Lynne Kiesling writes,
the distribution wires firm can, and should, operate as a platform and think about platform strategies as the utility business model evolves. An electric distribution platform facilitates exchange in two-sided electricity and energy service markets, charging a fee for doing so. In the near term, much of that facilitation takes the form of distribution, of the transportation and delivery. As distributed resources proliferate, the platform firm must rethink how it creates value, and reaps revenues, by facilitating beneficial exchange in two-sided markets.
Until now, I have not thought much about this whole two-sided market concept. I am struggling to see what it buys you. Earlier in her post, she quotes from a Harvard Business Review article.
In the traditional value chain, value moves from left to right: To the left of the company is cost; to the right is revenue. In two-sided networks, cost and revenue are both to the left and the right, because the platform has a distinct group of users on each side. The platform incurs costs in serving both groups and can collect revenue from each, although one side is often subsidized
If I’m understanding this correctly, then a brothel is a traditional value chain, but a singles bar is a platform. In terms of that metaphor, Kiesling is suggesting that electric utilities could change from operating like brothels to operating like singles bars.
Some problems I am having:
1. I am not sure what, if anything, makes brothels the natural business model in one industry and singles bars the natural business model in another.
2. Suppose that a singles bar has to pay women in order to get them to show up. By my reading of the HBR excerpt, then it becomes a traditional value chain. Metaphorically, it becomes a brothel, although I assume that it can avoid legal difficulty as long as the beds are off premises.
3. To me, cable TV looks like a brothel, not a singles bar. And to me, electricity looks like cable TV.
4. Metaphorically speaking, taxi companies and hotels operate brothels. Uber and airbnb operate singles bars. What Uber and airbnb are tapping into is supply-capacity that taxi companies and hotels were not using, either because they didn’t think of it or because it didn’t fit their business model. Is there spare electricity-generating capacity that utilities could be tapping into? If so, do they have the know-how and flexibility to tap into it?