Asymmetric Demand is multi-sided demand

by Philip Boxer

Social Flights, like airlines, provides flights. Except that Social Flights, unlike the airlines, has defined the demand they are responding to as asymmetric, developing a platform that can support the multi-sidedness of this demand. This is an early blog by them:

“Social Flights starts by enabling consumers to consider flying on private aircraft vs. commercial airlines. Our original theory was that “selling seats” and enabling consumers to create on demand flights would bring value to the market of travelers. We tested our theory, finding ways to lower the cost and present the better way to travel using social technology as the backbone for communicating with multiple markets of interest.”

Thus Social Flights is providing a business platform that can support a two-sided market: on the one side are travellers with particular routes in mind, and from the other side are the owners of private aircraft selling capacity on particular routes [1]. What makes it two-sided is the different relationship that Social Flights has with each side.

In describing the multi-sidedness of a market, we can usefully distinguish the following:

  • Customer situations – situations in which there is a need for a particular form of collaboration between customers and complementors. In this case, the need (for example) for members of a team to travel together to play an ‘away’ match.
  • Customers – the end-users within a customer situation i.e. the team members.
  • Complementors – the suppliers whose product/service offerings are needed within particular customer situations i.e. owners of private aircraft offering lower overall costs on the particular route.
  • Platform – the means by which customers and complementors are enabled to come together to form a collaboration i.e. the capability of Social Flights to bring customers and complementors together.[2]

Other multi-sided examples are shown below:

From the perspective of any one complementor, say an airline or a clinical specialty, the market is one-sided: they are there to provide flights or operations to the market.  This one-sided view of demand defines demand as symmetric to their service offering of a direct benefit.

But if they define their market as multi-sided, they must take an asymmetric view of demand, identifying the customer situations giving rise to the collaborations that include a demand for their particular service offering – the types of travel situation creating demand for their routes, or the types of patient condition creating demand for their clinical services. And they must organise their propositions to extract indirect value from these (asymmetric) customer situations, not just from particular (one-sided) direct demands. Code-sharing airlines or hospitals are the result [3].

Thus what makes the demand asymmetric is the competitive need to consider the larger situation within which the particular demand arises, and to take into account the way the interactions within that larger context affect the particular demand.[4] How does the business platform ‘extract value’?  It has to be able to support the greater social complexity involved. And it has to be able to support it in a way that creates value for the customer by reducing the customer’s costs of alignment of the various complementors to their particular situation.[5]

The take-home?  We have to be able to understand the relationship between the platform architecture and the variety of forms of indirect value it can support.

Notes
[1] See also Richard’s earlier blog on two-sided markets using the example of retailers.
[2] The platform approach thus enables the tension to be managed between rings and wedges (i.e. between the economies of scale & scope of particular services provided by complementors, and the economies of alignment involved in bringing them together as a collaboration responding to the customer situation as a whole).
[3] What is challenging in this, of course, is that it involves a change in the way the business defines its competitive identity – from a supply-side definition of itself (we fly these kinds of route or we perform these kinds of surgery) to a demand-side definition (we can organise your travel or we can manage the treatment of your condition). But this change in competitive identity also drives innovation and transforms industries.
[4] In terms of rcKP services at the edge, only the r-type proposition treats demand as one-sided, all the others becoming increasingly involved with the larger customer situation within which demand arises.
[5] This value for the customer is indirect value from the perspective of the platform.  The need to establish economies of alignment is currently a major issue in public services, where the government ultimately pays for these indirect costs arising when citizens fall into the gaps between direct public services. This kind of analysis was used in a Swiss e-Government case (also outlined in this blog and published here).

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