Since the early 2000s a new business model has taken over the top of most valued companies: platforms. A platform brings together two or more groups that are dependent on each other; often this are consumers and producers. They don’t actually own big part of the value chain, they provide the opportunity to connect different parts of the value chain. Their ecosystems changed the way of doing business and disrupted a lot of industries. Among the top 5 highly valued companies in 2016, we can find 4 tech companies that are platforms.
Platforms lower transaction costs within the ecosystem and they can cause innovation due to the competitiveness within the platform. However, it is sometimes easy for a platform to gain rapid market share, especially if the platform makes good use of its first mover advantage and creates big network effects. This can set of a monopolistic market structure that is not always beneficial for the customer. Besides, this platform might be able to envelop smaller companies to keep its competition low, which creates high barriers of entry and might not foster innovation within the industry.
Taking a closer look at two of the platforms and their influence on both their industry and our society I think we should do something different. Uber has lost its license in the London last week and is probably going to cease its operation in Quebec next month due to new regulations. Despite the fact the company might not always be right (as they admit themselves), protecting the current industry players (traditional taxi drivers in this case) plays a big role in countering it.
Another example can be found in Airbnb. This company disrupted the hotel industry and has prosper times ahead. However, it is not going to be easy. At least not in our country. A big increase of booking through the platform in Amsterdam resulted in stricter rules. Though the rules are not directly implemented in the whole country, we can see similar events happening here compared to the Uber example; protecting the traditional players within the industries.
I agree that, just as traditional businesses, platforms shouldn’t harm society. However, shouldn’t we adapt to these platform ecosystems, instead of the other way around, and try to get society one step further with the use of all these innovative businesses?
References:
Bhargava, H. K., & Choudhary, V. (2004). Economics of an information intermediary with aggregation benefits. Information Systems Research, 15(1), 22-36.
Butler, S. & Topham, G. (22 September 2017) https://www.theguardian.com/technology/2017/sep/22/uber-licence-transport-for-london-tfl accessed on 27 September 2017
Dickey, M.R. (22 September 2017) https://techcrunch.com/2017/09/26/uber-is-pulling-out-of-quebec-due-to-regulatory-issues/ accessed on 27 September 2017
Eisenmann, T. R., G. Parker, and M. van Alstyne. “Strategies for Two-Sided Markets.” Harvard Business Review 84, no. 10
Gallagher, L. (15 February 2017) http://fortune.com/2017/02/15/airbnb-profits/ accessed on 27 September 2017
Gandel, S. (4 February 2016) http://fortune.com/2016/02/04/most-valuable-companies-fortune-500-apple/ accessed on 27 September 2017
Kollewe, J. & Topham, G. (25 september 2017) https://www.theguardian.com/business/2017/sep/25/uber-tfl-concerns-vows-keep-operating-london-licence accessed on 27 September 2017
Moazed, A. (1 May 2016) https://www.applicoinc.com/blog/what-is-a-platform-business-model/ accessed on 27 September 2017
Could you give some examples of what you perceive to be wrong actions, so to say, regarding Uber and Airbnb, and how else they should have been handled by society? For the sole example I can think of is a clear breach of the law, with Uber, which has built its entire business model on breaking the law, and capturing a large enough userbase within the timeframe it has before it is forced to adhere to the law. That is a pretty despicable way of doing business, and should never become the norm, in my opinion.