Please read the forum (pdf) and answer the question in the instruction document. American English spelling, 250 words.
The World Economic Forum (provided separately) briefing paper argues that containment of digital ecosystems “is necessary through strong frameworks to ensure that the broader societal implications receive appropriate consideration." Discuss the issue of trust within the digital ecosystem, using examples from current, newsworthy events that support this argument. 250 words – American English Spelling – open format Briefing Paper Platforms and Ecosystems: Enabling the Digital Economy February 2019 World Economic Forum 91‑93 route de la Capite CH‑1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 Email:
[email protected] www.weforum.org © 2019 World Economic Forum. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. The views expressed are those of certain participants in the discussion, and do not necessarily reflect the views of all participants or of the World Economic Forum. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms or their related entities (collectively, the “Deloitte network”) is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this publication. In collaboration with Deloitte Authors: Michael G. Jacobides, London Business School Arun Sundararajan, New York University Marshall Van Alstyne, Boston University 3Platforms and Ecosystems: Enabling the Digital Economy Contents Foreword 5 Executive summary 6 1. The opportunity and challenge of platforms 8 Marshall Van Alstyne, Boston University A. Changing the nature of the firm 8 B. Predicting change 9 C. Building and opening platforms 9 D. Monetization and revenue 11 2. Designing digital ecosystems 13 Michael G. Jacobides, London Business School A. From designing products, services or organizations, to designing digital ecosystems 13 B. What are digital ecosystems and how can they be leveraged? 14 C. Building new ecosystems: The business challenge 16 D. A guide for navigating a world of digital ecosystems 16 E. From private benefit to public good 17 3. Blurring boundaries: Managing platform trust, responsibility and governance 19 Arun Sundararajan, New York University A. Platform trust: A peek under the hood 19 B. Striking the right balance between institutional and digital trust 20 C. Six governance choices that can make or break a platform 21 4. How digital platforms and ecosystems can reinvigorate public‑private collaboration 24 Michael G. Jacobides, London Business School Arun Sundararajan, New York University Marshall Van Alstyne, Boston University Appendix: Key lessons in building a digital platform and ecosystem 26 Acknowledgements 27 Endnotes 29 4 Platforms and Ecosystems: Enabling the Digital Economy 5Platforms and Ecosystems: Enabling the Digital Economy Foreword The Fourth Industrial Revolution is enabled by new digital and physical technologies with almost limitless applicability – and huge implications for the economy and society. New business models are being leveraged not only by emerging organizations but also by traditional entities, which view them as either complementary to well‑established models or as potential replacements of their core businesses. The subsequent economic disruption has indeed been revolutionary. In a few short years, the ranking of most valuable companies by market capitalization has totally shifted to being dominated by one business model – digital platforms and ecosystems. The World Economic Forum has launched the initiative on Digital Platforms and Ecosystems not only because it is a topic on almost every corporate board’s agenda, but also because digital platform models already dominate our daily lives and our experiences as consumers, employees, community members and citizens. Considering the implications of platform and ecosystem models for society, as well as the opportunities and risks they could present in the future, it seems obvious to aim for broad collaboration between the public and private sectors, between corporate giants and start‑ups, and with consumer‑rights groups and civil society. The topic of digital platforms and ecosystems has been a matter of significant interest at the World Economic Forum. The objective of this briefing paper is to synthesize some of the key points that have arisen during an ongoing set of discussions over the last year. We are very grateful to the three authors who collaborated on this briefing paper, as these academics’ professional work and ideas continue to trigger cross‑collaboration and action‑oriented interaction. We believe the ideas expressed here offer fertile ground for our stakeholders to continue the conversation. Derek O’Halloran, Head, Future of Digital Economy and Society, Member of the Executive Committee, World Economic Forum Jolyon Barker, Global Managing Principal, Clients and Industries, Deloitte 6 Platforms and Ecosystems: Enabling the Digital Economy Executive summary Digital platforms are expanding across economies, reshaping the business models of a wide range of industries, from finance and healthcare to media and retail, while creating fundamentally new divisions of public and private responsibility. The companies driving this trend are diverse and disparate. Some are start‑ups, others are giants of the digital economy. Others, still, are traditional firms that are adapting to a more digital world by adopting an active platform and ecosystem strategy. This briefing paper forms part of the World Economic Forum System Initiative on Shaping the Future of Digital Economy and Society, initiated against a backdrop of complexities brought about by digital platforms and ecosystems. Significant changes have come from diverse angles at the macro and micro levels, affecting commercial and financial models, employment, and societal or regulatory issues. The project examines how digital platforms and ecosystems are created, nurtured, managed and governed, and the intelligence gathered is as critical to the private sector as it is to the public sphere. The first chapter by Boston University’s Marshall Van Alstyne includes a simple chart showing the striking pace of growth of platform‑based companies compared to their established competitors. The stories these companies tell demonstrate the myriad advantages of digital platforms. Most striking is the model itself, which rejects traditional paths to scale (i.e. selling more and more for less and less) in favour of one that measures success by the number of users in the community. This “network effect” inverts the firm, shifting production from inside the firm to outside. In contrast with 20th‑century industrial giants, companies with platforms do not merely create value themselves, they orchestrate value creation by outside users. In this inverted model, the platform is more important than the product. The platform value appreciates through repeated and broader use, and it increases with positive feedback, eventually dominating the static or declining value of the product. Because the users are themselves the producers and the company serves as facilitator, the inverted model redefines traditional public‑private interaction models, while calling for an openness that managers raised on traditional competitive dynamics find difficult to grapple with. However, once scale is achieved, the digital ecosystems are extraordinarily powerful. In the second chapter, Michael G. Jacobides of the London Business School examines how the digital platform is changing the way companies think about how the end customer and private partners deliver policy objectives. Robust ecosystems comprise many stakeholders, including suppliers and producers from the private sector, customers as innovators, and government and regulatory bodies from the public sector. In this interconnected modular digital world, acting alone is too onerous for most companies. Indeed, working collaboratively – to complement, adjust and support joint efforts – is essential to leveraging digital ecosystems. And tomorrow’s public‑sector goals reflect broader, systemic needs that require the variety of skills, assets and expertise that ecosystems offer. Since such variables as geography, the regulatory environment and competition affect the ecosystem strategy, the optimal solution often lies in having multiple ecosystems, each tailored to specific local operating needs. This level of complexity has its downside. Digital ecosystems can mimic organic organisms by growing in unpredictable directions, depending on where they find the most nourishment. Containment is necessary through strong frameworks to ensure that the broader societal implications receive appropriate consideration. The third chapter, by New York University’s Arun Sundararajan, delves deeper into the shifting landscape of trust and the fundamental redefinition of institutional and societal governance. Never before has the public been asked to place so much confidence in corporations; correspondingly, the reliance of global trust models on vast streams of unfiltered consumer inputs is also unprecedented. This evolving dynamic is causing a radical redefinition of boundaries between the public and the private, between regulators and the regulated, and between citizens and their governments. In this time of transition, reflecting a progression from top‑down or vertical trust to horizontal or peer‑to‑peer trust, the governance of digital platforms is determined as much by the broader user communities (with some help from artificial intelligence) as it is by overseers. The public‑private landscape is reshaped radically and, as complexity grows, the policy framework evolves. The blossoming of new opportunity reflects greater societal responsibility for private and digital actors. The chapter highlights six critical choices, from neutrality, oversight and transparency to fairness, data rights and due process, each a central determinant of whether platforms and ecosystems can retain public trust over time. Finally, the fourth chapter considers the recurring theme – how digital platforms redefine public and private relationships and responsibilities – in a co‑authored section by our business school academics. As digital progress increasingly melds the public and private spheres, platforms and ecosystems bring a dynamic set of complementors from the private sector to engage with the public sector. The existing and emerging fields in which platforms can define and demonstrate the efficacy of the new public‑private liaison are numerous. The most promising include managing mobility, providing healthcare, renewing infrastructure, regenerating urban areas and countering 7Platforms and Ecosystems: Enabling the Digital Economy Read the detailed case studies on digital.weforum.org the consequences of climate change. Such areas of opportunity can be fully leveraged only through strong cross‑collaboration aimed at establishing sustainable foundations for all future work in the space of platforms and ecosystems, highlighting once again the importance and urgency of public‑private partnerships. Realizing the benefits of these potential partnerships requires a shift in the way the public and private sectors view each other. The chapter concludes with a glimpse at new partnership models (including data‑driven delegation) and their implications for both governments and industry. http://digital.weforum.org 8 Platforms and Ecosystems: Enabling the Digital Economy Markets have existed for millennia, yet properties of platforms seem new. Where product firms, like diamond mines, protect their profits with barriers to entry, platform firms make profits by lubricating the entry of drivers on Lyft and merchant shops on Alibaba. Where product firms’ best supply chains use just‑in‑time inventory, platform firms beat that model selling goods and services whose marginal costs they do not incur. Market boundaries blur and new paths to dominance emerge. Pioneers ranging from Amazon to Lyft and Zillow and from Airbnb to Klöckner and ZBJ are disrupting the retail, healthcare, real estate, banking, lodging and steel industries, and labour markets. Incumbent firms must grapple with predicting change and comprehending network business models in order to shape their own platform strategies. Comprehension and strategy begin with a new logic. A. Changing the nature of the firm: Inversion Platform firms do not behave like product firms. They innovate faster. They operate with fewer employees, often by an order of magnitude. Many are young yet achieve higher market values than their well‑established competitors (Figure 1). These new firms play by new rules that pose challenges to traditional firms that operate by old rules. Platform firms with fewer employees beat incumbents despite having started later. Figure 1: Market values of digital platform firms vs comparable traditional firms, 2018 Firm Start year Employees Market capitalization (billion $) BMW 1916 131,000 51 Uber 2009 16,000 76 Marriott 1927 177,000 39 Airbnb 2008 10,000 38 Walt Disney 1923 199,000 163 Facebook 2004 35,000 473 Source Author The challenge for comprehension is that today’s change in organizational form is as significant as the change from trade crafts to industrial firms a century ago. Both shifts yield