Esko Kilpi: The idea of the platform company – how companies grow in the network economy!

Esko Kilpi writes in his blog about emergence of the platform company – and about the logics which are also behind the Urban Mill Open Innovation Platform development:

Gap between network-economy companies and traditional asset leverage driven companies is widening

”The effects of Moore’s law on the growth of the ICT industry and computing are well known. A lesser-known but potentially more weighty law is starting to replace Moore’s law in strategic influence. Metcalfe’s law states that the cost of a network expands linearly with increases in the size of the network, but the value of the network increases exponentially.

When this is combined with Moore’s law, we are in a world where at the same time as the value of the network goes up with its size, the average costs of technology are falling. This is one of the most important business drivers today. The implication is that there is an ever-widening gap between network-economy companies and those driven by traditional asset leverage models. Traditional business economics focus on economies of scale derived from the capital base of the company, which tends to scale linearly.”

A platform company should be as open, as accessible and as supportive as possible, to as many users as possible

”What used to be called “public goods” is today called “platforms”. A new form of a company is being born!

Once the up-front costs have been incurred and the platform is established, the more people there are who are sharing the benefits, the greater the net present value of the whole value system becomes.  A platform company should therefore be as open, as accessible and as supportive as possible, to as many users as possible.  This is unequivocally the route to optimum value creation.  Moreover, the higher the value of the system, the costlier it becomes to all its members to replace it – creating a major barrier to entry.”

Aggregator of enterprise value will no longer be a value chain, but a network space

”But something else needs to change too: customer focus has been the dominant mantra in business. Everybody knows that everything should focus on the customer. However this is not enough any more. Up to now, business has focused on the customer as an audience for products, services and marketing communications. In the world of digital networks, the customer will be transformed from being an audience to an actor. The activity of the customer focuses corporate effort.

The central aggregator of enterprise value will no longer be a value chain, but a network space, where these platform companies are fully market-facing and the customer experience is defined by applications connecting to the platform.

New leadership: Power with people is much more effective than power over people

The basis of executive power is shifting from being in charge to being connected. New leaders understand that power with people is much more effective than power over people. It is about integrating the best of networked thinking and leveraging the new platforms for value creation.”

Read the whole post of Esko Kilpi from his blog.

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