Executive education on digital platforms

Together with Radicand Economics

Executive education on digital platforms

Since 2017, we provide executive education on digital platforms at Nyenrode Business University. Through an interactive lecture, discussing various cases, we train executives and managers in the basics of platform economics. We challenge them to think strategically about why and how to launch a platform.

Since 2018, we also provide a three-day course on digital platforms and policy at the National Academy of Finance and Economics. This course teaches policy makers about how digital platforms work, what public interests are at stake and how they relate. It also discusses the costs and benefits of different policy options.

During this training, we inspire participants to develop their own platforms. As a natural follow-up, students often invite us to organise an in-house business modelling workshop.

Knowledge about platforms is essential for digital transformation

Our executive education on digital platforms at Nyenrode Business University is part of a wider MBA module on digital transformation.

Digital transformation refers to the process of using digital technologies to reinvent business processes, culture, and customer experiences. Other terms often heard are agile, lean, fluid, and so on. What these terms have in common is that they focus on business processes. However, the most disruptive effects typically results from the invention of new business models around these technological breakthroughs. History shows that this is much more effective than trying to implement new technologies into existing business models. In the current era of digitisation, these new business models are platform-based.

These multi-sided business models pursue a different kind of value creation than the traditional linear business models. True, they have always been around (just think of the local marketplaces and bazaars). But digitisation has made these business models much more scalable and it puts a turbo on the network effects that characterise them. Combined with data analysis and scope economies, these platforms exhibit unprecedented growth potential.

Solving market frictions

Some argue that organisations are there to resolve market frictions, such as information asymmetries and agency problems (see video below). At the same time, the way we do business may cause new market failures (such as market power). Due to technological developments, we can address these market frictions in a different way. This then results in organisational and societal changes.

The employment of digital technologies is driven by entrepreneurs who see an opportunity to address such market frictions. Or simply stated: they observe that there is room for improvement. Digital platforms can often realise such improvements by orchestrating interactions throughout value chains. This allows all participants in the value chain to gain from optimised service deliveries or production processes. One can find examples in logistics, healthcare, construction, and building maintenance.

Digitalisation and platformisation of society results in new and innovative ways to address market frictions. This not only challenges the role of every company in a value chain, but also the role of the government who needs to rethink its policy theories.

The basic ingredients of a digital platform

Transformation of business models requires understanding of the new ways of doing business. Our executive education programme on digital platforms teaches the different with the traditional ways of doing business and it highlights the strategic consequences.

We focus on three key ingredients of a platform’s growth engine:

  • Network effects: One can define a platform as a governance system with multiple users that facilitates interactions between them. The platform’s core business is to facilitate interactions, which gives rise to network effects. This means that more users lead to more interaction possibilities, which makes the platform more attractive again for other users. In other words, network effects are a self-reinforcing driver of growth. Once a user base grows beyond a critical mass, it tends to grow automatically at an exponential rate.
  • Learning effects: Data is essential part of the ‘growth engine’ because it feeds the learning process of algorithms. This works as follows: a larger number of users generates more useful data and improves functionalities. This makes the platform more attractive again for new users. Notice also here the circularity of this process.
  • Scope economies: A third driver of growth is scope economies. A larger number of users supports the introduction of new services, which makes the platform more attractive for new users. Again, notice the circularity.

Successful platforms manage to interlock these drivers of growth and create a powerful self-reinforcing growth engine. A prime example is WeChat. This app started out as a Chinese version of WhatsApp. Next, it grew into an omnipresent digital Swiss army knife. It combines a tremendous amount of functionalities relating to chatting, jobs, food and restaurants, e-commerce, travelling, delivery, investing, etc. WeChat basically offers everything you need. (check out the video below on WeChat by the New York Times).

(Dis)Intermediation

Digitisation leads to realignments in value chains. Consequently, disruptive competition can emerge in unexpected places. Platforms can disrupt an existing value chain by inserting themselves in between existing relationships in a value chain (intermediation). Alternatively, platforms let others bypass certain players in the value chain (disintermediation).

A platform can thus sideline certain players, and they can make others dependent on it for interaction with trading partners. This may start innocently with a few sensors on a tractor. However, the interlocking network and learning effects and scope economies allow a platform to quickly take control of the entire industry.

Examples

An increasing number of traditionally organized value chains are at risk of being disrupted by digital platforms. This trend is inevitable. Rather than to fear such forces, traditional companies should seize the opportunity. This starts by identifying market frictions in the value chain. Next, think about ways to overcome these frictions by facilitating interactions. The exponential growth that characterizes platforms means that the first-mover advantages are extremely important. Below you find some examples of disrupted industries.

Entertainment and communication

The digitisation of music and videos has resulted in the disruption of many nodes in the traditional value chain. Initially distributors and retailers were challenged by platforms that facilitated (illegal) filesharing. Eventually, more professional platforms like Facebook YouTube, Spotify and Netflix have taken over the role of orchestrating the sale and distribution of content. This has also upset the broadcasting sector, as radio stations and cable networks started to lose listeners and subscribers, and thus advertisement revenues.

Real estate

Online marketplaces have side-lined traditional department stores and removed the mom-and-pop stores from the streets to an attic. Vacant inner-city locations are used to host popup stores that travel around countries and find their locations via, indeed, platforms. The recent COVID crisis has further undermined the business case of real estate owners, as remote working has been given a boost and it is probably there to stay. This may result in a flood of empty offices. This, in turn, creates opportunities for platforms to intermediate between empty spaces and ideas for new use.

Construction sector.

A CIO of a well-known Dutch contractor once said Google may become their biggest future competitor. It is not that a platform will start laying bricks. Rather it takes control by orchestrating the process from demand, to design, to applying for permits, to purchasing materials, to arranging labour, logistics and equipment, to long-term maintenance.


Impact

Through an interactive lecture, discussing various cases, we train you in the basics of platform economics. We challenge you to think strategically about why and how to launch a platform. For policy makers, we broaden your the understanding of how digital platforms work. We let you assess concerns about public interests and consider policy options.


Participate in a course?

Visit the website of our partner Ngrane or contact us by phone

Clients

Nyenrode Business University and the National Academy of Finance and Economics.

Results
  • Twice a year we provide a one-day lecture on business models and strategies of digital platforms. This training is part of the executive MBA programme ‘Digital Strategy and Transformation’ at the Nyenrode Business university.
  • Once a year we provides a three-day course for policy makers on digital platforms and policy.
Impact
  • We train executives and managers in the basics of platform economics and challenge them to think strategically about why and how to launch a platform.
  • We broaden policy makers’ understanding of how digital platforms work and how to assess concerns about public interests.
Documents
  • More information on the Digital Strategy and Transformation module at Nyenrode can be found here
  • More information on the course on digital platforms at the National Academy of Finance and Economics can be found here
Team