Teaching Platforms and Ecosystems
Figure 1. The cover image depicting buildings of the MIT Sloan School of Management set in Naples was generated by a GAN algorithm
Resources, Competences, Dynamic Capabilities and Competitive Advantage (in a Creative Economy)
December 19–20, 2022.
How has the “Resource Based” approach to corporate strategy evolved over time?
What is the significance of “Dynamic Capabilities” (related to the ability to change and learn quickly) in an “Economy of Creativity” where Artificial Intelligence technologies emerge with their disruptive potential?
What new organizational and business models are capable of enabling the implementation and execution of more “agile” strategies?
Within the MEIM Master’s program, a collaboration between the Parthenope University of Naples and the MIT Sloan School of Management, two seminar days were dedicated to seeking answers to these questions, together with the course participants.
First teaching unit: The advent of digital platforms, December 19, 2022.
The course began with the extraordinary opportunity, offered by Professor Marco Ferretti to the students, to listen to one of the most influential thinkers from the Sloan School of Management: Professor Michael Cusumano. Cusumano’s contribution to management studies has been extraordinary since the early 1990s. As a leading scholar during those years, he studied the changes in the automotive industry and software production. The MIT professor was the first to recognize the parallel between what was happening with Lean Manufacturing in the automobile industry and the transformation of the software industry, which introduced “agile” principles in product development projects.
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Cusumano’s vision and appoach stood out from that of other scholars in Operations Management and Operations Strategy because he grasped, at a higher level of generalization, the strategic nature of the revolution that was taking place, even before considering the production organization aspect.
During the meeting with Michael Cusumano, the students had the opportunity to reflect on Platform Strategies (with their multiple possibilities and implementation differences) and the transformative role they assume in the business ecosystem of transactions and of innovation. The platform model emerges as a “strategically agile” response and a forerunner of radical innovation, addressing both the need for stability in the extended enterprise ecosystem (where the integrating company, supply chain, and partners cooperate) and the need for speed of change (shortening product life cycles and time to market, continuous development and refresh of product and service ranges). This response requires minimal levels and costs of hierarchical and bureaucratic coordination, the ability to promptly respond to demand triggers (pull and not just push), the ability to achieve economies of scope rather than just scale, and the ability to increase the share of value provided by services relative to that of products.
In the business platform model, the concept of distinctive capabilities — as discussed with the students — encompasses a set of “static” capabilities (built to last) that become stable infrastructure within the platform, and a set of dynamic capabilities (built to change) contributed by small creative enterprises that thrive in the ecosystem like fertile soil and rely on the platform as their launching pad and essential vector to reach the larger market.
Once the critical success factors in platform competition were clarified, the seminar focused on emphasizing the importance of capability analysis in strategy formulation. In the second part, we will revisit some key points discussed in the seminar.
Second teaching unit. Platforms in entertainment industry (December 19, afternoon)
After benefiting from the enlightening contribution of Professor Michael Cusumano from the MIT Sloan School of Management, who highlighted the characteristics of a platform economy, the students of the MEIM master’s program sought these traits in a rapidly growing sector of the “creative economy”: entertainment. An industry that thrives on the time and attention of viewers, and today sees a few major global platforms (such as streaming platforms) as key players in competition with traditional producers, with significant upstream integration. In this sector, the product and value lie in the creativity of content creators — directors, screenwriters, set designers, costume designers, musicians, sound engineers, lighting technicians, special effects artists, and more. Typically, this creativity reached the mainstream market through a value chain that involved film and television producers, publishers (for books and magazines), broadcasting networks, cinemas, book distributors, and retailers (such as bookstores and Amazon in its early years) between the author and the audience.
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Starting from the observation of the streaming platform revolution, the students were invited to look ahead and delve into the analysis of some innovative production and distribution models. The case study they worked on focused on the project and business model of a Decentralized Autonomous Organization (DAO) created on the Discord platform, which involves a large number of creatives from around the world. The case study revolved around “2137AD — Under a Green Sky,” a global-scale multimedia ecosystem project with the goal of creating, within a couple of years, a sci-fi TV series, a mobile game, a PC game, at least three collections of Non-Fungible Tokens (NFTs), a project-associated token, merchandise, two graphic novels, and the beginning of a dedicated metaverse.
The intellectual property rights of all these elements will serve as the basis for building a Decentralized Autonomous Organization (DAO) in which interested parties, as contributors of ideas and content developers, can participate. Each participant will potentially profit from the rights associated with the sale of the project’s envisioned products. This organized production disrupts the entertainment value chain by bypassing intermediaries (such as Netflix, Amazon, Disney, etc.) that typically provide substantial investments to produce content in exchange for substantial profits derived from wide-scale distribution.
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The discussion of the case study was conducted in connection with the founder of the DAO, Luigi Forlai, with whom the focus was also placed on the impact that artificial intelligence is having on the project, particularly in supporting the production of artworks. This process is typically expensive and limits the evaluation to a narrow range of proposals provided by creators. Luigi Forlai further emphasized the impact that artificial intelligence will have on the creative economy and, more broadly, in all sectors where intelligent chatbots transform human interactions with artificial entities, potentially disrupting major platform businesses.
To exemplify the concept of an ecosystem, continuous reference has been made to the Apple case. The Cupertino company builds its platform on a vast number of users and devices that operate in connection and synergy. In the context of entertainment and the new businesses emerging in the logic of metaverses and web3, the students were asked to discuss the advent of the virtual and augmented reality industry. The project of launching an Apple “viewer” was analyzed to identify potential factors of success and failure for the new product or rather, the new ecosystem. I will provide more details on this topic in another post.
The third part of the seminar was dedicated to the automotive production supply chain, revisiting some topics in which Michael Cusumano made a significant contribution in the 1990s.
Third teaching unit. (December 20, morning)
The final teaching unit of the course focused on innovation in the supply chains of mature industries. We wanted to highlight the work done by Michael Cusumano in the automotive industry since the 1990s. The question we asked ourselves was: where does innovation originate today in the extended enterprise model that characterizes the automotive industry? Increasingly, every project for a new vehicle is the project of a platform and a business and innovation ecosystem that consists of what was traditionally considered the supply chain where manufacturing activities take place.
The students had the opportunity to analyze the history of strategic choices made over a period of about twenty years by a major international automotive component company. In particular, they examined the production of custom-designed seats (build to print) for automobile manufacturers. From expanding the range of “build to print” products offered to manufacturers to identifying distinctive capabilities in the field of ideation and interior design as innovation partners for manufacturers (i.e., providers of creative solutions) in new vehicle projects. These creative capabilities have been developed over time, focusing on the knowledge and design of the best driving experience and passenger comfort.
Some slides projected during the third teaching unit:
As an evolution of the “Resource-Based” approach to strategy, in the last teaching unit, the importance of identifying a coherent combination of distinctive capabilities that support each other as the basis for every strategic move (Booz&Co) was emphasized. The conclusion of the course focused on the concept of “dynamic capabilities,” which involve the ability to recognize new opportunities and learn by developing new capabilities (and unlearn what is obsolete). In line with the idea of the firm’s “ambidexterity” (BCG), it is necessary to cultivate both the exploitation of current capabilities suited to existing opportunities and the exploration aimed at developing new capabilities for new windows of opportunity that may arise. The platform business model, presented by Michael Cusumano, represents a response to the need for dynamism in solution development associated with the demand for stability in the innovation ecosystem.
In the examples given, drawing on the concept from Cusumano’s lesson, it was emphasized that a platform or ecosystem business, if successful, has the potential to capture practically the entire market because its strength lies in the vastness of the network it creates. To win the entire stake, it is essential for the expansion of the network to occur at a faster and more effective pace than that of a competing platform. This effect was discussed in the context of an automotive project (like Porsche’s), Apple’s ecosystem, and the entertainment industry where Netflix operates.
