The MIT Platform Strategy Summit brings together leading experts, practitioners and policy makers involved in building, managing and regulating platform businesses. The Summit provides an opportunity to gain a unique perspective on important trends relating to platform businesses. During the most recent Summit, held at the MIT Media Lab on July 13, 2018, Geoffrey Parker, Marshall Van Alstyne and I highlighted four key platform trends:
Data- There is increasing recognition that data offers significant new value creation opportunities for companies. This is particularly true for platform companies, which were quick to seize on the value of leveraging the data generated by users to enhance their offerings, as well as drive what scholars call network effects or Jeff Bezos simply calls the flywheel. Data has also become central to the ability of platform leaders to build and harness value via their platform ecosystems. However, as events of the past year have shown in the case of Facebook in particular, mishandling data can undermine platform value. Thus, while data can be fuel for platform growth, data misuse can be the source of damaging fire.
Innovation- Platform companies have become powerful engines of innovation. Platform companies have moved to the forefront of a wide range of cutting edge technologies. Cloud computing, computer voice, virtual reality, machine learning, and artificial intelligence are just a few of the capabilities around which they are driving innovation. The change in patents awarded to platform companies provides one measure of the fruits of this innovation. The growth in patent awards among the leading platform companies is impressive. In 2011, Google earned 426 patents. In 2017 that number climbed to over 3,000 or nearly 60 each week. Amazon is another platform company that has experienced a surge in patent awards. In 2017, Amazon was granted 1,960 patents. Facebook grew its patents to 660 in 2017, up from 0 in 2012. These awards come on the heels of strong R&D spending. Together, Amazon, Alphabet, Intel, Microsoft and Apple now spend USD 76bn annually on R&D.
Growth- While the retail platforms such as Amazon, eBay and Etsy and service providing platforms Kickstarter (project funding), AngelsList (venture capital), Zopa (peer-to-peer lending) and Transferwise (global money transfers) are well established, the application of platform business models to new areas shows no signs of slowing. One interesting area is manufacturing, where incumbent companies are investing in platform business models. One recent example is Toyota Material Handling, North America’s top manufacturer of forklifts and material handling equipment. In order to keep closer tabs on its supplier network, collect data, and improve parts fulfillment, it has established an eCommerce marketplace for equipment parts. These and other platforms seem to confirm the adage: “Everywhere there can be a platform, there will be a platform.”
Regulation- The regulatory landscape is rapidly changing with growing implications for platform companies. This is particularly true in the area of privacy and data. One of the most significant changes has been the introduction of the European Union’s General Data Protection Regulation (GDPR), which went into effect in May 2018. Some of the key provisions include requiring the consent of subjects for data processing, safely handling the transfer of data that crosses national borders, and anonymizing data to protect privacy. It also comes with tough penalties for any violations. Companies found in violation can be fined up to 4% of annual global revenue or EUR 20m, whichever is greater. Tax, zoning and antitrust are other areas where platforms are facing new rules.
The changing regulatory landscape is perhaps inevitable. As platform businesses gain in size and scale, their social and economic spillover effects become larger and therefore attract greater regulatory scrutiny. Since there are few signs of platforms receding, we can therefore expect that they will continue to garner greater regulatory scrutiny.
The video of the opening session of the Summit, in which we discussed these trends, is available here: https://www.youtube.com/watch?v=uEpv7XXEx24&feature=youtu.be
As the rich contributions during the rest of Summit reinforced, platform businesses continue to grow in value and impact and the landscape in which they operate continues to rapidly change.