Category: Digital Business

8 ways to launch a successful digital platform

Posted by MIT Sloan Executive Education - 5 months and 1 day ago


The digital platform—connecting people, organizations, and resources in an interactive ecosystem through technology—is taking the business world by storm. The platform model powers many of today's biggest and most disruptive companies, like Amazon, Airbnb, and Uber. Platform businesses bring together producers and users in efficient exchanges of value (think Uber drivers and passengers), and they leverage network effects—the more participants, the greater the value produced.

Building a platform business differs from traditional product or pipeline marketing in a number of ways, perhaps most notably by virtue of its pull (rather than push) strategies. Instead of creating awareness through channels like advertising and PR (that's the push), the goods and services of a platform must attract users with incentives for participating (the pull). In network businesses, marketing must be baked into the platform. While push strategies are still valuable to a platform model, they can easily get lost in a sea of abundance and distraction.

However, platforms and the pull they require poses a conundrum. How can you begin to build a user base for a two-sided market when each side depends on the prior existence of the other? Geoffrey Parker, a visiting scholar and research fellow at the MIT Initiative on the Digital Economy, refers to this as the chicken-or-the-egg dilemma in Platform Revolution: How Networked Markets Are Transforming the Economy – And How to Make Them Work for You. In the book, Parker and his co-writer’s Marshall W. Van Alstyne and Sangeet Paul Choudary, propose eight strategies for beating this dilemma and successfully launching a platform business. We summarized them briefly here, but you can learn more about them in depth in Parker's online MIT Sloan Executive Education program, Platform Revolution: Making Networked Markets Work for You (online), which starts next week (November 7).

  1. The follow-the-rabbit strategy: Use a non-platform demonstration project to model success and attract users and producers and then convert to a platform. (Amazon, for example, started as an effective pipeline business, then converted itself into a platform by opening its system to external producers.)
  2. The piggy-back strategy: Connect with an existing user base from a different platform, such as when PayPal piggybacked on eBay’s online platform, or when YouTube rode the Myspace growth wave by offering its powerful video tools to attract members of the social network.
  3. The seeding strategy: Create value units that will be relevant to at least one set of users, and other users (who want to interact with the first set) will follow. Take Adobe, for example, which launched its PDF document-reading tool in part by arranging to make all federal government tax forms available online. The IRS saved money on printing and postage, and taxpayers got fast and easy access to documents. Millions of people were turned on to Adobe this way and since adopted Adobe as their document platform of choice.

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How digital platforms conquer all

Posted by MIT Sloan Executive Education - 9 months and 19 days ago


The platform concept is not new; it's actually been practiced for millennia. The traditional, open-air marketplace, such as a Middle-Eastern souk, is one such platform in which farmers and craftspeople sell their wares openly to consumers. The original stock markets were the same--buyers and sellers of shares would gather in person to establish fair market prices.

The difference between these traditional platform businesses and modern platforms is the addition of digital technology, which expands reach, efficacy, and convenience. Businesses engaged in digital platform models seek to leverage network effects--a phenomenon whereby a good or service becomes more valuable when more people use it. The car-service platform Uber is the perfect example, claiming a huge and growing share of the rides-for-hire market, displacing taxi and limousine services as a result.

However, Uber's disruption of its industry may only have just begun. In the upcoming MIT Sloan Executive Education program, Platform Revolution: Making Networked Markets Work for You (online), Geoffrey Parker, a Visiting Scholar and Research Fellow at MIT's Initiative for the Digital Economy, will suggest that the advent of self-driving cars may signficantly improve Uber's already stellar economic model and possibly lead to a series of cascading impacts. Might millions of people eschew car ownership altogether and instead rely on instantly available driverless vehicles? What would this mean for ancillary business, such as automakers, auto insurance, or even parking?

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Waiting for blockchain's tipping point

Posted by MIT Sloan Executive Education - 9 months and 20 days ago


There's great debate around Bitcoin, a digital currency and blockchain (the underlying technology behind Bitcoin). Is it a good thing, or will it propagate in the "dark Internet?" How will countries and institutions regulate it? Could it really revolutionize financial transactions in developing and third world countries? And, a question posed at the recent MIT Sloan CIO Symposium, what use case of blockchain will become its tipping point?

The MIT Media Lab's Digital Currency Initiative describes blockchain as a decentralized public ledger of debits and credits that no one person or company owns or controls; its users control it directly. This system lets people transfer money without a bank, for example, or write simple, enforceable contracts without a lawyer. It can even turn physical items like real estate or concert tickets into digital assets that can be sold with low (or nonexistent) transaction fees. According to Brian Forde, Director of Digital Currency at the MIT Media Lab, "Many are projecting that the impact [of blockchain] will be similar to that of the Internet--disrupting traditional industries, challenging existing regulations, and significantly increasing the volume of commerce by dramatically lowering the cost to transact and establishing trust between two previously unknown parties." You can learn more about blockchain in this video from Financial Times.

MIT's Digital Currency Initiative brings together global experts in areas ranging from cryptography to economics, privacy, and distributed systems to take on this important new area of research. Experts involved in the Initiative include MIT Professor Christian Catalini*, who moderated the recent CIO Symposium panel, "How Blockchain will Transform the Digital Economy." As Catalini described it, blockchain is “bringing together the fields of computer science, market design, and law.” In some ways, the opportunities around blockchain technology seem almost limitless—it can enable trusted micro-transactions, it is inherently auditable, and it addresses what can’t be addressed by traditional distributed databases.

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Join the platform revolution

Posted by MIT Sloan Executive Education - 11 months and 5 days ago

It's no overstatement to say that the two-sided networked market--or platform--model is one of the most important economic and social developments of our time. The platform model powers many of today's biggest and most disruptive companies, like Amazon and Airbnb, with others, like Nike, coming on board. Platforms use technology to connect people, organizations, and resources in an interactive ecosystem in which enormous value is created and exchanged. And researchers believe that the transformation is soon to hit a range of other economic and social arenas, from health care and education to energy and government.

Surprisingly, many people--even savvy business executives--remain unaware of how the platform revolution happened, or what to do about it. In a new MIT Sloan Executive Education program, Platform Revolution: Making Networked Markets Work for You (online)Geoffrey Parker, Professor of Management Science at Tulane University and Visiting Scholar and Research Fellow at MIT's Initiative for the Digital Economy, explores the escalation of IT-driven platforms over established product leaders--such as iPhone's rapid domination of its industry at the expense of Nokia, Blackberry, Motorola, Sony Ericsson and others. The four-week, online course also provides technology leaders with ways to prepare for even more rapidly unfolding disruption.

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Intuit embraces its digital strategy

Posted by MIT Sloan Executive Education - 11 months and 11 days ago

cloud computing

Intuit, the Mountain View, California-based maker of business and financial management software, has made the move from packaged product to a purely online digital strategy. The company started in 1983 with its Quicken personal finance software--one of the early success stories in boxed software. But the company has recently decided to shed its PC roots and become a cloud software company, selling Quicken to a private equity firm in order to focus the business on their Software-as-a-Service (SaaS), or cloud, offerings--its TurboTax software and QuickBooks Online.

"[Intuit] is a classic case of a onetime disrupter being challenged by an upstart with a new approach and a simpler product," reported The New York Times, referring to Xero, a New Zealand company that offers a flexible, online accounting system for as little as $9 a month.

Intuit has made a bold move to embrace its digital strategy, which Jeanne Ross, Principle Research Scientist at MIT Sloan's Center for Information Research, defines as “an integrated business strategy inspired by the capabilities of powerful, readily accessible technologies and responsive to constantly changing market conditions.”

According to the The New York Times, Intuit’s digital reinvention strategy is bearing fruit. Subscriptions to its QuickBooks Online software grew 49% last year, and overall revenue grew 23%. QuickBooks Online now connects with about 2,000 apps, and the open structure has increased customer retention and helped feed customers into the TurboTax side of the business, especially its online version. 

In one sense, this strategy shift makes sense--more and more people are turning to cloud computing. However, according to the McKinsey & Company article, "From box to cloud: An approach for software development executives," only 8% of the revenues generated by the top 100 software vendors originate from SaaS models (as of early 2015). And seven of the ten biggest companies draw less than 5% of their software revenues from SaaS. Nonetheless, the global SaaS market is projected to grow from $49B in 2015 to $67B in 2018.

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Digital strategy: One company's approach to digitized solutions

Posted by MIT Sloan Executive Education - 1 year and 18 days ago


Recently we shared some insight presented by Principal Research Scientist at MIT Sloan, Jeanne Ross. In her webinar, Digital Disruption: Transforming your Company for the Digital Economy, Ross stated that there are two paths for a digital strategy: customer engagement or digitized solutions. In our earlier blog post, Responding to disruption with digital strategy, we covered how the U.S. retailer Nordstrom took the customer engagement approach to developing a digital strategy.

Ross' webinar included a second example of a company that opted for developing digitized solutions to create disruption in the marketplace. Schindler Group, based in Lucerne, Switzerland, is one of the world's leading providers of elevators, escalators, and moving walks. The company believed a digitized solution was the best approach to disrupt a permanent business annoyance--small service companies receiving maintenance contracts for their elevators and escalators, or being called for emergency repairs. Schindler wanted to capture that maintenance and repair revenue. Instead of just selling elevators and escalators, Schindler wanted to be the service provider of choice for ongoing maintenance contracts, emergency calls, and preventative and predictive maintenance. 

As Ross points out in her webinar, a proper digital strategy requires a strong operational backbone. Schindler’s first step was to create SHAPE--Schindler's Harmonized Applications for Process Excellence. This business process leveraged the company’s enterprise resource planning (ERP) system and provided the foundation for its overall digital solution.

The company's next step was to better understand the repair process. The findings were intriguing: overall, repairing elevators and escalators is a tough job. There are many generations and versions of the equipment, therefore technicians need to find the needed parts in a massive catalogue. Schindler solved this issue by creating a simplified, digital catalog that technicians could access using an iPad, iPhone, or other mobile technology. Subsequently, Schindler analyzed trends in this data so that the company could have partners deliver the right parts to the technicians, reducing the amount of down time for the elevator or escalator.

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Responding to disruption with digital strategy

Posted by MIT Sloan Executive Education - 1 year and 1 month and 1 day ago

We're well into an age of digital disruption. Businesses in all industries are experiencing changes in their competitive environments that result from the use of digital technologies by new market entrants or established companies. These disruptions can undermine the viability of products, service portfolios, and approaches to the market.

The response to digital disruption is to develop a digital strategy. As defined by Principal Research Scientist at MIT Sloan's Center for Information ResearchJeanne Ross, told attendees of her recent webinar, Digital Disruption: Transforming your Company for the Digital Economy, digital strategy "is an integrated business strategy inspired by the capabilities of powerful, readily accessible technologies and responsive to constantly changing market conditions."

According to Ross, there are two choices for a successful digital strategy: customer engagement or digitized solutions. Customer engagement requires thinking about an organization's relationship with the customer; it should be one built on trust and loyalty, and ideally, passion. Digitized solutions transform the business model. Both rely on a strong operational backbone.

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Is a world without ads nirvana?

Posted by MIT Sloan Executive Education - 1 year and 4 months and 25 days ago

In October, Apple announced approval of a new application, Been Choice, into the iTunes App Store. The app blocked advertisements in mobile applications as well as in native apps. Shortly thereafter, Apple pulled the app due the potential risk of security breaches. However, the promise of an app that blocks ads in both Safari and in native mobile apps had consumers cheering. After all, who really likes ads interrupting their online browsing, shopping, or reading experiences?

Sinan Aral, Associate Professor of Information Technology and Marketing at MIT Sloan, was recently a featured guest on NPR's OnPoint with Tom Ashbrook, where Ashbrook, Aral and Rebecca Lieb, a research analyst and author, discussed ad blockers and the future of digital advertising.

"I get annoyed by ads, just like other people," commented Aral. "Most people would consider a world without ads to be nirvana. But the bigger question is how to go forward."

As Aral explains, ads pay for the content we all consume on the Internet. When new technologies enable us to block ads, it means that advertisers and content producers need to think about how to pay for the content available today. As many publishers have learned, most consumers are unwilling to pay for content placed behind paywalls. As much as we’d like to think of the Internet as free, the fact is, someone has to pay for the quality content available online

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