Kim Hiort NielsenThe Digital transformation – platforms and network effects Date:

What’s putting the world’s top executives on edge?

CxOs expect industry convergence to have the biggest impact on their business

Total CEO CFO CHRO CIO CMO COO

70%

60%

50%

40%

30%

20%

10%

0%

Industry convergence

The “anywhere” workplace

Rising cyber riskThe redistribution of consumer purchasing powerThe sustainability imperativeAlternative finance and financing mechanismsThe sharing economy

Top trends to impact business (in 3 to 5 years)

External forces impacting the enterprise (in 3 to 5 years)

For the first time, the entire C-suite selected technology as the main game changer

Technologyfactors

Marketfactors

Regulatoryconcerns

Macro-economicfactors

People skills

Socio-economicfactors

Globalization

Geopolitical factors

Environmentalissues

72% 71%

55%

51%

48%

34%

31% 31%

27%

The technologies that CxOs expect to revolutionize business tomorrow are already in play today

Cloud computing and servicesMobile solutionsInternet of Things (IoT)Cognitive computingAdvanced manufacturing technologiesNew energy sources and solutionsBioengineeringMan-machine hybrids

63%

61%

57%

37%

28%

23%

12%

10%

Technologies revolutionizing business (in 3 to 5 years)

Market disruptions New markets

New business models

InterBrand: Best Global Brands

These Grew Fastest

These Grew Fastest

Industry

Platform

No Yes

$50B

Valuation ($B)

$50B

Valuation ($B)

eCommerce/MarketplaceTransportation

FintechInternet Software & Services

SocialHealthcare

FacilitiesMobile Software & Services

AdtechMedia

GamingReal Estate

Big DataClothing & Accessories

CybersecurityFilm & Video

GreentechHardware

Other TransportationVR/AR

Platforms = 80 of 115 firms worth $1,000,000,000+

1995 2000 2005 2010 2015Year

1

2

5

10

20

50

Valuation ($B)

Airbnb

Appnexus

InMobiPanshi

Avito.ru

BeiBei

Blue Apron

Dianping

Fanatics

FanliFarfetch

Flipkart

Meituan

Snapdeal

Tujia

VANCL

WeWork

Credit Karma

Lakala

Lufax

One97 Communications

Square

Stripe

Zenefits

Proteus Digital Health

Theranos

Atlassian

DocuSign

Dropbox

Evernote

Spotify

SurveyMonkey

Yello Mobile

Snapchat

Kuaidi Dache*

Uber

Source: P. Evans, CGE; CB Insights, Capital IQ, CrunchBase, 2015

The Product Business Model is Broken

The Product Business Model is Broken

In 2009, BlackBerry had nearly 50% market share in U.S. operating systems, according

to IDC. Now: 2.1%

2008 2009 2010 2011 2012 2013

50%

40%

30%

20%

10%

0%

1980-2000 Microsoft Platform Beats Apple Product

Apple launched the PC revolution but Microsoft licensed widely, built a huge developer ecosystem, 6X larger.

Apple Feb 5, 1996

Michael Dell - ”Shut it down and give the money back to

the shareholders.”

These Grew Fastest

Nike Builds a Biz Platform

Network EffectsValue rises as more people use the

platform

Metcalfe’s Law

Each Side Attracts More of the Other

eBay BuyersUber RidersXbox GamersAmex CardHoldersAga Khan PatientsYouTube ViewersAirBnb RentersTesla Car DriversMechanical Turk JobsLinkedIn EmployeesAndroid Users

eBay SellersUber Drivers

Xbox DevelopersAmex Merchants

Aga Khan DoctorsYouTube Videographers

AirBnb RoomsTesla Charge Stations

Mechanical Turk LaborersLinkedIn EmployersAndroid Developers

In any market with network effects, the focus of attention must shift from

inside to outside the firm.Reason: You can’t scale network effects inside as easily as outside.

Source: Marshall Van Alstyne

To have an external focus,

you must have an API strategy.

... this implies ...

and growth is accelerating dramatically

APIs represent a new, fast-growing channel opportunity

Business models are evolving

stores (800) ###s web sites web APIs

According to Gartner, by 2016, 75% of the top 50 global banks will have launched an API platform By 2016, 50% of B2B collaboration will take place through Web APIs.

Sources: Gartner, Predicts 2012: Application Development, 4Q, 2011; Gartner, Govern Your Services and Manage Your APIs with Application Services Governance, 4Q 2012; Gartner, Open for Business: Learn to Profit by Open Data, 1Q 2012

APIs are a path to new business opportunitiesWeb APIs are the new, fast-growing business channel

Businesses are Evolving

stores (800) ###s web sites

Exposing systems of record to Mobile

apps

• Enterprises are taking existing businesses into the mobile world. Their data resides on-premise. For mobile apps to be interesting & useful, they need access to this on-premise data.

• APIs provide a secure and simple way to allow mobile apps to access existing on-premise data.

Accelerate internal development

• APIs don’t always have to be exposed to the world. Many companies build much of their internal code in form of APIs, for reusability.

• Result: a library of useful components that can be reused to greatly accelerate app development

Expand the reach of your business

• Increasingly, businesses are expecting to consume your product/service in the context of other related services. This means interacting with your business not through your web page or store, but through APIs

• APIs enable partners, entrepreneurs, developers to build/embed your service into theirs

Build hybrid cloud applications

• The canonical hybrid cloud app resides in the public cloud, and accesses data that must remain on-premise for legal, security, regulatory reasons.

• APIs provide a secure and simple way to allow hybrid cloud apps to access on-premise data

Monetize data and services

• Businesses often have high-value data and services that they can provide and sell to others• Peugeot (French auto manufacturer) sells their connected car data to external business partners

via APIs, resulting in a new revenue stream

1

2

3

4

5

What are some common use cases in the API Economy?

• Estimate global taxi market• Estimate market share• Est. risk adjusted cash flow• Consider proprietary methods, barriers

to competition

• Value: $5.9 Billion

Aswath Damodaran: NYU Finance professor, Corporate Valuation author, Herb Simon Prize.

Bill Gurley: Venture Capitalist, OpenTable, Zillow, Uber

All true but overlooking network effects.

Source: David Sacks, COO PayPal, CEO Yammer

Value: $17 Billion

Platforms Unlock New Value from Spare Resources

and User Generated Content

What Changes :: Supply Chains

AirBnb sells users’ spare rooms, competing with hotels that must own them

RelayRides sells users’ spare cars, competing with rental firms that must

own them

Instagram sold for $1B not because of contributions from 13 employees

but from 30 million users

2005

2013

’’In 2015, Uber, the world’s largest taxi company owns no vehicles, Facebook the world’s most popular media owner creates no content, Alibaba the most valuable retailer has no inventory, and Airbnb the world’s largest hotelier owns no real estate.’’

Tom Goodwin, Sr. VP of Strategy Havas Media

Why are the old competitors not the new competitors?

Isn’t afraid of …

publishing

broadcast

electronics

cars

watches

delivery

+

but should fear …

Disruptions in Pharma

• Empowered patients• Health Gamification• Argumented reality and virtul reality• Genomics and truly personalized medicine• Body sensors• 'Do it yourself' biotechnology • 3D printing revolution • End of human experimentation • Medical decision making with artificial intelligence• Nanorobots

What’s Next?

City as Platform

Energy/Smart Grid as Platform

Education as Platform

Healthcare as Platform

Xellia / Pharma as a platform

Developers

Suppliers

Patients

Universities / research facilities

Assets core but sorrounding by a continous evolving network

Startups/entrepreneurs

Gamers

Manufactors