The economics, structure, and behavior of platform ecosystems and organizations

In preparation for the launch of On The Horizon, I virtually sat down with founder and future of work luminary Stowe Boyd to talk about what’s driving the publication. I’ve been working with Stowe for nearly ten years, and know him to be innovative thinker, not only about the topics he’s thinking about but about how to think about them.

Stowe Boyd source: Ken Yeung

We’ve created original research on work tools, millennials in the workplace, and other topics, but sometimes half the fun is figuring out the best approaches and processes for research, analysis, and collaboration. We both know how challenging it can be to harness the intelligence of really smart, creative people for maximum impact. Which may sound like a throat-clearing preamble, but it’s actually one of the key focus points for On The Horizon. We both believe that platform-based business ecosystems and the people, organizations, processes, and technologies behind them are beginning to take over the world. But we’ll need some language and knowledge in common to make the best of them.

David Card: What was the original motivation for On The Horizon? And what’s behind the name?

Stowe Boyd: I was researching the inner workings of platform-oriented business models, and I realized that one of the barriers to the adoption of platforms and their attendant ecosystems and economics is that we don’t have a general body of knowledge or a lexicon to discuss them. I’m a researcher, so I searched, but while I found some very good materials, I couldn’t find a publication that was uniquely oriented to the exploration of these ideas and their implications. So here we are.

The name (and the logo) is derived from the expression ‘on the horizon’ alluding to what is ‘imminent, or becoming apparent,’ which is perfect, I think.

The name (and the logo) is derived from the expression ‘on the horizon’ alluding to what is ‘imminent, or becoming apparent.’

| Stowe Boyd

DC: Who should read it?

SB: On The Horizon is intended for people who want to gain deeper understanding of the economics, structure, and behavior of platform ecosystems in an accelerating world. This includes leaders of organizations competing in platform-dominated industries, practitioners building platform-based businesses, and those involved in understanding the strategic implications of a world transitioning to the economics of platform ecosystems.

DC: Within large organizations, which roles should be most interested in On The Horizon?

SB: It’s a spectrum, I think. Clearly those involved directly in projects to create or build on platform ecosystems will find On The Horizon a critical resource. That can include strategists, software developers, and those charged with developing such capabilities. Given the fact that this is such new territory, I believe this will also include all sorts of consultants: those working in strategy, digital transformation, and organizational design consulting companies. Plus entrepreneurs who have left larger firms to establish platform startups. As companies decide to become ecosystem partners with larger and rapidly expanding platforms, they will want to understand how it works.

DC: What are some themes you've thought about before that will be relevant to On The Horizon? What are some new ones you'd like to explore?

SB:  We intend to write about and talk to all sorts of people who are making strides in the domain of platform economics, which covers a lot of ground. I think we need to understand the macroeconomics of this transition in our markets and societies, so we will be talking with economists, practitioners, and those analyzing this tectonic shift. We will profile platform ecosystem projects and the companies behind them. We’ll look into the role that technology plays, and the visionaries that are pushing forward in this expanding landscape.

DC: The term platform is used to mean so many different things. Could you dive into it a little more in this context? What, for instance, are some of the core business benefits from a platform?

SB: Yes, it is a term with some elasticity, but basically we use the term to represent a two- or multi-sided market and the technological foundation that supports it. Historical examples include credit cards and the Yellow Pages, both of which mediate merchant and consumer interactions. Modern examples where the technological component is more evident include the Apple App Store, Airbnb, Uber, and Upwork. These platforms create mechanisms for participants to buy and sell, but also ways for disputes to be handled, largely without recourse to external institutions. This groundwork for governance is generally laid down by the central company in the platform, and negotiated with the participants who join at the outset.

These platforms create mechanisms for participants to buy and sell, but also ways for disputes to be handled, largely without recourse to external institutions.

| Stowe Boyd

DC: The platform owner would seem to be the alpha carnivore in an ecosystem. What will be other roles that companies can play and still thrive in a given ecosystem? Do you think the structure of ecosystems and the role of the platform will vary much by industry, or will the core components be pretty similar?

SB: Yes, the principal orchestrator of a platform has a unique role and gains non-linear benefits as a result. But all members of the ecosystem — as a general rule — benefit as the ecosystem grows, and their payment for that growth approaches zero as a function of size. So while it may appear that vendors selling on Amazon’s platform are competing for customer attention and orders, the fact is they benefit from customers being able to search against a broad array of goods: the customers are strongly attracted to larger platforms, and that value is shared by all vendors. These dynamics will hold up across most public platform ecosystems. In private ecosystems, things can be more parochial, but across the board the increasing value of the ecosystem has to be shared, or it won’t attract participants, despite what we are seeing in Apple’s recent moves on revenue-sharing by Apple News+.

DC: How are the organizations of participants in platform ecosystem different from those of traditional companies?

SB: There are several key differences, but the biggest can be considered metaphorically as a transition away from a vertical model of business — made up of functional silos, like engineering, customer support, marketing, sales, finance, HR, and so on — principally organized around supply chains. The platform ecosystem is horizontal, where the functional silos have been broken down, and platform’s organizations are reordered around the communications and commitments — including delivering goods and services, exchanging funds, and so on — made among the platform participants on top of protocols laid down by the platform orchestrator. This environment is accelerating; made faster by nearly frictionless platform technologies. So there is an inherent benefit in making organizational units — or what I call organelles, after the biology term — as small and focused (and therefore as agile and flexible) as possible. More than shape, though, it is the dynamics of platform ecosystem organizations that differ from the past.

More than shape, though, it is the dynamics of platform ecosystem organizations that differ from the past.

| Stowe Boyd

So there you have it. These are the foundations of On The Horizon. With your participation and ideas, we look forward to charting the new era of platform ecosystems.

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