“Software is eating the world” said Netscape founder Marc Andreessen in his Wall Street Journal 2011 op-ed to describe how digital technology has transformed the world of business. We divide the disruption into two stages; efficient pipelines disrupting inefficient pipelines and platforms disrupting pipelines. Most Internet applications during the 1990s involved the creation of highly efficient pipelines—online systems for distributing goods and services that out-competed incumbent industries. Online pipelines tended to have very low marginal costs of distribution—sometimes as low as zero. This allowed them to target and serve large markets with much smaller investment. We are now in stage two where platforms disrupt pipelines. They bring news sources of supply to market, change value consumption by facilitating new forms of consumer behavior, change quality control through crowd sourced curation, and bring new market middlemen by aggregating fragmented markets.

1. Geoffrey Parker
Dartmouth College
@g2parker
Marshall Van Alstyne
Boston University
@InfoEcon
Chapter 4
Disruption
Platform Revolution: Making Networked Markets Work for You
Questrom School of Business
2016 Parker & Van Alstyne with Choudary –
licensed under Creative Commons Attribution-
ShareAlike 4.0 Int’l (CC BY-SA 4.0).
Sangeet Choudary
Platform Thinking Labs
@sanguit

2. 1. Introduction: Welcome to Platform World
2. Network Effects: The Power of the Platform
3. Architecture: Basic Principles for Designing Successful Platforms
4. Disruption: How Platforms Conquer &Transform Traditional Industries
5. Launch: Chicken or Egg? 8 Ways To Launch Successful Platforms
6. Monetization: Capturing the Value Created by Network Effects
7. Openness: Defining What Platform Users/Partners Can &Cannot Do
8. Governance: Policies That Increase Value and Enhance Growth
9. Metrics: How Platform Managers Can Measure What Really Matters
10. Strategy: How Platforms Change Competition
11. Policy: How Platforms Should (and Should Not) Be Regulated
12. Future: Industries Facing Imminent Change
Platform Revolution: Chapter 4 - Disruption
(click to order on Amazon)
2016 Parker & Van Alstyne – licensed under
Creative Commons Attribution-ShareAlike 4.0
International (CC BY-SA 4.0).
2016 Parker & Van Alstyne, with Choudary – licensed under
Creative Commons Attribution-ShareAlike 4.0 International (CC BY-
SA 4.0).

3. 2016 Parker & Van Alstyne – licensed under
Creative Commons Attribution-ShareAlike 4.0
International (CC BY-SA 4.0).
Pathway to disruption: online pipes’ superior marginal economics of production & distribution
https://www.poynter.org/2012/times-picayune-confirms-
end-of-daily-publication/175038/
http://newspaperdeathwatch.com
/pittsburgh-post-gazette-hikes-
prices-even-as-circulation-
plummets/
http://www.nbcnews.com/id/22452666/ns/business-
us_business/t/cincinnati-post-stops-press-after-years/
Disruption Past: Efficient pipelines disrupt inefficient pipelines
Newspapers under tremendous pressure

4. 2016 Parker & Van Alstyne – licensed under
Creative Commons Attribution-ShareAlike 4.0
International (CC BY-SA 4.0).
http://articles.latimes.com/2013/nov/06/
entertainment/la-et-mn-blockbuster-
video-stores-closing-20131106
Disruption Past: Efficient pipelines disrupt inefficient pipelines
Media retailers under tremendous pressure
Pathway to disruption: online pipes’ superior marginal economics of production & distribution

5. Disruption Stage 2 - Platforms disrupt pipelines
Emergence of Platforms into traditional print news and classified markets
Path: Aggregation; Classified Ad Revenue
Superior economics: Social Curation

6. Path: Low cost new supply; fixed costs covered, low variable costs
Problem Solved: Trust/Insurance
Disruption Stage 2 - Platforms disrupt pipelines
Airbnb lists rooms without having to commit capital

7. Path: New Supply; Break the Bundle.
Problem To Solve: Certification
Disruption Stage 2 - Platforms disrupt pipelines
Traditional Bricks and Mortar Schools under pressure

8. Disruption Future: Professional & Financial Services
Path: Bypass Gatekeepers.
Problem To Solve: Regulatory Restrictions
http://apptology.com/blog/tag/blockchain/

9. Disruption Future: Distributed Energy Resources
http://www.siliconvalley.com/2015/0
2/25/solarcity-and-google-partner-
on-750-million-solar-fund-largest-of-
its-kind/
http://www.intechopen.com/boo
ks/progress-in-gas-turbine-
performance/micro-gas-turbine-
engine-a-review https://www.tesla.com/powerwall

10. PLATFORM SPONSOR
System Status by time & location
Prices by time & location
Ecosystem Rules Architecture
Disruption Future: A Platform Distributed for Energy Resources
Platform
Provider/Distribution System
Adjacent
Service
Providers
Household
RetailESCOs
Facilitate user role change
Government/
Commercial
Industrial
Supply:
Bulk Power
& DER
http://scholarspace.manoa.hawaii.edu/bitstream/10125/41519/1/paper0370.pdf
Path: New Supply; Market Aggregation.
Problems To Solve: Launch, Federal vs. State Regulations

11. Why Now? Dramatic increase in computational power
http://aiimpacts.org/trends-in-
the-cost-of-computing/

12. Why Now? Many new users and devices!
http://mobilemarketingmagazine.co
m/four-connected-devices-per-
person-worldwide-by-2020/

13. Why Now? New Behavior

14. TAKEAWAYS FROM CHAPTER FOUR
The disruption of business by the Internet has proceeded through two stages. In stage one, efficient pipelines ate
inefficient pipelines. In stage two, platforms eat pipelines.
Platforms are able to outcompete pipelines because of their superior marginal economics and because of the value
produced by positive network effects. As a result, platforms are growing faster than pipelines and taking leading
positions in industries once dominated by pipelines.
The rise of platforms is also disrupting business in other ways. It is reconfiguring value creation to tap new sources
of supply; reconfiguring value consumption by enabling new forms of consumer behavior; and reconfiguring quality
control through community-driven curation.
The rise of platforms is also causing structural changes in many industries—specifically, through the phenomena of
re-intermediation and market aggregation.
Incumbent companies can fight back against platform-driven disruption by studying their own industries through a
platform lens and beginning to build their own value-creating ecosystems, as Nike and GE are doing.
2016 Parker & Van Alstyne – licensed under
Creative Commons Attribution-ShareAlike 4.0
International (CC BY-SA 4.0).

15. Platform Revolution:
Next Chapter 5 – Launch
1. Introduction: Welcome to Platform World
2. Network Effects: The Power of the Platform
3. Architecture: Basic Principles for Designing Successful Platforms
4. Disruption: How Platforms Conquer &Transform Traditional Industries
5. Launch: Chicken or Egg? 8 Ways To Launch Successful Platforms
6. Monetization: Capturing the Value Created by Network Effects
7. Openness: Defining What Platform Users/Partners Can &Cannot Do
8. Governance: Policies That Increase Value and Enhance Growth
9. Metrics: How Platform Managers Can Measure What Really Matters
10. Strategy: How Platforms Change Competition
11. Policy: How Platforms Should (and Should Not) Be Regulated
12. Future: Industries Facing Imminent Change
(Click on left hand icons to access content)
2016 Parker & Van Alstyne, with Choudary – licensed under
Creative Commons Attribution-ShareAlike 4.0 International (CC BY-
SA 4.0).

16. For More Chapter 4 Information
Suggested background: MBA Course Readings
1. David Ferris, Jeffrey Tomich and Edward Klump, "NRG's David Crane wants to rule -- and
overthrow." EnergyWire: Tuesday, September 9, 2014.
http://www.eenews.net/stories/1060005411
2. Charles Moldow. "A Trillion Dollar Market By the People, For the People: How Marketplace
Lending Will Remake Banking As We Know It." Foundation Capital Whitepaper
3. Marc Andreessen, “Why Software Is Eating the World,” Wall Street Journal, August 20,
2011, http://www.wsj.com/articles/SB10001424053111903480904576512250915629460.
4. Arun Sundararajan, “From Zipcar to the Sharing Economy,” Harvard Business Review,
January 3, 2013, https://hbr.org/2013/01/from-zipcar-to-the-sharing-eco/
5. Dan Charles, “In Search of a Drought Strategy, California Looks Down Under,” The Salt, NPR,
August 19, 2015, http://www.npr.org/sections/thesalt/2015/08/19/432885101/in-search-
of-salvation-from-drought-california-looks-down-under.
6. Jason Tanz, “How Airbnb and Lyft Finally Got Americans to Trust Each Other,” Wired, April
23, 2014, http://www.wired.com/2014/04/trust-in-the-share-economy/.
Geoffrey Parker
@g2parker
Marshall Van Alstyne
@InfoEcon
2016 Parker & Van Alstyne, with Choudary – licensed under
Creative Commons Attribution-ShareAlike 4.0 International (CC BY-
SA 4.0).

17. For More Chapter 4 Information
Suggested background: PhD Course Readings
1. Hemant K. Bhargava and Vidyanand Choudhary, “Economics of an Information Intermediary
with Aggregation Benefits,” Information Systems Research 15, no. 1 (2004): 22– 36.
2. Marco Ceccagnoli, Chris Forman, Peng Huang, and D. J. Wu, “Cocreation of Value in a
Platform Ecosystem: The Case of Enterprise Software,” MIS Quarterly 36, no. 1 (2012): 263–
90.
3. Thomas Eisenmann, Geoffrey Parker, Marshall Van Alstyne, "Platform Envelopment,”
Strategic Management Journal 32 (2011).
4. Peter C. Evans and Marco Annunziata, “Industrial Internet: Pushing the Boundaries of Minds
and Machines,” General Electric, November 26, 2012, http:// www.ge.com/ docs/ chapters/
Industrial_Internet.pdf.
5. Feng Zhu and Marco Iansiti, “Entry into Platform-Based Markets,” Strategic Management
Journal 33, no. 1 (2012): 88– 106.
6. Richard Tabors, Michael Caramanis, Elli Ntakou, Geoffrey Parker, Marshall Van Alstyne, Paul
Centolella, Rick Hornby (2016), “Distributed Energy Resources: New Markets and New
Products.”
Geoffrey Parker
@g2parker
Marshall Van Alstyne
@InfoEcon
2016 Parker & Van Alstyne, with Choudary – licensed under
Creative Commons Attribution-ShareAlike 4.0 International (CC BY-
SA 4.0).

18. For More Chapter 4 Information
Suggested video for disruption
1. Platform Revolution - Lecture at MIT Platform Symposium - Geoff Parker
https://www.youtube.com/watch?v=F-EJrG3J4GQ
2. Platform Revolution - MIT Initiative on the Digital Economy - Marshall Van Alstyne
https://www.youtube.com/watch?v=jfd3k4VUYh4&t=817s
3. Four forms of market-driven disruption - Sangeet Paul Choudary
https://www.youtube.com/watch?v=32nTvAzS8Tg
2016 Parker & Van Alstyne, with Choudary – licensed under
Creative Commons Attribution-ShareAlike 4.0 International (CC BY-
SA 4.0).

19. Platform Revolution
Author video links
1. Geoff Parker
https://www.youtube.com/playlist?list=PLMMkE0nV-WxySm4apD9EsOFXHjgc5mMdP
2. Marshall Van Alstyne
https://www.youtube.com/results?search_query=marshall+van+alstyne
3. Sangeet Paul Choudary
https://www.youtube.com/channel/UCv9bXzmPIQBXpWSPgBGzF2g/videos
2016 Parker & Van Alstyne, with Choudary – licensed under
Creative Commons Attribution-ShareAlike 4.0 International (CC BY-
SA 4.0).