Platform Play among Incumbent Firms: The Wrong Focus? 

18 Pages Posted: 25 Apr 2017

See all articles by Nicolas van Zeebroeck

Nicolas van Zeebroeck

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, iCite

Jacques R. Bughin

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECORE) ; McKinsey & Company

Date Written: April 24, 2017

Abstract

Scholars have been investigating the quick emergence of digital platforms, essentially through the lens of digital native firms. If there is limited occurrence of platforms launched by incumbent firms such as Daimler (Car2Go, Moovel) or Johnson Controls (Panopix), the economics of their strategic responses through platforms by incumbents merit attention. This paper provides the first large-scale empirical evidence on the incidence, nature and profitability of incumbent platforms. Our contribution is threefold: (1) only 10 to 30% of incumbent firms have already engaged in some platform play, with substantial heterogeneity across industries, however; (2) incumbent firms engage in such strategies with a strong focus on their supply chain, suggesting that their platform initiatives are biased toward supply-side economies of scale, rather than demand-side; and (3) platform strategies contribute to revenue and/or profit growth only when they are combined with a priority attached to the demand-side of the business (i.e. customers, instead of the supply chain), typically through the unbundling or rebundling of products or services, and are part of an offensive digital strategy at scale. These results are robust to a Heckman-selection equation and a number of changes to the specification and key measures.

Keywords: Digital Transformation, Digital Strategy, Platforms, Incumbent Capabilities, Demand-Side Economies of Scale

JEL Classification: L22, L25, M15, O33

Suggested Citation

van Zeebroeck, Nicolas and Bughin, Jacques R., Platform Play among Incumbent Firms: The Wrong Focus?  (April 24, 2017). Available at SSRN: https://ssrn.com/abstract=2957554 or http://dx.doi.org/10.2139/ssrn.2957554

Nicolas Van Zeebroeck (Contact Author)

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, iCite ( email )

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HOME PAGE: http://www.vanzeebroeck.net

Jacques R. Bughin

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECORE) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
00 32 2 645 4230 (Phone)
00 32 2 646 4548 (Fax)

McKinsey & Company ( email )

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Brussels, Quebec 1050
Belgium

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