Professor Charles Fine

1
Thoughts on Value Chain Dynamics and P2P
Networking
Professor Charles Fine Co-Director,
Communications Futures Program Massachusetts
Institute of Technology Cambridge, Massachusetts
02142 January 2008 charley_at_mit.edu
http//cfp.mit.edu Tel [phone], Fax
1-617-253-6720
2

• P2P Who are peers? What do they do?

• End User Peers
• Interact
• real time communication
• (or asymmetric or near RT)
• voice, email, IM, some games
• Social networking
• Facebook, etc.
• Some gaming environments
• (e.g., 2nd Life)
• Consume content (push vs pull)
• Downloads
• Broadcast
• On Demand
• Publish content
• Individual end users
• For-profit
• Advertise
• The Network provides the pipes that enable my
  utility/consumption.

• Transport Peers
• ISPs
• Carriers
• Concerned with ROI
• The Network is my business.
• I want to monetize my pipes.

3

• What are platforms? What do they do?

Aggregators/platforms/frameworks

• End User Peers
• Interact
• real time communication
• (or asymmetric or near RT)
• voice, email, IM, some games
• Social networking
• Facebook, etc.
• Some gaming environments
• (e.g., 2nd Life)
• Consume content (push vs pull)
• Downloads
• Broadcast
• On Demand
• Publish content
• Advertise
• The Network provides the pipes that enable my
  utility/consumption.
• I want easy-to-use, low cost and probably
  end-to-end simplicity

• Transport Peers
• ISPs
• Carriers
• Concerned with ROI
• The Network is my business.
• I want to monetize my pipes?

• Provide environments that support end-user
  utility, usually using Transport networks
• Some not for profit
• Gnutella, BitTorrent,
• Some for profit
• Google, eBay, Facebook, Akamai, Skype
• Corporations, Universities, etc.

4

• What are platforms? What do they do?

Aggregators/platforms/frameworks

• End User Peers
• Interact
• real time communication
• (or asymmetric or near RT)
• voice, email, IM, some games
• Social networking
• Facebook, etc.
• Some gaming environments
• (e.g., 2nd Life)
• Consume content (push vs pull)
• Downloads
• Broadcast
• On Demand
• Publish content
• Advertise
• The Network provides the pipes that enable my
  utility/consumption.
• I want easy-to-use, low cost and probably
  end-to-end simplicity

• Transport Peers
• ISPs
• Carriers
• Concerned with ROI
• The Network is my business.
• I want to monetize my pipes?

• Provide environments that support end-user
  utility, usually using Transport networks
• Some not for profit
• Gnutella, BitTorrent,
• Some for profit
• Google, eBay, Facebook, Akamai, Skype
• Corporations, Universities, etc.

• Multi-sided platforms

Advertisers
buyers
sellers
Content consumers
Content providers
eBay
google
5

• Who creates value in this chain? Who captures
  value?
• Who controls what aspects of the chain?

Aggregators/platforms/frameworks

• End User Peers
• Interact
• real time communication
• (or asymmetric or near RT)
• voice, email, IM, some games
• Social networking
• Facebook, etc.
• Some gaming environments
• (e.g., 2nd Life)
• Consume content (push vs pull)
• Downloads
• Broadcast
• On Demand
• Publish content
• Advertise
• The Network provides the pipes that enable my
  utility/consumption.
• I want easy-to-use, low cost and probably
  end-to-end simplicity

• Transport Peers
• ISPs
• Carriers
• Concerned with ROI
• The Network is my business.
• I want to monetize my pipes?

• Provide environments that support end-user
  utility, usually using Transport networks
• Some not for profit
• Gnutella, BitTorrent,
• Some for profit
• Google, eBay, Facebook, Akamai

6

• What are the dynamic forces that impact his
  chain?
• How can we create and assess useful future
  scenarios?

Corporate Strategy Dynamics
Customer Preference Dynamics
Technology Innovation Dynamics
Regulatory Policy Dynamics
Industry Structure Dynamics
Business Cycle Dynamics
Capital Market Dynamics
7
THE DYNAMICS OF PRODUCT ARCHITECTURE,
STANDARDS,AND VALUE CHAIN STRUCTURE THE DOUBLE
HELIX
INTEGRAL PRODUCT VERTICAL INDUSTRY PROPRIETARY
STANDARDS
MODULAR PRODUCT HORIZONTAL INDUSTRY OPEN STANDARDS
NICHE COMPETITORS
INNOVATION TECHNICAL ADVANCES
HIGH- DIMENSIONAL COMPLEXITY
SUPPLIER MARKET POWER
PRESSURE TO DIS-INTEGRATE
INCENTIVE TO INTEGRATE
ORGANIZATIONAL RIGIDITIES
PROPRIETARY SYSTEM PROFITABILITY
Examples IBM, Autos, Embraer/Boeing, Nokia,
Small Firms
Fine Whitney, Is the Make/Buy Decision
Process a Core Competence?
8
THE DYNAMICS OF CORE EDGE THE (third) DOUBLE
HELIX
SKYPE NAPSTER I FACEBOOK
MSFT VERIZON
CENTRALIZED CONTROL VERTICAL INTEGRATION PROPRIETA
RY STANDARDS
OPEN ARCHITECTURES VIBRANT EDGE
INCREMENTAL INNOVATION
RADICAL INNOVATIONS
FRUSTRATION AND SUBTERFUGE AT THE EDGES
INNOVATOR MARKET POWER
AMAZON YAHOO! GOOGLE APPLE
PRESSURE FOR OPENNESS
INCENTIVE TO INTEGRATE LOCK IN ADVANTAGE
POLICY TUSSLES
PROPRIETARY SYSTEM PROFITABILITY
LOBBY WARS (e.g., Net Neutrality)
Adapted from Clockspeed by C. Fine, Chapter 4,
Perseus Books, 1998.