MIT System Dynamics Seminar | Strategic Investments for Platform Launch and Ecosystem Growth

Please visit the MIT System Dynamics Seminars page for more information.

You are invited to attend the System Dynamics Seminar being held on Friday, April 12^th from 12:30-2:00pm EST in the Jay W. Forrester conference room, E62-450, or via Zoom: https://mit.zoom.us/j/94114971874 (Password: SDSP24). Our guest speaker will be Burcu Tan (Anderson School of Management, UNM) presenting Strategic Investments for Platform Launch and Ecosystem Growth: A Dynamic Analysis (see abstract and brief bio below; announcement attached). Lunch will be provided to those attending in person and a reminder email will be sent out closer to the date.

If you would also like to schedule a 30-minute 1:1 meeting with her before or after the seminar, please fill out the following link by COB Friday, April 5^th and I will confirm times and location with a calendar invite: https://rallly.co/invite/CI5nD2MSCPLB. Please notify me if you need to meet over Zoom instead.

Abstract

Multi-sided platforms must make decisions on both pricing and engineering investment and must continually adjust them as the platform scales over its lifecycle. Engineering investments can be allocated to features that improve a platform’s standalone value, social features to take advantage of same-side network effects, or integration tools and boundary resources to facilitate third-party content creation. Guidance in the academic or practitioner literature is not granular. Moreover, relevant normative economic models that consider externalities are rarely dynamic. Hence, there is a gap in knowledge about how to best balance tradeoffs between different strategic decisions throughout the entire platform lifecycle. To begin to address this gap, we explore normative strategies for coordinating pricing and engineering investment decisions on a continuous basis under different ecosystem conditions. We build a simulation model informed by economics and marketing theory and perform extensive sensitivity analyses on key parameters in different ecosystem scenarios over a multi-period lifecycle. We find that pricing and investment strategies must continuously change to perform optimally. In particular, strategies that are most effective at launch often differ from those that are most effective during scaling as well as those most effective at maturity. We also find that the optimal strategy depends strongly on the monetization model and market aversion to price changes. Lastly, we specifically examine four different industry segments: mobile platforms, social media, the sharing economy, and business-to-business. The results provide evidence that the trajectory of platform pricing and investment strategies should greatly differ depending on industrial context.

Brief Bio

Burcu Tan (btan@unm.edu) is an Associate Professor at Anderson School of Management, University of New Mexico. She holds a Ph.D. in Operations Management from the University of Texas at Austin and a BSc. and MSc. in Industrial Engineering from Bogazici University. Her research interests include digital platforms,  supply chain management, socially responsible operations, and system dynamics. Her work has been published in Information Systems and Operations Management journals such as Information Systems Research, Journal of Management Information Systems, and Production and Operations Management. She is a Senior Editor at Production and Operations Management.