Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You: How Networked Markets Are Transforming the Economy―and How to Make Them Work for You

by Geoffrey G. Parker

Furthermore, where network effects are present, industries operate by different rules.17 One reason is that it is far easier to scale network effects outside a firm than inside it—since there are always many more people outside a firm than inside it. Thus, where network effects are present, the focus of organizational attention must shift from inside to outside. The firm inverts; it turns inside out. The management of human resources shifts from employees to crowds.18 Innovation shifts from in-house R & D to open innovation.19 The primary venue for activities in which value is created for participants shifts from an internal production department to a collection of external producers and consumers—which means that management of externalities becomes a key leadership skill. Growth comes not from horizontal integration and vertical integration but from functional integration and network orchestration. The focus on processes such as finance and accounting shifts from cash flows and assets you can own to communities and assets you can influence. And while platform businesses themselves are often extraordinarily profitable, the chief locus of wealth creation is now outside rather than inside the organization.

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