Multisided platforms with positive cross-group effects
This software is a simulation model for multisided platforms with positive cross-group effects (MSP+s). It is the model described in the book: The Drive of Business: Strategies for Creating Business Angles by Robert Hughes.
The relationship between the participants in a value network can take two forms: a buyer-supplier relationship, and an MSP relationship. The essential feature of an MSP is that it enables two or more groups to transact directly with one another. This is done by providing the platform for interchanges between various groups, but not actually taking part in the contractual relationship between the users.
The key features of MSPs are illustrated by the various platforms that enable buyers to locate potential suppliers. Examples of platforms that do this are the postal service, advertising supported media and introduction agents such as job boards. An MSP consists of a platform provider and at least two groups of users (generically referred to as senders and receivers) who transact directly with one another through the facilities of the platform.
An MSP is a particular way of intermediating in a value network. In single-sided markets suppliers deal directly with buyers with no involvement from an intermediary, that is in a buyer-supplier relationship. Where the relationship between suppliers and buyers is through an intermediary, such as a reseller, the direct customer relationship with the buyer is held by the reseller and not the supplier. As for resellers, an MSP facilitates buyers acquiring products from suppliers, but unlike resellers they enable buyers to directly deal with suppliers.
An MSP is a class of value network, where products are provided to at least two quite different markets (one for each group), but equally, success in one market influences success in the other market. The postal service is an example of this. The postal service inserts itself in the value network between senders and receivers, two different groups of users with different demand characteristics, with the objective of removing search and shared transaction costs.
The model depicts a particular type of multisided platform, that operating in a two-sided market. The cross-group interactions that operate in a two-sided market can be depicted in a single diagram. Continuing with the mail example, the two groups of users are senders and receivers. In these markets: access to content drives the number of receivers; and access to delivery that reaches receivers drives the number of senders. The key to depicting the participation curves for senders and receivers is to express the two relationships in common variables. This is done by equating content to the number of senders, and delivery reach to the number of receivers.
The model shows the conditions that must exist for a platform to have any prospect of gaining the critical mass for positive cross-group effects to become active. Products and their supporting processes that have no prospect of meeting these conditions have no outlook as a multisided platform.
Using the simulation model
The simulation model requires market conditions to be specified. For ease of use these are entered by answering four questions about the market conditions faced by receivers, and four questions about that encountered by senders. These questions provide estimates of various elasticities of demand. Elasticity of demand is the percentage change in quantity that results from a small percentage change in an independent variable, keeping all other factors constant. These independent variables are:
Based on this information, the model assesses the prospects that a multisided platform could be established. The model presents its results in four graphs: