End Of Competition, The: The Impact Of The Network Economy. C N A Molenaar
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It regulates the relationships and provides arbitration in the event of disputes.
• This means that the platform can be used for arbitration without breaking the law.
• Small group of businesses and investors work for the platform; it is they who take the risk. They earn very well from this and, if the business is successful, will profit from the value that is activated on the (stock) market.
• Then there are also (small) companies that deliver goods for the platform. They are in fact mini-operators or consignees. Most of these will not be successful or profitable, though some will be very successful.
• There will be a number of employment relationships that involve long hours at the office and benefits such as healthcare, but most such relationships will be defined anew, resulting in the creation of jobs with very flexible hours but fewer of the traditional benefits. In the food delivery sector, there will be a large increase in the demand for food deliverers, boys and girls, to deliver these meals. In addition, possibly even a greater demand for cooks to prepare these meals. The deliverers are usually able to choose their own hours, and therefore work very flexible hours, but are hired mainly as freelancers and so do not enjoy many of the traditional employment conditions. We see this not only within food delivery companies but also clearly within transport companies (Uber) and parcel delivery services (post.nl).
• Repositioning of power in the economic system will happen.
• The manager or owner of a platform varies per platform. The differences are important as the distribution of the benefits varies per owner of the platform. Platforms such as Foodora and Deliveroo are a third party, but there are also restaurants that have started their own platforms for delivering meals. In such cases where a third party owns a platform, the restaurant benefits from more business. If the restaurant has its own platform, then the restaurant enjoys more commercial benefits as well as the advantage of customers loyal to the platform (Zysman and Kenney, 2016).
Bibliography
Choudary, S. P. (2018). The Architecture of Digital Labour Platforms: Policy Recommendations on Platform Design for Worker Well-Being. International Labour Office, Geneva.
Eisenmann, T., Parker, G., Van Alstyne, M. (October 2006). Strategies for two-sided markets, Harvard Business Review 84(10): 92–101.
Osterwalder, A. and Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Wiley, New Jersey.
Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press, New York, 557 p.
Van Alstyne, M. W., Parker, G., and Choudary, S. P. (2016). Pipelines, platforms, and the new rules of strategy, Harvard Business Review, April.
Zysman, J. and Kenney, M. (2016). The Next Phase in the Digital Revolution Platforms, Abundant Computing, Growth and Employment, 17 October 2016.
1Read, for example, Freeman, Joshua B. (2018). Behemoth: A History of the Factory and the Making of the Modern World, Norton & Company, New York.
2The computer service company RAET in Arnhem was initially part of Heidemaatschappij (1965) before it became independent. The name stood for Computer Centre for Administration, Efficiency and Technology.
3In telecommunication networks, a node is a junction, a redistribution point or a communication end point. The definition of a junction depends on the network and the protocol level to which it refers.
Chapter 3
The New Market Conditions *
The use of the Internet has changed the competitive relationships and the market conditions. As a result, it has become necessary for providers to go along with the innovation of one of the providers. When a provider successfully applies new technologies within the traditional business model, it can lead to lower costs in the so-called input–output model and in the processing. The application of the Internet can consequently reduce the price level or, if the market price forms the basis, lead to a higher profit margin. Other providers would have to tag along to ensure they do not fall behind the competition. This is a vicious circle; despite the innovation brought about by the Internet, this will only lead to an increasingly level playing field.
Do the Traditional Competition Models Restrict Innovation?
The old view that a business makes products and then sells them within the supply chain is no longer so relevant. Certainly not for the so-called non-daily products and for applications within the business-to-business (B2B) market. (Say’s law: supply creates its own demand, should actually be: demand creates its own supply.) Thanks to the enormous knowledge and information that purchasing parties can access, they can be much more selective in their purchasing decisions. Organisations should no longer have a sales focus but a purchasing focus. They should no longer first produce a product and then try to find a market for it. They should instead start with the customer: what do they want, who are they, how have they changed and what motivates their decisions. This shift from a production orientation to a customer orientation results in the following:
• companies that gear products better to the needs of (often individual) customers;
• greater satisfaction;
• the creation of loyalty;
• a more concentrated strategy for businesses.
I will take a closer look at this customer focus when I later analyse the model of Treacy and Wiersema as well as during the assessment of various models.
Porter observes the market and product-related factors. He looks at, for example, the availability of replacement products, but does not ask himself whether these products lead to the same loyalty with consumers (customers). Nor whether preferences in the future will change, allowing a company to prepare for this change (just look at the examples of both Kodak and Nokia). This is actually the general criticism levelled at Porter’s model as well as other competition models that are based on the supply. In the traditional market, which is very dynamic and characterised by a dynamic demand, different conditions apply. Companies should take advantage of the opportunities available, but they are constantly on the defensive. This results in a less effective strategy. There are plenty of examples of this strong focus on products and traditional markets, such as Kodak, Nokia, retailers on the high street and travel agencies. The traditional strength of companies is collaboration in a network based on one’s own added value. A purchase/customer focus based on engagement requires a different type of strategy (customer-oriented), a different type of organisation (agile, flexible) and a different supply proposition and value exchange (based on customer needs). By now focusing on increasing their value, companies have to dispose of divisions that do not contribute to this. Traditional outdated competition models, which are still based on supply, stand in the way of innovation and change. If companies continue to hang on to those competition models for too long, they will quickly fall behind the competition and find themselves separated from the new entrants by a chasm that will be impossible to bridge.
Will the Rivalry between Providers (Competitors) Change?
The first modification I would like to make relates to the ‘Rivalry between traditional competitors’. This component is best suited to a product-oriented supply chain, aimed at defending market share. Competition has always been regarded as something negative, while these days we see collaboration with competitors based on added value. One should not look at who is a competitor and how a company can compete against them. Rather, one should