the digital transformation – platforms and network effects
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Kim Hiort NielsenThe Digital transformation – platforms and network effects Date:
What’s putting the world’s top executives on edge?
CxOs expect industry convergence to have the biggest impact on their business
Total CEO CFO CHRO CIO CMO COO
70%
60%
50%
40%
30%
20%
10%
0%
Industry convergence
The “anywhere” workplace
Rising cyber riskThe redistribution of consumer purchasing powerThe sustainability imperativeAlternative finance and financing mechanismsThe sharing economy
Top trends to impact business (in 3 to 5 years)
External forces impacting the enterprise (in 3 to 5 years)
For the first time, the entire C-suite selected technology as the main game changer
Technologyfactors
Marketfactors
Regulatoryconcerns
Macro-economicfactors
People skills
Socio-economicfactors
Globalization
Geopolitical factors
Environmentalissues
72% 71%
55%
51%
48%
34%
31% 31%
27%
The technologies that CxOs expect to revolutionize business tomorrow are already in play today
Cloud computing and servicesMobile solutionsInternet of Things (IoT)Cognitive computingAdvanced manufacturing technologiesNew energy sources and solutionsBioengineeringMan-machine hybrids
63%
61%
57%
37%
28%
23%
12%
10%
Technologies revolutionizing business (in 3 to 5 years)
Market disruptions New markets
New business models
InterBrand: Best Global Brands
These Grew Fastest
These Grew Fastest
Industry
Platform
No Yes
$50B
Valuation ($B)
$50B
Valuation ($B)
eCommerce/MarketplaceTransportation
FintechInternet Software & Services
SocialHealthcare
FacilitiesMobile Software & Services
AdtechMedia
GamingReal Estate
Big DataClothing & Accessories
CybersecurityFilm & Video
GreentechHardware
Other TransportationVR/AR
Platforms = 80 of 115 firms worth $1,000,000,000+
1995 2000 2005 2010 2015Year
1
2
5
10
20
50
Valuation ($B)
Airbnb
Appnexus
InMobiPanshi
Avito.ru
BeiBei
Blue Apron
Dianping
Fanatics
FanliFarfetch
Flipkart
Meituan
Snapdeal
Tujia
VANCL
WeWork
Credit Karma
Lakala
Lufax
One97 Communications
Square
Stripe
Zenefits
Proteus Digital Health
Theranos
Atlassian
DocuSign
Dropbox
Evernote
Spotify
SurveyMonkey
Yello Mobile
Snapchat
Kuaidi Dache*
Uber
Source: P. Evans, CGE; CB Insights, Capital IQ, CrunchBase, 2015
The Product Business Model is Broken
The Product Business Model is Broken
In 2009, BlackBerry had nearly 50% market share in U.S. operating systems, according
to IDC. Now: 2.1%
2008 2009 2010 2011 2012 2013
50%
40%
30%
20%
10%
0%
1980-2000 Microsoft Platform Beats Apple Product
Apple launched the PC revolution but Microsoft licensed widely, built a huge developer ecosystem, 6X larger.
Apple Feb 5, 1996
Michael Dell - ”Shut it down and give the money back to
the shareholders.”
These Grew Fastest
Nike Builds a Biz Platform
Network EffectsValue rises as more people use the
platform
Metcalfe’s Law
Each Side Attracts More of the Other
eBay BuyersUber RidersXbox GamersAmex CardHoldersAga Khan PatientsYouTube ViewersAirBnb RentersTesla Car DriversMechanical Turk JobsLinkedIn EmployeesAndroid Users
eBay SellersUber Drivers
Xbox DevelopersAmex Merchants
Aga Khan DoctorsYouTube Videographers
AirBnb RoomsTesla Charge Stations
Mechanical Turk LaborersLinkedIn EmployersAndroid Developers
In any market with network effects, the focus of attention must shift from
inside to outside the firm.Reason: You can’t scale network effects inside as easily as outside.
Source: Marshall Van Alstyne
To have an external focus,
you must have an API strategy.
... this implies ...
and growth is accelerating dramatically
APIs represent a new, fast-growing channel opportunity
Business models are evolving
stores (800) ###s web sites web APIs
According to Gartner, by 2016, 75% of the top 50 global banks will have launched an API platform By 2016, 50% of B2B collaboration will take place through Web APIs.
Sources: Gartner, Predicts 2012: Application Development, 4Q, 2011; Gartner, Govern Your Services and Manage Your APIs with Application Services Governance, 4Q 2012; Gartner, Open for Business: Learn to Profit by Open Data, 1Q 2012
APIs are a path to new business opportunitiesWeb APIs are the new, fast-growing business channel
Businesses are Evolving
stores (800) ###s web sites
Exposing systems of record to Mobile
apps
• Enterprises are taking existing businesses into the mobile world. Their data resides on-premise. For mobile apps to be interesting & useful, they need access to this on-premise data.
• APIs provide a secure and simple way to allow mobile apps to access existing on-premise data.
Accelerate internal development
• APIs don’t always have to be exposed to the world. Many companies build much of their internal code in form of APIs, for reusability.
• Result: a library of useful components that can be reused to greatly accelerate app development
Expand the reach of your business
• Increasingly, businesses are expecting to consume your product/service in the context of other related services. This means interacting with your business not through your web page or store, but through APIs
• APIs enable partners, entrepreneurs, developers to build/embed your service into theirs
Build hybrid cloud applications
• The canonical hybrid cloud app resides in the public cloud, and accesses data that must remain on-premise for legal, security, regulatory reasons.
• APIs provide a secure and simple way to allow hybrid cloud apps to access on-premise data
Monetize data and services
• Businesses often have high-value data and services that they can provide and sell to others• Peugeot (French auto manufacturer) sells their connected car data to external business partners
via APIs, resulting in a new revenue stream
1
2
3
4
5
What are some common use cases in the API Economy?
• Estimate global taxi market• Estimate market share• Est. risk adjusted cash flow• Consider proprietary methods, barriers
to competition
• Value: $5.9 Billion
Aswath Damodaran: NYU Finance professor, Corporate Valuation author, Herb Simon Prize.
Bill Gurley: Venture Capitalist, OpenTable, Zillow, Uber
All true but overlooking network effects.
Source: David Sacks, COO PayPal, CEO Yammer
Value: $17 Billion
Platforms Unlock New Value from Spare Resources
and User Generated Content
What Changes :: Supply Chains
AirBnb sells users’ spare rooms, competing with hotels that must own them
RelayRides sells users’ spare cars, competing with rental firms that must
own them
Instagram sold for $1B not because of contributions from 13 employees
but from 30 million users
2005
2013
’’In 2015, Uber, the world’s largest taxi company owns no vehicles, Facebook the world’s most popular media owner creates no content, Alibaba the most valuable retailer has no inventory, and Airbnb the world’s largest hotelier owns no real estate.’’
Tom Goodwin, Sr. VP of Strategy Havas Media
Why are the old competitors not the new competitors?
Isn’t afraid of …
publishing
broadcast
electronics
cars
watches
delivery
+
but should fear …
Disruptions in Pharma
• Empowered patients• Health Gamification• Argumented reality and virtul reality• Genomics and truly personalized medicine• Body sensors• 'Do it yourself' biotechnology • 3D printing revolution • End of human experimentation • Medical decision making with artificial intelligence• Nanorobots
What’s Next?
City as Platform
Energy/Smart Grid as Platform
Education as Platform
Healthcare as Platform
Xellia / Pharma as a platform
Developers
Suppliers
Patients
Universities / research facilities
Assets core but sorrounding by a continous evolving network
Startups/entrepreneurs
Gamers
Manufactors
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