Platform

Business Models (PBM)

3 Credits; EPGP Term V/ PGP Term VI

Instructor: Srinivasan, R | srini@iimb.ac.in | Office: C block II floor | Phone: 3143
Secretary: Rama KPG | Phone: 3209 | ramakpg@iimb.ac.in
Teaching Assistant: Pramoth Kumar Joseph | jpramothkumar@gmail.com

Course overview: Firms operating as platforms as business models face certain
challenges atypical of product, service or information firms: they operate in
multi-sided markets, face network effects that typically allow only a few firms to
operate in those market spaces, and traditional rules for pricing fail in such
markets.

Goals: At the end of the course, you will appreciate the nuances of platform
business models; and be able to build on your learning on network concepts
from your core strategy courses. This course aims to highlight the specific
strategies for understanding, designing, and working in platform business
models.

Pedagogy: This course will be delivered through a set of cases that ensure that
you appreciate the multi-dimensional nature of managing in a platform business
model.

Evaluation: Your performance in the course will be evaluated using active class
participation (15%); a term paper (40%); and an end- term examination (45%).

Course material
A compilation of cases and essential readings are uploaded on Moodle. The
following books are suggested for the advanced reader.
• Evans D, Hagiu, A, Schmalensee, R. 2006. Invisible Engines: How Software
Platforms Drive Innovation and Transform Industries, MIT Press, Boston,
MA.
• Gawer A, Cusumano M. 2002. Platform Leadership: How Intel, Microsoft,
and Cisco Drive Industry Innovation. Harvard Business School Press:
Boston, MA.
• Liebowitz, S., Margolis S. 2001. Winners, Losers & Microsoft. The
Independent Institute: Oakland, CA.
• Rohlfs J. 2001. Bandwagon Effects in High-Technology Industries. MIT
Press: Cambridge, MA.
• Shapiro C, Varian H. 1999. Information Rules: A Strategic Guide to the
Networked Economy. Harvard Business School Press: Boston, MA.
• Shy O. 2001. The Economics of Network Industries, Cambridge University
Press: Cambridge, England.
 Course Schedule

Module 1: Introduction to Platforms and networks
In this module, we would introduce you to the basic concepts of platforms, multi-
sided markets, networks, and platform-mediated networks.
Readings
• Eisenmann T., Parker, G., & Van Alstyne, M. 2006. Strategies for two-sided
markets. Harvard Business Review Oct. 2006.
• Hopkins, M S. 2011. How to innovate when platforms won’t stop moving:
Interview with Professor Michael A. Cusumano. MIT Sloan Management
Review, Summer 2011.
• Sawhney, M., Prandelli, E., Verona, G. 2003. The power of innomediation.
MIT Sloan Management Review, Winter 2003.

Sessions 01-02: Introduction to concepts
In these two sessions, we will learn the basic concepts around platforms,
network effects, and how network effects impact/ create new business models.
We will also discuss the core issues around platform-mediated network firms –
standards, network effects, pricing, and envelopment. Please read the article by
Eisenmann et al, and the case, Google, Inc. before the first and second sessions
respectively.
Case: Swiggy, Foodora and Yelp: Hyperlocal platforms
Questions: Describe the Swiggy business model. Enumerate the network
effects. Compare and contrast the three business models – Swiggy, Foodora, and
Yelp. Given that Yelp is a hyperlocal platform, how would it sustain its position
against potential bigger rivals such as Google, Amazon and Facebook?
Sessions 03-04: Different types of platforms
During these sessions, we will build on the concepts learnt in first two sessions
and introduce the three different types of platforms – matching platforms,
transaction platforms, and info-mediation platforms. To facilitate this, please
read the cases on BharatMatrimony.com, Practo, and Just Dial. Please also take
time to explore the websites of the respective firms.
Cases: BharatMatrimony.com, Just Dial and Practo
Questions: What are the reasons for BharatMatrimony.com’s success? How
did the platform evolve? How did the Practo.com platform evolve? How did the
Just Dial platform evolve? What are the core elements of a matching platform
that BharatMatrimony.com could leverage across other businesses? Why did the
other services fail? What are the core elements of a matching platform that
Practo could leverage across Practo Ray and Practo.com? What are the core
elements of a matching platform that Just Dial could leverage as it moved from a
pure “local search” to a “search and transact” business model? What other
opportunities can BharatMatrimony.com explore, given its success in matrimony
and property? Is online dating an opportunity for BharatMatrimony.com? What
other opportunities can Practo explore, given its success in connecting clinics
and patients? Can Just Dial succeed in the product ecommerce space, given its
“inherently local” network of consumers and businesses?


Module 2: Managing network effects
In this module, we would explore the concepts on network effects and their
implications on designing robust and sustainable platform business models.
Reading
• Shapiro C, Varian H. 1999, The art of standards wars. California
Management Review 41 (2): 8-32.

Sessions 05-06: Products and platforms
In this session, we will understand the difference between products with
network effects and platform-mediated networks. We will also explore how
firms can leverage the product ecosystem to create platforms.
Case: Delhivery: Leveraging the platform
Questions: Describe Delhivery’s business model. Critically analyze the role of
technology investments in the success of Delhivery’s businesses. Comment on
Delhivery’s pricing model. How would Delhivery motivate and incentivize
warehousing entrepreneurs to share the risk and revenues in exclusive contracts
with the Delhivery platform? How would Delhivery prioritize between
introducing new products, reducing costs for their customers, and entering new
markets? What criteria would you use to evaluate these options? How would you
sequence these strategic actions, if you choose to follow more than one of these
options? And why?
Session 07: Creating network effects
In this session, we will learn how to create network effects (same-side and cross-
side) and leverage them for business growth and competitive advantage.
Case: HackerEarth: Open innovation management platform
Questions: Describe the HackerEarth business model. Enumerate the network
effects. How did they solve the penguin problem? How did they evolve the
platform to move from recruitment-focused to one that handles open innovation
management? Given that HackerEarth is an innovation platform, how does it
sustain its position against potential rivals in the open innovation space?
Session 08: Standards and bundling
In this session, we will understand the role of standards in creating and
sustaining network effects. We will also explore the value of bundling products
and services to increase/ decrease customer switching and homing costs.
Case: Tally: The making of a platform
Questions: What are the major issues facing Tally today? Can Tally reposition
itself to be known as an ERP solution, rather than an accounting software
product? Is Tally.ERP a platform – does it fulfill the three conditions of platforms:
existence of two-sided markets, network effects, and winner-takes-all dynamics?
Create a plan for Tally.ERP as it transforms itself (including repositioning as an
ERP) into a platform-mediated network.

Module 3: Platform Architecture & Pricing
In this module, we will focus on platform architecture: the various sides of the
platform to engage with, decisions on subsidy and pricing, strength and signs of
network effects and trade-offs in network evolution strategies
Readings
• Eisenmann, T., 2008. Managing proprietary and shared platforms,
California Management Review, 50 (4), 31-53.
• Eisenmann, T., Parker, G. & Van Alstyne, M., Opening Platforms: How,
When and Why? In Gawer, A and Cusumano M. 2002. Platform
Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation.
Harvard Business School Press: Boston, MA.
• Rochet J, Tirole J. 2003. Platform competition in two-sided markets.
Journal of the European Economic Association, 1(4): 990-1029.

Session 09: Shared vs. proprietary platforms
In this session, we will discuss the core of platform architecture decisions:
making a platform shared or keeping it proprietary.
Case: Wipro BPO – Positioning Base )))TM Suite as a Platform
Questions: Describe how the Base))) Suite of products enable Wipro BPO to add
value to the spectrum of BPO services. Provide directions for Wipro BPO’s
product strategy. Should Base))) be kept closed or be made open? Should there
be more third party vendors participating in the development of applications in
the Base))) environment? Should Base))) remain proprietary standard? Is there
an opportunity to make it a shared platform?
Session 10: Pricing power
The relative power of various sides in a platform can be best analyzed when the
players produce goods and services that are seen as complements by the end
consumers. In this session, we will discuss how the relative bargaining powers of
EA and Microsoft play out in the nascent online gaming industry.
Case: EA in online gaming
Questions: Why do video game platform providers choose to sell consoles at
breakeven or loss-making prices, profiting instead from royalties charged to
game publishers? Analyze the economics of title exclusivity, i.e., an agreement
that limits a game’s availability to a single console. How important is EA to
Microsoft’s success in online gaming? How important is Microsoft to EA? Should
either/ both Microsoft and/ or EA seek to end their dispute?
Session 11-12: Pricing
There are times when firms choose to subsidize one side of the platform in order
to grow the network and gain network strength. In the process, there is a
possibility of this subsidy leading to a significant loss of competitive advantage.
Case: IndiaMART
Questions: What is the basis of pricing at IndiaMART? How do you retain
buyers/ sellers networks? Why do customers (buyers) keep coming back to
IndiaMART? How does IndiaMART ensure that the transactions keep happening
inside IndiaMART? Should they? And how does IndiaMART protect itself from
becoming a discovery platform? Why does IndiaMART focus on making “sellers
are also buyers”? How does it add stickiness?

Module 4: Platform envelopment
Platforms that provide services to niche markets and special customer segments
have a great threat of being enveloped by a larger multi-platform competitor.
There are two defenses against envelopment – racing to acquire customers, and
developing interoperability.

Readings
• Eisenmann, T., “Racing to Acquire Customers,” HBS Note
• Boudreau, K.J. & Lakhani, K.R. 2009. How to manage outside innovation,
MIT Sloan Management Review, Summer 2009
• Hagiu, A. & Yoffie, D.B. What’s your Google strategy, Harvard Business
Review, April 2009.
• Yoffie D, Kwak M. 2006. With friends like these: the art of managing
complementors. Harvard Business Review, September 2006.

Session 13-14: Speed in platform development
Firms that are operating in winner-takes-all markets and facing envelopment
threats can effectively defend themselves by significant speed of customer
acquisition and rapid ecosystem development.
Case: Tarnea Technology Solutions
Questions: How should Tarnea price their products/ services? What pace should
Tarnea grow? How does their pace of growth affect their ability to garner
network effects and create winner-takes-all (WTA) economies? What strategies
should Tarnea adopt to insure themselves from threats of envelopment?
Session 15: Developing contextual interoperability
Platforms in non-WTA markets facing envelopment threats have to make the
trade-off between setting standards and developing interoperability.
Case: JOSEPHS®: The service manufactory
Questions: Would you say JOSEPHS® has been successful? What parameters would
you use to justify your answer? If your organization (where you are currently
working/ were working in the recent past) were provided an opportunity to set up a
spot in JOSEPHS®, what research questions would you study? Is JOSEPHS®
replicable across contexts, say, would the same design parameters be applicable in
another location like an airport; or in another city like London, Boston or Bangalore?


Module 5: Emerging business models

Reading
• Casadesus-Masanell, R., and Hervas- Drane, H. (2005). Peer-to-Peer
Filesharing and the market for Digital Information Goods, Journal of
Economics & Management Strategy, 19 (2), 333-373.
More recent readings from newspapers and business magazines will be
provided closer to the class.

Session 16: Converging business models
Internet and digital businesses have slowly begun converging in terms of
contestable spaces, including search, sharing, and advertising markets. We will
take a comprehensive look at the big four internet firms and evaluate if and
when one or many of them would fail like how AOL and Yahoo! failed.
Case: Amazon, Apple, Facebook and Google
Questions: Define the contested boundaries among Amazon, Apple, Facebook,
and Google. For each contested boundary that you have identified, how is the
contest likely to play out? How many contests give rise to WTA markets? How
many to always-a-share markets? How will the complex ecosystems, in which
online businesses are built on top of other online businesses, and third-party
sellers that rely on platforms, evolve?
Session 17: Balancing SaaS and MSP business models
In this session, we would discuss how SaaS and MSP business models
complement each other and what specific value do each of them offer the other
complement
Case: Qwikcilver: Developing a complementary platform
Questions: Is Qwikcilver a MSP? Is Woohoo a MSP? Describe. Is the gift card
business a winner-takes-all market? Why or why not? Can the gift card and e-gifting
markets be enveloped? If so, by what kind of competitors? Can Qwikcilver sustain its
growth and maintain its leadership in the gifting business? Is e-gifting a disruption?
How has Qwikcilver adapted (or not) to this change from physical gift cards to e-
gifting? What threats do they need to watch out for as they expand footprint into other
countries, as gift card processing and distribution becomes a lucrative business that
attracts competition? What changes were needed in their distribution strategy to take
digital gift cards to the tier-II and tier-III cities which hold the next big growth
opportunity?
Session 18: P2P networks
We will explore how P2P network architectures could help us understand the
different variations in platform business models.
Case: Peer-to-peer File Sharing and the Market for Digital Information
Goods
Questions: Why have P2P networks been so successful? Why do peers
contribute to P2P file sharing networks? How many P2P file sharing networks
will there be in the long term? Why has client-server systems like Apple’s iTunes
been so successful? How should the music and film industries react to P2P?

Session 19-20: Project presentations