End Of Competition, The: The Impact Of The Network Economy. C N A Molenaar
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double-edged sword; it is not the large hotels that profit from the tourists but private individuals and small and medium-sized businesses. The traditional providers, such as hotels, can still offer customers what they have always provided when it comes to ‘all the bells and whistles’ if that’s what they want. But for them, too, it is advisable to consider one’s own proposition and come up with a vision of the new structure. After all, that’s what the ‘guests’ want.
Tourism is becoming an evermore important economic motor for employment and prosperity. In Amsterdam, some 70,000 people work in tourism. The network economy is not only technical but also physical. People travel more and look for new experiences. The Internet and the real-world influence one another; the network economy and the individualisation in society are parallel developments, both influencing one another. Hotels are hindered not only by Airbnb but also by booking sites such as Booking.com and Trivago. If hotels use these sites for reservations, they have to pay a fee; it becomes increasingly difficult to compete independently. However, competition is actually possible on a platform such as Booking.com. Here the supply is presented on the basis of search criteria entered by the customers. For hotels it all comes down to being able to offer something distinctive. For this service, i.e., mediation and marketing, you have to pay a margin, but you do get (many more) customers as a result. The platform in effect becomes the ‘market’. You compete on the platform, not with the platform. Platforms acquire a dominant market position, but within the platform, the competition between the suppliers is open.
The following are just a few examples of developments that are possible due to the network economy:
• bundling supply;
• facilitating interactivity;
• taking advantage of the technological possibilities.
Particularly the strength of the so-called multisided platforms, which mediate between supply and demand on the basis of needs, ensures for different competitive relationships. These occur on a global scale where local markets are connected directly, not on the basis of geography but on the basis of users, suppliers or customers. It used to be inconceivable that local shops would have to compete with shops in America or China or that we would be able to have direct contact with our friends anywhere in the world, and even be able to have direct visual communication with them through various types of video-streaming services.
A platform is a collaboration between parties, and the various types of platforms are as follows:
• demand-driven platforms, the mediator between demand and supply;
• aggregators (the bundling of supply) whose aim is to sell on behalf of various parties;
• information platforms whose aim is to provide specific objective answers to questions (for example, regarding science, health or tourist information);
• communication platforms that set up the communication between visitors, for example Facebook, as well as video platforms such as YouTube.
In a platform business model, value is created by the owner of the platform as an independent intermediary, by matching two (or more) mutually dependent parties, as well as connecting them and facilitating the direct interaction between these parties.
This network economy forms the basis for many changes. Some changes, such as the above-mentioned platforms, can already be seen and are leading to disruption in markets. Other applications have just been introduced or are yet to be introduced (such as blockchain). These will have a disruptive impact, but what can you do as a traditional supplier? Nothing, change or join other successful parties? The forces involved are quite considerable — from suppliers in Silicon Valley with plenty of money to consumers who adopt quickly. The decision is actually taken for you, with the market leaders becoming more dominant than they ever were. We can see the end of competition in its traditional form. But is that a bad thing? Are the advantages of traditional competition such that it should be maintained or will competition take place at other levels and in different ways? Old legislation from another era stands in the way of progress. Perhaps it is a good idea to see what has happened in the past and to examine the greatest drives behind the changes.
How Did We Get Here?
Traditional society is based on an analogue approach, often on physical principles. Society has changed slowly, and only major shocks have had any impact on the circumstances. Wars (such as the Second World War) have led to changes, but it is particularly the application of technology that has resulted in major societal changes. Technological developments continued to form the basis for not only change but also the foundation for economic growth, efficiency in the production process and international trade.
The First Industrial Revolution1 in the 18th century, with the steam engine and mechanisation, resulted in the emergence of factories and subsequent major social demographic changes. The infrastructure was adapted, too, in order to enable train traffic (initially in England). The agricultural society changed, with many nouveau riche emerging (factory owners) as well as new dependants (the workers). This divergence led to undesirable situations such as poverty and dependency. The largest motors behind this change were transport, logistics and machinery (first powered by water and then later steam). International trade started to flourish (with England leading the way), and the technological foundation (factories) ensured for a more efficient production process and growth (albeit limited) of prosperity. This prosperity was, however, unfortunately not evenly distributed among the various population groups.
The most important changes were as follows:
• machines substituting manpower (e.g., for textiles);
• new forms of power production (e.g., waterpower, steam engines);
• use and processing of new materials in different ways (such as cotton and linen).
The Second Industrial Revolution started at the end of the 19th century, with the application of technology in new forms of transport: the car and the airplane. The world consequently became smaller and the physical infrastructure was modified again, with roads alongside railways. Technological changes in turn led to a chain reaction and to changes in society. The introduction of electricity around the turn-of-the-century, i.e., from the late 19th to the early 20th century, also resulted in a disruptive change. ‘The end of night’ became a reality, increasing the length of days and making new developments possible. The new inventions that arose from this, such as the telegraph and telephone, made the world even smaller and led to new forms of communication. First the newspapers were published; this was quickly followed by the invention of the radio.
The motors of change were the technologies (which sped up and improved mobility), the distribution of information and new forms of communication. International trade became evermore important and prosperity increased. America led the way, while the new discoveries resulted in further prosperity and a new elite (the owners of the machines).
The most important changes were as follows:
• a broader impact of technology on society;
• the application of the combustion engine (cars, aviation, machinery);
• mass production through further industrialisation and applications in the processing industry.
The Third Industrial Revolution started in the 1960s with the emergence and application of computers. These computers initially had a facilitative function and enabled greater efficiency by taking over certain tasks; manual work became automated. The areas in which the computers were applied changed particularly in the 1970s and the decades that followed. Automation increasingly developed into computerisation (information technology (IT)), making information more accessible and improving the communication medium. This development heralded the disruptive changes that were in store for many facets of our daily lives. It also meant the start of the service sector. Due to the increased computerisation, the decision-making process