Introduction to Digital Work

Lecture 9 - Digital work in crowds

Platformization and entrepreneurial work

Introduction to Digital Work
Introduction to Digital Work

Learning objectives

  • Identify and distinguish platforms supporting the work of digital entrepreneurs
  • Explain the different procedures for sourcing from online markets
Introduction to Digital Work

Platformization

Our focus: Digital platforms as two-sided online markets involving supply and demand-side users

  • Platforms rely on network effects: the incremental benefit gained by each user for each new user that joins the platform
  • Platforms generally decrease transaction costs (e.g., search costs, bargaining costs, etc.)
  • Platforms lower the barrier for individuals to pursue entrepreneurial activity
Introduction to Digital Work

Classification of platforms

  • Gawer (2014) distinguishes three types of (technology) platforms and illustrates their key differences
  • We focus on digital platforms for entrepreneurial work: Entrepreneurs can use platforms as supply-side actors to sell their goods or services or as demand-side actors to orchestrate their value chain (side switching)
  • These platforms would be classified as industry platforms (ecosystems)
Introduction to Digital Work

Entrepreneurial activities

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Introduction to Digital Work

Entrepreneurial work on digital platforms

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Introduction to Digital Work

Platformization: Crowdfunding

Traditional alternatives: Venture capital, loans, IPOs

Typical mechanism to raise capital on crowd-funding platforms:

  • Sequential crowdfunding, with previous customers' decisions available
  • Later customers make decisions on whether to back a project, they know their own valuations but also see the aggregate contribution made by previous customers
  • Funds are transferred when a predefined threshold is met (all-or-nothing funding)

Example: Kickstarter

Introduction to Digital Work

Platformization: Innovation

Traditional alternatives: in-house innovation, innovation through external agencies

Typical mechanism to source from innovation platforms:

  • A requester posts a task (e.g. logo design) and announces a monetary reward for the winning solution
  • Contestants submit solutions on the platform
  • The requester chooses the best solution(s) and awards the prize

Example: Crowdspring

Introduction to Digital Work

Platformization: Micro-tasks

Traditional alternatives: internal employees or temporary workers

Typical mechanism to source from micro-task platforms:

  • Requestors post tasks, requirements, and compensation
  • Workers self-select into tasks (when requirements are met) and complete the work
  • Requestors accept or reject the solution

Example: Amazon Mechanical Turk

Introduction to Digital Work

Platformization: Knowledge work services

Traditional alternatives: internal employees, consultants

Typical mechanism to source knowledge work services from platforms (buyer-determined reverse auctions):

  • Clients post a project, including requirements, and compensation (hourly or fixed price)
  • Workers submit applications
  • Client interviews and selects one or multiple workers
  • The execution of work is monitored by clients (continuously or at milestones)
  • Project completion: submission of results, and mutual ratings

Example: Upwork

Introduction to Digital Work

Platformization: Marketing

Traditional alternatives: Advertising via print, TV, etc.

Typical mechanism to post advertising on the web:

  • Set campaign goals (e.g., increase website traffic, generate leads)
  • Choose a campaign type (e.g., search, display, shopping)
  • Define target audience (e.g., based on demographics, interests, behaviors)
  • Provide ad material (e.g., banner)
  • Set budget and bidding strategy for the real-time auction (e.g., impressions, clicks)

Examples for marketing platforms:

  • Google Ads
  • Social media (influencers, sponsored ads)
Introduction to Digital Work

Platformization: Supply side

Examples of platforms entrepreneurs use as supply-side actors:

  • Physical goods: Ebay, Amazon, Etsy
  • Digital goods: Apple/Android app store
  • Services: Uber, AirBnB, Lieferando
  • Online services: Upwork, 99Designs, Amazon Mechanical Turk
Introduction to Digital Work

Platform entrepreneurship in practice

We have seen that platforms offer a range of opportunities for individual entrepreneurs, but we have not seen how entrepreneurs would use these platforms.

Task: Select one of the platformization examples, search for best practices, and create a short guideline. For instance, what are the key things to consider when using a crowdfunding platform? Which challenges or risks should be avoided?

Introduction to Digital Work

Platform governance and regulation of platforms

In addition to supply and demand-side actors, the platform owner plays a critical mediating role (triadic relationship).

  • In the platform economy, the most common form is centralized governance by a private company
  • Other forms include platform cooperativism or decentralized governance (e.g., Blockchain)

Regulators increasingly recognize downsides of platforms, including the development of market monopolies, the violations of privacy laws, and the marginalization of workers. As a response to these challenges, corresponding legislation has been pushed, including the EU's Digital Services and Digital Markets Acts.

Introduction to Digital Work

The role of platform owners

Platform owners take on multiple roles and facilitate activity between supply and demand-side users. They bundle the roles typically played by different market institutions (Khanna and Palepu, 2005):

  • Information analysers that “collect and analyze information on producers and consumers in a given market”.
  • Credibility enhancers that provide “third-party certification of the claims by suppliers or customers”.
  • Aggregators that “provide low-cost matching and other value-added services for suppliers and customers through expertise and economies of scale”.
  • Transaction facilitators that “provide a platform for exchange of information, goods, and services, provide support for consummating transactions”.
  • Regulators that “create the appropriate regulatory and policy framework, and enforce it”.
  • Adjudicators that “resolve disputes regarding law and private contracts”.
Introduction to Digital Work

Reading

  • Skim the paper of Cutolo and Kenney (2021) on platform-dependent entrepreneurship
  • Summarize the key concepts of each subsection by reading as much as needed

Cutolo, D., & Kenney, M. (2021). Platform-dependent entrepreneurs: Power asymmetries, risks, and strategies in the platform economy. Academy of Management Perspectives, 35(4), 584-605.

Introduction to Digital Work

Materials

Khanna, T., & Palepu, K. G. (2010). Winning in emerging markets: A road map for strategy and execution. Harvard Business Press.

Gawer, A. (2014). Bridging differing perspectives on technological platforms: Toward an integrative framework. Research Policy, 43(7), 1239-1249.

Lower transaction costs Not just for individuals but also for startups TODO : check volume of "the platform economy" https://digital-strategy.ec.europa.eu/de/policies/digital-services-act-package https://www.perc.org.uk/project_posts/reflections-on-platform-cooperativism/ https://www.ft.com/content/6d2fe2a8-722c-11e7-93ff-99f383b09ff9

Examples: - The "Black and Decker" platform (never heard of it - that's because it is just for Black and Decker/internal) - The Boeing supply-chain platform that integrates with different suppliers (monitoring, scheduling, ... supply materials and parts) - Google/Apple app stores Distinctions: Gawer2014 table 2 (industry platforms: expecially digital entrepreneur context) Freelancing, gig-work, entrepreneurship micro-entrepreneurial: UN / Sustainable development goals (developing countries) very broadly (from a digital entrepreneurship perspective): leverage resources like different forms of human labor (purely online and also in the real world, e.g., transportation etc.), computational services, capital, innovative ideas, actual design, expert knowledge (push to the individual level at all market sides (supply and demand)) Many of those resources have become very easily accessible on different (crowdsourcing) platforms C2C and non-commercial platforms, B2B platforms, **micro-entrepreneurial platforms**

Porter's value chain provides an overview of acitivities that may be orchestrated on digital platforms. Digital leadership: orchestrating resources, entrepreneurial thinking (connect to the skills frameworks?) - finance: as part of firm infrastructure - innovation: somehow external (maybe add to technology) Orchestrator perspective: for individual entrepreneurs, but also for start-ups/SMEs Note: different for services, purely online/offline vs. hybrid value chains

All-or-nothing funding :why do platforms do that? -> to keep satisfaction of customers high (avoid funding of projects that fail) Kickstarter: potentially utilizing market evaluation/information from future buyers all-or-nothing funding https://help.kickstarter.com/hc/en-us/articles/115005047893-Why-is-funding-all-or-nothing-

- note that innovation (e.g., design/creative work) is also needed for other downstream steps - crowd-evaluation (option) https://www.sciencedirect.com/science/article/abs/pii/S0377221719302218

We were trying to find somebody who had a combination of skills that nobody in their right mind should actually have.

Viral

# Platformization: Infrastructural services Payments, communication infrastructure, computational resources, web-hosting, identification of users (post-ident), ... - Typically provided by third-party providers (e.g., Cloud-Computing) ---

TODO : - include example for platform cooperativism - include illustration of the triadic relationship antitrust laws Platforms are here to stay, but they need to be regulated.

Khanna and Palepu (2005) identify six market institutions that are critical in emerging markets Platform owners create their own "ecosystem" in which they play the role of the regulator, judiciary, and executive branch (based on the terms of service/as far as the law permits) This dramatically lowers enforcement costs, in particular for demand-side users (may not always be fair)

- Appreciate the clear structure, writing, and figures

- [ ] give students project descriptions and platform options -> ask where to post and why (argumentation based on researching the platform / maybe even suggest Toulmins argumentation theory to structure the arguments), what the key considerations would be - [ ] TODO startups etc. e.g., virtual assistants (4hour work week) / ability to create the impression of a highly professional firm (e.g., phone service, website, ...)