company I work for own my employee records, why don't I own them too!).
Platform Revolution is not perfect of course. My main complaint is the lack of useful diagrams. The book is sketch poor and I found that I had to keep a notebook and pencil beside me as I read to make sure I was following all of the interactions of forces and to give me some mnemonics to remember what I was reading. This is good in that it helped me to build up my own mental models, but I would prefer to have shared sketches that I could use in business planning with other people. I also found the characterization of the two sides of a market as 'producers' and 'consumers' limiting. This is not a useful model to describe many two-sided market interactions, as the authors themselves noticed when they talked about dating sites (dating sites are a good thing to study to learn a lot about very dynamic two-sided markets). I also found the discussion of Porter's Five Forces to be simplistic and dismissive. This seems to be an MIT thing as other people associated with MIT have the same blinkers. A more useful approach would be to look at how each aspect of the five forces gets drawn into platform markets.
There are some other good books to read on this theme. I would also recommend Platform Ecosystems by Amrit Tiwana, Matchmakers by David Evans and Modern Monopolies by Moazed and Johnson. But Platform Revolution is an excellent place to start.
Platform Revolution is best seen as a workbook of case studies on how platforms are changing the business landscape. If you approach the book from the perspective that it will tell you explicitly how to build a platform, you will be disappointed. The book is meant to inspire discussion around a new framework for building businesses, the specifics of which will be different for each platform. For reference, I am a growth equity technology investor that is highly familiar with the concepts brought up in Platform Revolution. In the interest of full disclosure, I was a collaborator with Sangeet on his prior project, Platform Scale. Regardless, I've done my best to give my objective perspective on Platform Revolution.
Chapter 1 - Welcome to the Platform Revolution - Is meant to bring the reader up to speed on the basic principles of platforms, which ones are currently operating right now at scale, and how value exchange has shifted from a linear supply chain to one that contains producers and consumers interacting in a myriad of ways. This chapter was less useful for myself, as I was already familiar with most of the concepts, but will serve the broader audience well. While I found the platform examples useful (AirBnB, Uber, etc.), the examples of individuals and how they were affected were slightly idiosyncratic and less widely applicable.
Chapter 2 - Network Effects - The authors' point about expanding the size of a market due to network effects is a potent one, and not necessarily intuitive at first. I'd encourage the reader to take some time to think about how non-linear growth in a platform is actually a feature.
Chapter 3 - Architecture - The biggest value derived from this chapter is actually quite simple, the equation of how participants, value units, and curation form a core interaction. Understanding the core "unit" of a platform, or of one you are attempting to build, is a great way to think about platform architecture.
Chapter 4 - Disruption - The greater point of delinking assets from value is a great point, and has been discussed less quantitatively at length by the media as the "sharing economy." It's worth understanding why this actually works at a micro-economic level. While its difficult to truly fault the authors on the section describing how incumbents can fight back, as it is incredibly difficult to shift your entire business model if you are an incumbent, this was the weakest section of the chapter.
Chapter 5 - Launch - Chapter 5 is most helpful for understanding how to seed your platform, but is only truly useful when combined with the "core interaction" of your platform. In order to obtain a self-sustaining platform, you need to understand both the seeding and the mechanic, without perfecting both simultaneously, your platform will leak users or dollars or fail to provide enough value altogether.
Chapter 6 - Monetization - The most important point to be had from this chapter, which I don't believe is discussed as well as it could be, is not only how can you derive revenue from your core action (which is discussed) but how can you derive profit from it. A number of platforms have generated enormous scale and the bookings to show for it, but the bottom line profits are less clear at this point in their history. This is an ongoing question in my mind as the Ubers of the world march toward potential public offerings.
Chapter 7 - Openness - This chapter is more of a corollary to launching in my opinion, and can have critical effects on the construction of the core interaction of the platform and seeding the community. This chapter is best seen as a discussion point and less of a best practice.
Chapter 8 - Governance - The basic line to debate in building a platform is how to govern and set the basic rule sets of the platform. Again, these feed into your core interaction and how quickly it can occur. Your platform must have some set of rules to protect both producers and consumers from bad actors, in this case, the best platforms have norms that are ultimately self-reinforcing by the community at large.
Chapter 9 - Metrics - Everybody loves a good metric, especially technology investors. So which metrics apply to platforms? Yet again, your metrics should primarily be measuring aspects of your core interaction, how often it is occurring, for which populations on the platform, how profitable it is, etc. But more broadly, the authors' 3 metrics for platforms are helpful to think about as well: liquidity, matching quality and trust. These are broad enough that you the reader need to think through what those mean relative to your core interaction and platform.
Chapter 10 - Strategy - I found this chapter to be the least useful in the entire book, aside from the point of Winner Take All markets, which are especially important to think about in the context of platforms. Most of the chapter is spent on general business strategy that while relevant to platforms, readers with business / tech backgrounds are already familiar with.
Chapter 11 - Policy - The bottom line of this chapter is that regulation for platforms is coming, and you as a platform building need to understand how it might affect you (use of contractors / etc), and especially your core interaction.
Chapter 12 - Tomorrow - One of the best chapters in the book, if only because of this sentence - Industries that are most prone to platform transformation in the near future include those that are information-intensive, those with unscalable gatekeepers, those that are highly fragmented, and those characterized by extreme information asymmetries. If this is the only item you take away from the book, you will know which industries are going to be platformed next and/or which to go after.
Overall - A great handbook for understanding how platforms work and the underlying mechanics of how they operate and scale. Readers would be wise to spend some time building their intuition of how all the disparate parts of a platform can come together to produce value - that is where the highest degree of innovation will occur.