Multisided platforms as monopolists

MODERN MONOPOLIES: What It Takes to Dominate the 21st-Century Economy

Platform business is the hottest topic in organizational economics. Linear business  considered as a traditional value chain is exactly the opposite of the economics of platforms. Two years ago I explained in several posts the emergence of this model. In 2004 Tirole and Rochet defined the network externalities that emerged from multisided platforms. Nowadays it is the hottest topic and a new book explains the consequences.

The secret to tech companies’ success lies not in the tech, but in it’s business model. A platform, by definition, creates value by facilitating an exchange between two or more interdependent groups. So, rather than making things, they simply connect people. The book helps you understand what made these companies so successful, how to tell a good platform from the bad, and how you could build one too

And by definition, platforms are the new modern monopolies different from the ones we have known.

Although monopolies get a bad rap, they’re not always a bad thing. In the short term, modern monopolies are often a boon to consumers. They bring valuable new inventions to market, and, in the case of platforms, they build new communities and markets that would not exist otherwise. The downside comes much later, as the monopolist ages and starts to crowd out potential new competitors without delivering new value.

Today Amazon is the most valuable company in the world. That's it. Let's wait for the downside. It may be too late to react. Regulators should read today Jean Tirole and apply his recommendations.

PS. Go to the conclusion and you'll find this statement:

So where should you be looking to next? Well, there are a few industries where the three factors are starting to converge
The first industry is health care, which we’ve touched on at several points in this book. Here you have platforms connecting doctors and patients in new ways, like Doctor on Demand, Teladoc, and ZocDoc. However, these platforms are just going after the low-hanging fruit. There’s still a tremendous amount of waste and inefficiency in the healthcare sector, especially in the United States. And wherever there’s waste and inefficiency, there’s a platform opportunity. For instance, although they’re relatively popular with casual consumers, wearable health devices are just starting to make their way into formal health care. These devices offer tremendous potential for improving patient wellness. But in order for them to be useful, a platform will need to build a unified network of doctors and patients. Despite the recent entrance of Silicon Valley heavyweights Apple and Google, this market is still wide open.

PS. Four additional useful books on the same topic:

Evans and Schmalensee are the best authors on this subject and this is the recommended book for economists.

A historical perspective on platforms.

A book that connects platforms with other topics of interest.

A management perspective on platforms.

Platforms, a business model (3)

 HBR's 10 Must Reads on Platforms and Ecosystems

Previous posts on platforms.

Mazzucato on platforms

This collection of articles includes "Pipelines, Platforms, and the New Rules of Strategy," by Marshall W. Van Alstyne, Geoffrey G. Parker, and Sangeet Paul Choudary; "Strategies for Two-Sided Markets," Thomas R. Eisenmann, Geoffrey Parker, and Marshall W. Van Alstyne; "Finding the Platform in Your Product," by Andrei Hagiu and Elizabeth Altman; "What's Your Google Strategy?," by Andrei Hagiu and David B. Yoffie; "In the Ecosystem Economy, What's Your Strategy? ," by Michael G. Jacobides; "Right Tech, Wrong Time," by Ron Adner and Rahul Kapoor; "Managing Our Hub Economy," by Marco Iansiti and Karim R. Lakhani; "Why Some Platforms Thrive and Others Don't," by Feng Zhu and Marco Iansiti; "Spontaneous Deregulation," by Benjamin Edelman and Damien Geradin; "Alibaba and the Future of Business," by Ming Zeng; and "Fixing Discrimination in Online Marketplaces," by Ray Fisman and Michael Luca.

Platforms, a business model (2)

A long long time ago Michael Porter wrote Competitive Strategy a book that has been used as the bible of strategy.

Porter’s model identifies five forces that affect the strategic position of a particular business: the threat of new entrants to the market, the threat of substitute products or services, the bargaining power of customers, the bargaining power of suppliers, and the intensity of competitive rivalry in the industry. The goal of strategy is to control these five forces in such a way as to build a moat around the business and thereby render it unassailable.
Thus, when a firm can erect barriers to entry, it can keep competitors out, and entrants with substitute products cannot storm the castle. When a firm can subjugate suppliers, competition among them weakens their bargaining power so the firm can keep its costs low. When a firm can subjugate buyers by keeping them relatively small, disunited, and powerless, the firm can keep its prices high.
In this model, the firm maximizes profits by avoiding ruinous competition for itself but encouraging it for everyone else in the value chain. Advantage is found in industry structures that create a protective moat—one that enables the firm to segment markets, differentiate products, control resources, avoid price wars, and defend its profit margins.
For decades, companies have studied the five forces model and used it to guide their decisions about which markets to enter and exit, what mergers or acquisitions to consider, what sorts of product innovation to pursue, and what supply chain strategies to employ.

Now platforms add a new perspective,

Enter platforms. Many of the insights embodied in the five forces, resource-based, and hypercompetition models remain valid, but two new realities are now shaking up the world of strategy.
First, firms that understand how platforms work can now intentionally manipulate network effects to remake markets, not just respond to them. The implicit assumption in traditional business strategy that competition is a zero-sum game is far less applicable in the world of platforms. Rather than re-dividing a pie of more-or-less static size, platform businesses often grow the pie (as, for example, Amazon has done by innovating new models, such as self-publishing and publishing on demand, within the traditional book industry) or create an alternative pie that taps new markets and sources of supply (as Airbnb and Uber have done alongside the traditional hotel and taxi industries). Actively managing network effects changes the shape of markets rather than taking them as fixed.
Second, platforms turn businesses inside out, moving managerial influence from inside to outside the firm’s boundaries. Thus, a firm no longer needs to seize every new opportunity on its own; instead, it can pursue only the best opportunities while helping ecosystem partners seize the others, with all partners sharing the value they jointly create.13
These two new realities add a dramatic layer of complexity to business competition. Platform strategy resembles traditional strategy much the way three-dimensional chess resembles the traditional game.14 Within the ecosystem, the lead firm negotiates dynamic tradeoffs involving competition at three levels: platform against platform, platform against partner, and partner against partner.

These are excerpts from the book "Platform revolution" a must read if you want to understand what's going on in value creation in a connected world. In chapter 12 you'll find some comments on health sector, very succint and general.

Platforms as essential services

Essential Platforms

Competition in Digital Markets 

Imagine you own a company, and you see millions of potential customers for a new product. But there is a problem: all these customers live on the other side of a river and the only way to reach them leads over a privately owned bridge. The owner of that sole bridge either prevents you from passing altogether or charges excessive fees. Long story short, if that is the case, this product line and, potentially, your entire business are doomed.

 Digital platforms can behave in that manner because they do not face serious competition. The platforms’ monopoly power mainly stems from network effects—that means the participation of additional users almost exponentially increases the utility of the network and creates enormous market entry barriers for potential competitors. The characteristics of data and algorithms further foreclose the markets.

 Google, Amazon, Facebook, Apple, and others behave just like the railroads did 100 years ago. Instead of physical infrastructure, like bridges and tunnels, the digital platforms leverage network effects that shield them from effective competition. 

To define the suitable remedies and to open the digital economy for competition, we can learn from the past. In the early twentieth century, the railroads controlled critical infrastructure and excluded competitors from crucial markets. The railroad monopolies rested on enormous investments in physical infrastructure that could not be replicated.

After all these years, a clear message, while the regulator is still on vacation. 

 

 

 

Platforms, a business model (4)

 The Digital Platforms Handbook. How to transform any business into a digital platform and thrive in the digital age

Platforms, a business model (5)

 The Economics of Platforms. Concepts and Strategy

Platforms, a business model

Platform scale

Platform Scale (n): Business scale powered by the ability to leverage and orchestrate a global connected ecosystem of producers and consumers toward efficient value creation and exchange.

The new hype on business models is around platforms. Well, this is not new, a decade ago David Evans wrote Catalyst Code but its impact was limited. Now "Platform scale" and "Platform revolution" are the two required business books. If you want to understand the economic foundations go to "Platform Economics".
The topic requires more elaboration than a post in a blog. How this trend affects health care in practice remains to be seen.

The Platform Manifesto
1. The ecosystem is the new warehouse
2. The ecosystem is also the new supply chain
3. The network effect is the new driver for scale
4. Data is the new dollar
5. Community management is the new human resources management
6. Liquidity management is the new inventory control
7. Curation and reputation are the new quality control
8. User journeys are the new sales funnels
9. Distribution is the new destination
10. Behavior design is the new loyalty program
11. Data science is the new business process optimization
12. Social feedback is the new sales commission
13. Algorithms are the new decision makers
14. Real-time customization is the new market research
15. Plug-and-play is the new business development
16. The invisible hand is the new iron fist

 The book

Digitization

Digital Economics

If you want to get a description of what digital economics represents, this article in JEL is the one you have to read.

Digital economics explores how standard economic models change as certain costs fall substantially and perhaps approach zero. We emphasize how this shift in costs can be divided into five types:
(i) Lower search costs
(ii) Lower replication costs
(iii) Lower transportation costs
(iv) Lower tracking costs
(v) Lower verification costs 

Its impact in healthcare is starting right now. Platforms that allow communication between physicians and patients leverage such digital environments. However, all these platforms have admitted that personal contact can't be avoided. Right now, digital represents a small part. Everything will not be digital, at least in healthcare.

Boudin at Mapfre Foundation in Barcelona

Llums i ombres de la medicina genòmica a data d'avui

 Genomic medicines: the coming waves?

Miro Nature i m'explica l'estat actual de la medicina genòmica, en els seus tres apartats teràpia genètica, oligonucleotids regulatoris i edició genòmica. I diu: 

The approval of the pioneering gene therapy alipogene tiparvovec (Glybera) a decade ago fuelled expectations of a subsequent wave of other virally delivered gene therapies. However, these expectations have not yet been realized, and with ~30 setbacks for genomic medicine candidates in the past 3 years (Supplementary Table 1), of which more than 50% were due to safety concerns, the valuation of public genomic medicine companies has fallen significantly.

I aquest és el panorama:

 There are ~1,100 active clinical trials of genomic medicines (Fig. 1a). However, only ~20 genomic medicine products have been approved so far (Supplementary Table 2). Together, these treatments currently target <0.1% of the global population with genetic disorders.

Among the three main genomic medicine platforms we analysed, the pipeline for gene therapies is the largest (532 programmes), but regulatory oligonucleotides are the basis for the greatest number of marketed products (11 products marketed for 13 indications) (Fig. 1a, Supplementary Table 2). With regard to disease focus, 53% of programmes overall are for rare diseases; laterstage programmes are also more focused on rare diseases, including more than 80% of marketed products (Fig. 1b). With regard to delivery platforms, the dominant disclosed technologies are adeno-associated virus (AAV) vectors for gene therapies (72% of programmes) and genome editing (30% of programmes), and N-acetylgalactosamine (GalNAc) conjugation for siRNA (Fig. 1c).

I us preguntareu, perquè tant d'èmfasi en els oligonucleotids?  Doncs perquè són patentables més fàcilment. I aquí comença una història difícil d'assumir. Determinades indicacions i malalties poden ser objecte de menyspreu investigador en teràpies avançades fruit de que la impossibilitat de patentar-ho. Ens ho hem de fer mirar, quan més aviat millor.

Aquestes són les dades clau de capitalització del mercat, i mostren la caiguda recent en la capitalització global de les 114 empreses, les que han caigut menys són les de teràpia cel·lular.

I això és el que hi ha aprovat per ara, mireu la darrera columna, hi trobareu els preus...

I sobre preus diu: 

the current price of genomic medicines ranges from US$6,500 to $750,000 annually for

regulatory oligonucleotides, and $850,000 (for Luxturna) to $3,500,000 (for Hemgenix)

for gene therapy with a theoretical one-time dose (Supplementary Table 2). To make gene

therapy affordable to patients with rare disorders, and sufficiently competitively priced

for non-rare diseases to support substantial market penetration, novel reimbursement

strategies are probably needed.

Esdevé fonamental fer una reflexió sobre el moment actual i el que tenim al davant. És massa rellevant com per deixar-ho per un altra dia. Convé copsar quin és l'impacte que tindrà a la salut poblacional i als sistemes de salut.

 

Covid and social perspectives

 THE COVID-19 CRISIS. Social Perspectives

In Chapter 13

13 Post-pandemic Routes in the Context of Latin Countries: The Impact of COVID-19 in Italy and Spain by Anna Sendra, Jordi Farré, Alessandro Lovari and Linda Lombi

In terms of health and risk communication, the COVID crisis has emphasised the lack of specific training in crisis and emergency communication of many public sector organisations, including health institutions. This first social media pandemic has been a major challenge for health communicators; individuals often failed in effectively communicating data and numbers to counteract the infodemic and thus reduce the impact of false narratives. With the increasing diversification of social media platforms, ‘individuals’ health […] will be shaped by a multitude of social forces, each of which can mediate different kinds of health contagion processes’ (Zhang and Centola, 2019). Mitigating the spread of fake news seems to involve coordinated efforts between authorities, mass media and digital companies, but it also appears crucial to invest in education and digital literacy for developing a critical awareness of the use of digital technologies that could be useful for facing future health crises. In other words, the strengthening of comprehensive population-centred responses lies on finding answers concerning how the mechanisms of public concern will operate to engage in coherent protection rules or in what ways the forms of interaction will change

Outline of the book:

PART I: INTRODUCTION

1 COVID Society: Introduction to the Book

Deborah Lupton and Karen Willis

2. Contextualising COVID-19: Sociocultural Perspectives on Contagion

Deborah Lupton

PART II: SPACE, THE BODY AND MOBILITIES

3. Moving Target, Moving Parts: The Multiple Mobilities of the COVID-19 Pandemic

Nicola Burns, Luca Follis, Karolina Follis and Janine Morley

4. Physical Activity and Bodily Boundaries in Times of Pandemic

Holly Thorpe, Julie Brice and Marianne Clark

5. City Flows During Pandemics: Zooming in on Windows

Oimpia Mosteanu

6. The Politics of Touch-Based Help for Visually Impaired Persons During the COVID-19 Pandemic: An Autoethnographic Account

Hidi Lourens

PART III: INTIMACIES, SOCIALITIES AND CONNECTIONS

7. #DatingWhileDistancing: Dating Apps as Digital Health Technologies During the COVID-19 Pandemic

David Myles, Stefanie Duguay and Christopher Dietzel

8. ‘Unhome’ Sweet Home: The Construction of New Normalities in Italy During COVID-19

Veronica Moretti and Antonio Maturo

9. Queer and Crip Temporalities During COVID-19: Sexual Practices, Risk and Responsibility

Ryan Thorneycroft and Lucy Nicholas

10. Isol-AID, Art and Wellbeing: Posthuman Community Amid COVID-19

Marissa Willcox, Anna Hickey-Moody and Anne M. Harris

PART IV: HEALTHCARE PRACTICES AND SYSTEMS

11. Strange Times in Ireland: Death and the Meaning of Loss Under COVID-19

Jo Murphy-Lawless

12. Between an Ethics of Care and Scientific Uncertainty: Dilemmas of General Practitioners in Marseille

Romain Lutaud, Jeremy K. Ward, Gaëtan Gentile and Pierre Verger

13 Post-pandemic Routes in the Context of Latin Countries: The Impact of COVID-19 in Italy and Spain

Anna Sendra, Jordi Farré, Alessandro Lovari and Linda Lombi

14. Risky Work: Providing Healthcare in the Age of COVID-19

Karen Willis and Natasha Smallwood

PART V: MARGINALISATION AND DISCRIMINATION

15. The Plight of the Parent-Citizen? Examples of Resisting (Self-)Responsibilisation and Stigmatisation by Dutch Muslim Parents and Organisations During the COVID-19 Crisis

Alex Schenkels, Sakina Loukili and Paul Mutsaers

16. Anti-Asian Racism, Xenophobia and Asian American Health During COVID-19

Aggie J. Yellow Horse

17. Ageism and Risk During the Coronavirus Pandemic

Peta S. Cook, Cassie Curryer, Susan Banks, Barbara Barbosa Neves, Maho Omori, Annetta H. Mallon and Jack Lam

Platforms, a business model (6)

 Advanced Introduction to Platform Economics

The perfect storm of surveillance capitalism

THE AGE OF SURVEILLANCE CAPITALISM: The Fight for a Human Future at the New Frontier of Power

THE DEFINITION

1. A new economic order that claims human experience as free raw material for hidden commercial practices of extraction, prediction, and sales;

2. A parasitic economic logic in which the production of goods and services is subordinated to a new global architecture of behavioral modification;

3. A rogue mutation of capitalism marked by concentrations of wealth, knowledge, and power unprecedented in human history;

4. The foundational framework of a surveillance economy;

5. As significant a threat to human nature in the twenty-first century as industrial capitalism was to the natural world in the nineteenth and twentieth;

6. The origin of a new instrumentarian power that asserts dominance over society and presents startling challenges to market democracy;

7. A movement that aims to impose a new collective order based on total certainty;

8. An expropriation of critical human rights that is best understood as a coup from above: an overthrow of the people’s sovereignty.

Last month in my post on the book: Modern monopolies I wanted to highlight the current trend towards monopolies using platforms as a business model. Now you may add a complementary perspective with the book: The age of surveillance capitalism. While the former emphasizes the business perspective, the later focus on behavioral prediction surplus and how it is generated. It provides a social perspective of the current "surveillance capitalism". In my opinion there is a lot of current economy that already confirms this view, it is not a future expectation.

Our lives are rendered as behavioral data in the first place; ignorance is a condition of this ubiquitous rendition; decision rights vanish before one even knows that there is a decision to make; there is no exit, no voice, and no loyalty, only helplessness, resignation and psychic numbing; encryption is the only positive action left to discuss.

Surveillance capitalists take command of the essential questions that define knowledge, authority, and power in our time: Who knows? Who decides? Who decides who decides? 

As you may imagine, this is a book that once you started it's impossible to stop reading. Highly recommended if you want to understand current hot topics and social trends.
A perfect storm is an event in which a rare combination of circumstances drastically aggravates the event. This is exactly what we have right now in front of us, and as we are inside the wave we are not able to recognise what's going on.

Platforms, a business model (5)

 The Platform Delusion. WHO WINS AND WHO LOSES IN THE AGE OF TECH TITANS

The peril of media capture

 Media Capture. HOW MONEY, DIGITAL PLATFORMS, AND GOVERNMENTS CONTROL THE NEWS

Platforms, a business model (6)

 The Platform Paradox. How Digital Businesses Succeed in an Ever-Changing Global Marketplace

A plea for public patents on COVID prevention and treatment

 Funding of Pharmaceutical Innovation During and After the COVID-19 Pandemic

Extensive public investments also are being made in therapeutics. The 2 most prominent monoclonal antibodies (by Regeneron and Lilly) have come to market with substantial governmental support for product commercialization. Both products derive from therapeutic research platforms established with governmental support before the COVID-19 pandemic, but product commercialization and manufacturing received major additional investments in 2020. Separately, the National Institutes of Health (NIH) Rapid Acceleration of Diagnostics program has committed $1.5 billion to supporting development of diagnostic tests related to COVID-19. The specifics of the federal contracts largely remain confidential.

Why do they remain confidential? 

The lesson of the COVID-19 experience is that, when innovation in the life sciences is imperative, the traditional reliance on pharmaceutical industry prices and profits is jettisoned in favor of governmental grants and procurement. Sustained public funding for product development and commercialization will permit the sustained financing of innovation, a renewed attention to major public health needs, and the global position of the US pharmaceutical industry.

If there is public funding, why there aren't public patents? 

Behavioral response to the virus

Using Behavioural Science to Help Fight the Coronavirus

Main topics of the paper:

(1) Evidence on handwashing shows that education and information are not enough. Placing hand sanitisers and colourful signage in central locations (e.g. directly beyond doors, canteen entrances, the middle of entrance halls and lift lobbies) increases use substantially. All organisations and public buildings could adopt this cheap and effective practice.

(2) By contrast, we lack direct evidence on reducing face touching. Articulating new norms of acceptable behaviour (as for sneezing and coughing) and keeping tissues within arm’s reach could help.

(3) Isolation is likely to cause some distress and mental health problems, requiring additional services. Preparedness, through activating social networks, making concrete isolation plans, and becoming familiar with the process, helps. These supports are
important, as some people may try to avoid necessary isolation.

(4) Public-spirited behaviour is most likely when there is clear and frequent communication, strong group identity, and social disapproval for those who don’t comply. This has implications for language, leadership and day-to-day social interaction.

(5) Authorities often overestimate the risk of panic, but undesirable behaviours to watch out for are panic buying of key supplies. Communicating the social unacceptability of both could be part of a collective strategy.  

(6) Evidence links crisis communication to behaviour change. As well as speed, honesty and credibility, effective communication involves empathy and promoting useful individual actions and decisions. Using multiple platforms and tailoring message to
subgroups are beneficial too.

(7) Risk perceptions are easily biased. Highlighting single cases or using emotive language will increase bias. Risk is probably best communicated through numbers, with ranges to describe uncertainty, emphasizing that numbers in the middle are more likely. Stating a maximum, e.g. “up to X thousand”, will bias public perception. 

Healthcare built around you?

Bezonomics
How Amazon Is Changing Our Lives, and What the World's Companies Are Learning from It

Amazon Care

Atul Gawande departure from Haven, the alliance between Amazon, JP Morgan and Berkshire for developing health services for their workers has created uncertainty about what is really Amazon going to do.
Anyway, if you look at the web you can check what is already doing for their employees: Amazon Care. Here you'll find the FAQS. Up to now everybody was thinking about health goods and businesses that Amazon could provide (details in this report). Right now they have started a pilot of health system that may be developed anywhere. A platform business, that starts slowly with and app and a physicians group.
If you want to undestand what Amazon really means for the economy (and for healthcare) than a new book can provide you some answers: Bezonomics.

The global business world will eventually divide into two camps—those who adopt their own version of Bezonomics, and those who don’t. Alphabet, Facebook, Netflix, Alibaba, JD.com, and Tencent have built huge, powerful businesses based on their ability to collect and analyze data, and keep applying those learnings to make their businesses smarter and their offerings to customers more attractive. In their pursuit of AI-driven technologies such as voice and facial recognition, the Internet of Things, and robotics, they’re creating automated business models that will crush traditional businesses that fail to adapt to this new world. And the emergence of 5G technology, which will replace our current digital networks, will only widen the gap. Experts predict that this next generation of Internet connectivity will be as much as a hundred times faster than today’s web.

The impact that Bezonomics is having on society is just as profound. Some of the big tech companies are sowing discord with fake news, interfering with elections, and violating personal privacy. As Apple CEO Tim Cook put it: “If you’ve built a chaos factory, you can’t dodge responsibility for the chaos.” The global wealth gap has become so out of kilter that politicians in America and Europe have singled out Amazon and other big tech companies for blame. These wealth-creation machines have become so efficient at creating riches for their top employees and shareholders that they’re likely to engender more public outrage and become easy targets for regulators—perhaps in some cases even be broken up.

A must read. In my opinion, what really brings Bezonomics to healthcare is the largest expression of commercialism. In other words, healthcare built around excedent appropriation, not around the patient. If this is so (and Atul Gawande departure is a signal) then we all have to stand up against this model and create value and platforms based on professionalism.

Machine learning for clinical labs

 Machine Learning Takes Laboratory Automation to the Next Level

Good article on ML applications for microbiology lab.

There are two commercially available Food and Drug Administration (FDA)-approved microbiology laboratory automation platforms in the United States, namely, WASPLab (Copan Diagnostics Inc.) and Kiestra (Becton Dickinson) (6). Each system is highly customizable and consists of front-end processing, “smart” incubation according to laboratory protocol, and plate imaging. The processing unit performs medium selection, application of patient information and barcodes for tracking, medium inoculation, and plate streaking. Automation of these processes cuts down on and improves the consistency of repetitive tasks previously performed by technologists.

Image analysis software is not currently FDA approved, so the algorithm it deploys qualifies as a high-complexity laboratory-developed test when used to make definitive calls about microorganism presence/absence or culture significance. In this context, the end user need not understand the internal workings any more than they understand the inner workings of most computers. Additionally, as with most laboratory software, manufacturer assistance is provided in training the algorithm. Labs may, therefore, validate performance according to familiar sensitivity and specificity (for significant growth), precision and accuracy (for quantification), and procedural variation (coefficients of variation, Kappa statistics). As with any test, revalidation must be performed if components of the test change. The number of samples needed to train the algorithm (hundreds to thousands) will be algorithm dependent but easily available due to their common nature, facilitating both initial and revalidation using new plate images. Validation of machine learning image analysis for laboratory automation may, overall, be comparable to that performed for whole-slide imaging as used in histopathology, where the object of validation is a process as much as a machine (12) and where modest interobserver agreement may set a similarly modest benchmark for machine learning performance.

 Eivissa autèntica, Joaquim Gomis

Platforms, a business model (7)

 Platform Business Models. Frameworks, Concepts and Design