Digital firm
Notes
Inhoud
Table of Contents
H1. Big Tech............................................................................................................................................2
H1.1. Big Tech.....................................................................................................................................2
H1.2. Timeline of Big Tech..................................................................................................................3
H1.3. Digital colonization....................................................................................................................4
H1.4. Digital Shift................................................................................................................................4
H1.5. Types of firms............................................................................................................................5
H1.6. Political-economic landscapes...................................................................................................6
H2. Network Effects................................................................................................................................7
H2.1. Increasing returns......................................................................................................................8
H2.2. Impact of Network structures.................................................................................................10
H2.3. Contestable market.................................................................................................................11
H3. Digital Platform...............................................................................................................................12
H3.1. Multi-sides platforms..............................................................................................................13
H3.2. Hub economies........................................................................................................................15
Definitions............................................................................................................................................16
,H1. Big Tech
H1.1. Big Tech
Big tech: the name for the biggest tech companies.
Big tech companies: Alibaba, Amazon, Apple, Google, Meta, Microsoft, Bytedance, Tencent.
Big Tech companies are forming the infrastructural core of our digital society.
they have become the point for all kinds of exchange in our society.
The biggest big tech are digital platforms.
They have acquired a dominating position in markets and society, through network effects and M&A’s.
Big tech are and act as monopolies or oligopolies
Infrastructural core features:
(1) Scale and scope
(2) Ability to support their own ecosystems
(3) Influence.
Social cost of big tech (monopolies or oligopolies):
platforms effectively function as “regulatory structures” enabling and
dictating the terms of interactions they facilitate, and shaping the behaviour of users in a fashion.
platforms control and use digitized data to organize and mediate transactions.
The positioning of being neutral, open and egalitarian facilitators, even though they may not be.
Collecting of large amounts of user data .
Use their high market share for monopolistic practices.
Network effects
Ability to position themselves above the market economy.
Social benefit of big tech:
Increase in productivity (Building skills, etc.)
Network effects
Brand awareness
Lowering transaction cost
Curse of bigness: analysis of the history of corporate monopoly in the U.S. and its impact on democracy and
capitalism.
Market capitalization (market cap): the total dollar market value of a company’s outstanding shares of stock.
Data capture: the action or process of gathering data.
Indirect data capture: when Big Tech firms form partnerships with other companies or organizations to access
existing data.
Direct data capture: when Big Tech firms collect information directly from users or create their own datasets.
Other words used to describe data (capture): algorithm management, AI/ML
The important dilemma: privacy of people? Or development of life altering technologies?
,H1.2. Timeline of Big Tech
Platform phase:
Platform: A platform can refer to an interface that connects users, resources, and tools through fewer individual
touchpoints.
Platforms combine characteristics of organization (hierarchy, planning, coordinating, etc.) and markets
(regulating, matching supply and demand).
Platforms invest in building the infrastructure and tools to support and grow networked markets places.
Super platform (digital ecosystems): platforms that are notable for three characteristics: size, ability to support
their own ecosystems and influence.
Platformization: the event in which a company alters or customizes the structures of a platform to better
accommodate its mission.
Platformization is the penetration of infrastructures, economic processes, and governmental frameworks of
digital platforms in different economic sectors and spheres of life.
Dimensions of platformization:
(1) Datafication: collecting and processing data with the help of AI-based techniques
(2) Reorganization: reorganizing of market relations around two- or multisided markets
(3) Governance w.r.t. users/consumers and w.r.t. Complementors
Platform power
Platforms have an extreme focus on consumers.
Platforms provide high quality, low priced services, in exchange for data.
Privacy paradox: consumer, who want high quality services, low prices and convenience
vs citizens who resist violation of privacy rules.
(platform) consumer alliance: often called an symbiotic alliance; an agreement, in exchange for high quality,
low priced services, you pay with private data.
Surveillance capitalism:
a concept in political economics which denotes the widespread collection and commodification of personal
data by corporations.
Zuboff defines surveillance capitalism as a "new economic order that claims human experience as free raw
material for hidden commercial practices of extraction, prediction, and sales."
Surveillance capitalism model:
Reason of use:
• Data collection
• Prediction products
• Behavioural markets
,H1.3. Digital colonization
Digital colonization:
how mass media and internet firms are leading to a new concept of monopoly.
Big Tech companies offer data-driven products and services that incumbents increasingly rely on. This pattern of
entry differs from traditional platform envelopment strategies.
Dilemma HRI: the HRI sector is enormously inefficiently and could use the products of big tech for development
and efficiency, but the cost is the privacy of the people.
phases of digital colonization:
(1) Provision of data infrastructure services
(2) Data capture in the highly regulated industry (HRI)
(3) Provision of date-driven insights
(4) Design and commercialization of new products and services
H1.4. Digital Shift
Digital technologies will adapt, depending on:
Technological advancement
Low prices/transaction cost
Usefulness
Easiness of use
Other factors
Vertical digital scope (shift): refers to the number of linked segments in a single value-chain that a firm.
Horizontal digital scope (shift): refers to the number of (customer-facing) markets a firm competes in.
Most platforms are horizontally specialized (Facebook, Uber, Google)
Inverted firm: shift from internal to external value generation is the “inverted firm”.
Network effects cause firms to “invert” shifting production from inside the firm to outside of it. Network effects
cannot scale inside as easily as outside
Moore’s law:
Moore’s law is defined as the ‘faster’ ‘cheaper’ principle.
Example: the number of transistors on a microchip doubles about every two years, though the cost of
computers is halved.
Moore’s law applies for the semi-conductor industry.
Other technological components: data storage or networking.
Tech products are highly price elastic
increase in number of cost of computers
transistors
, H1.5. Types of firms
Nexus of reciprocal relationships (NRR): mid-century industrial firm
Network of contracts (NOC): late 20th century firm; shareholder revolution
Digital Platforms (PF): early 21th century firm; platform based business model
Characteristics that distinguish the types of firm are:
(1) Digital technologies and patient capital
(2) Network effects and infrastructural power
(3) (extreme) focus on consumer interests
Characteristics of types of firms
NRR NOC PF
Capital Patient capital Stock, shares Patient capital
Power Small group of Shareholders/investors, Infrastructural power: platform
executives security analysts capitalists. Controls multiple side of
platform
Focus of relations Internal and external Supply chain network Venture capitalist + entrepreneurs
stakeholders partners platform + consumer-alliance
Focus of (growth) Stable growth, vertical Outsourcing, and core Winter take all, first-mover-
strategy integration competencies. Asset advantage, digital dominance,
stripping network effects
Focus of labour Large workforce, long- Labor-reducing Small workforce, large free-lance
term employment strategies, franchising, employees, dependent on type
fissuring workplaces platform, gig-based labour
Time horizon Long-term Short-term Long-term, monopoly position in the
market, ecosystem growth
Notes
Inhoud
Table of Contents
H1. Big Tech............................................................................................................................................2
H1.1. Big Tech.....................................................................................................................................2
H1.2. Timeline of Big Tech..................................................................................................................3
H1.3. Digital colonization....................................................................................................................4
H1.4. Digital Shift................................................................................................................................4
H1.5. Types of firms............................................................................................................................5
H1.6. Political-economic landscapes...................................................................................................6
H2. Network Effects................................................................................................................................7
H2.1. Increasing returns......................................................................................................................8
H2.2. Impact of Network structures.................................................................................................10
H2.3. Contestable market.................................................................................................................11
H3. Digital Platform...............................................................................................................................12
H3.1. Multi-sides platforms..............................................................................................................13
H3.2. Hub economies........................................................................................................................15
Definitions............................................................................................................................................16
,H1. Big Tech
H1.1. Big Tech
Big tech: the name for the biggest tech companies.
Big tech companies: Alibaba, Amazon, Apple, Google, Meta, Microsoft, Bytedance, Tencent.
Big Tech companies are forming the infrastructural core of our digital society.
they have become the point for all kinds of exchange in our society.
The biggest big tech are digital platforms.
They have acquired a dominating position in markets and society, through network effects and M&A’s.
Big tech are and act as monopolies or oligopolies
Infrastructural core features:
(1) Scale and scope
(2) Ability to support their own ecosystems
(3) Influence.
Social cost of big tech (monopolies or oligopolies):
platforms effectively function as “regulatory structures” enabling and
dictating the terms of interactions they facilitate, and shaping the behaviour of users in a fashion.
platforms control and use digitized data to organize and mediate transactions.
The positioning of being neutral, open and egalitarian facilitators, even though they may not be.
Collecting of large amounts of user data .
Use their high market share for monopolistic practices.
Network effects
Ability to position themselves above the market economy.
Social benefit of big tech:
Increase in productivity (Building skills, etc.)
Network effects
Brand awareness
Lowering transaction cost
Curse of bigness: analysis of the history of corporate monopoly in the U.S. and its impact on democracy and
capitalism.
Market capitalization (market cap): the total dollar market value of a company’s outstanding shares of stock.
Data capture: the action or process of gathering data.
Indirect data capture: when Big Tech firms form partnerships with other companies or organizations to access
existing data.
Direct data capture: when Big Tech firms collect information directly from users or create their own datasets.
Other words used to describe data (capture): algorithm management, AI/ML
The important dilemma: privacy of people? Or development of life altering technologies?
,H1.2. Timeline of Big Tech
Platform phase:
Platform: A platform can refer to an interface that connects users, resources, and tools through fewer individual
touchpoints.
Platforms combine characteristics of organization (hierarchy, planning, coordinating, etc.) and markets
(regulating, matching supply and demand).
Platforms invest in building the infrastructure and tools to support and grow networked markets places.
Super platform (digital ecosystems): platforms that are notable for three characteristics: size, ability to support
their own ecosystems and influence.
Platformization: the event in which a company alters or customizes the structures of a platform to better
accommodate its mission.
Platformization is the penetration of infrastructures, economic processes, and governmental frameworks of
digital platforms in different economic sectors and spheres of life.
Dimensions of platformization:
(1) Datafication: collecting and processing data with the help of AI-based techniques
(2) Reorganization: reorganizing of market relations around two- or multisided markets
(3) Governance w.r.t. users/consumers and w.r.t. Complementors
Platform power
Platforms have an extreme focus on consumers.
Platforms provide high quality, low priced services, in exchange for data.
Privacy paradox: consumer, who want high quality services, low prices and convenience
vs citizens who resist violation of privacy rules.
(platform) consumer alliance: often called an symbiotic alliance; an agreement, in exchange for high quality,
low priced services, you pay with private data.
Surveillance capitalism:
a concept in political economics which denotes the widespread collection and commodification of personal
data by corporations.
Zuboff defines surveillance capitalism as a "new economic order that claims human experience as free raw
material for hidden commercial practices of extraction, prediction, and sales."
Surveillance capitalism model:
Reason of use:
• Data collection
• Prediction products
• Behavioural markets
,H1.3. Digital colonization
Digital colonization:
how mass media and internet firms are leading to a new concept of monopoly.
Big Tech companies offer data-driven products and services that incumbents increasingly rely on. This pattern of
entry differs from traditional platform envelopment strategies.
Dilemma HRI: the HRI sector is enormously inefficiently and could use the products of big tech for development
and efficiency, but the cost is the privacy of the people.
phases of digital colonization:
(1) Provision of data infrastructure services
(2) Data capture in the highly regulated industry (HRI)
(3) Provision of date-driven insights
(4) Design and commercialization of new products and services
H1.4. Digital Shift
Digital technologies will adapt, depending on:
Technological advancement
Low prices/transaction cost
Usefulness
Easiness of use
Other factors
Vertical digital scope (shift): refers to the number of linked segments in a single value-chain that a firm.
Horizontal digital scope (shift): refers to the number of (customer-facing) markets a firm competes in.
Most platforms are horizontally specialized (Facebook, Uber, Google)
Inverted firm: shift from internal to external value generation is the “inverted firm”.
Network effects cause firms to “invert” shifting production from inside the firm to outside of it. Network effects
cannot scale inside as easily as outside
Moore’s law:
Moore’s law is defined as the ‘faster’ ‘cheaper’ principle.
Example: the number of transistors on a microchip doubles about every two years, though the cost of
computers is halved.
Moore’s law applies for the semi-conductor industry.
Other technological components: data storage or networking.
Tech products are highly price elastic
increase in number of cost of computers
transistors
, H1.5. Types of firms
Nexus of reciprocal relationships (NRR): mid-century industrial firm
Network of contracts (NOC): late 20th century firm; shareholder revolution
Digital Platforms (PF): early 21th century firm; platform based business model
Characteristics that distinguish the types of firm are:
(1) Digital technologies and patient capital
(2) Network effects and infrastructural power
(3) (extreme) focus on consumer interests
Characteristics of types of firms
NRR NOC PF
Capital Patient capital Stock, shares Patient capital
Power Small group of Shareholders/investors, Infrastructural power: platform
executives security analysts capitalists. Controls multiple side of
platform
Focus of relations Internal and external Supply chain network Venture capitalist + entrepreneurs
stakeholders partners platform + consumer-alliance
Focus of (growth) Stable growth, vertical Outsourcing, and core Winter take all, first-mover-
strategy integration competencies. Asset advantage, digital dominance,
stripping network effects
Focus of labour Large workforce, long- Labor-reducing Small workforce, large free-lance
term employment strategies, franchising, employees, dependent on type
fissuring workplaces platform, gig-based labour
Time horizon Long-term Short-term Long-term, monopoly position in the
market, ecosystem growth
