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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

5/5 (1)

Blockchain is the first radical technological innovation of the 21st century. The possibilities are endless, but we will be focusing on how blockchain will change the financial industry. A blockchain is simply a method of structuring data, which allows a digital ledger of transactions to be created and shared amongst numerous participants through a distributed network of computers. By using methods of secure communication like public or private key cryptography, network participants are able to add data to the online ledger, in the form of a transaction, without the requirement of a central authority to authenticate or manage users and data.

Besides lending and depositing, banks are also facilitating and recording transactions and offering a broad range of other services. However, it is not all roses with regards to the banking industry. There are some disadvantages, for which blockchain can offer a solution:
– Banks can decide who can get a loan and who is not welcome in their financial system. With blockchain, this type of discrimination is no longer possible as anyone in the world can join the network;
– Transferring money from one bank to another can be time consuming and costly. By using blockchain, transactions only take up a couple of seconds and its costs decrease as the number of participants increase;
– Currently, the banks invest your money and its destination is not transparent. With blockchain, you control your own money and transparency is guaranteed by ledgers distributed among network of numerous participants;

The blockchain has plenty of advantages but we also have to take into account the disadvantages. With the banks having less control in interest rates, the application of blockchain may result in an unstable economy. Also the fact that money creation will be stopped, can be seen as a disadvantage. The inability of the money supply to vary in response to demand would likely cause greater volatility in prices and real activity. Besides, the anonymity the blockchain offers can allow for shady financial practices.

Blockchain has the ability of changing the financial industry by positioning it as newly vulnerable market:
– Newly easy to enter: blockchain allows its users to be their own financial intermediary, making the financial industry newly easy to enter by empowering the customers;
– Attractive to attack: grabbing a fraction of the profits is what makes this market attractive to attack, which is happening in this industry. For example, a London based startup named ‘Blockchain’ recently raised 41 million dollars;
– Difficult to defend: the financial industry is evidently difficult to defend, because when masses of people decide to switch to a blockchain system, banks will lose their customers, which means missing out on interest received;

We expect that the blockchain technology will be integrated into the financial value chain by many financial institutions. It will trigger an era of severe reorganization in these institutions, suggesting a disruption in the financial industry. However, as of today, blockchain is still in its early days and a complete transformation of current processes will take time.