Analysis Report Four - Trend Analysis and Value Creation

Author

Cameron O’Connor

Executive Summary

This report examines how digital platforms create value through network effects, different business models, and large connected ecosystems. The assigned readings show that successful platforms depend on more than simply having a large number of users. They must create strong network effects, reduce competition from users joining multiple platforms, and find ways to connect different services. Apple provides an example of both the advantages and risks of this strategy. Its connected ecosystem creates high switching costs and supports profitable services, but it has also attracted criticism from developers and regulators. The report also uses Northwind data to study how revenue changes over time across different product categories. Using SQL functions such as strftime(), SUM(), and GROUP BY, the analysis identifies trends by year and month. Overall, companies should focus on building useful connected ecosystems while maintaining competition, offering customers value, and avoiding strategies that create unnecessary dependence or regulatory problems.

Introduction

The assigned readings explain how digital technology has changed the way companies create value and compete. In Why Some Platforms Thrive, Feng Zhu and Marco Iansiti explain that platform success depends on network effects, clustering, multi-homing, disintermediation, and network bridging. Strong network effects can make a platform more valuable as additional users join, but having a large platform does not guarantee long-term success. Bernard Marr’s article explains several common digital business models, including advertising, e-commerce, freemium, marketplaces, subscriptions, aggregators, and crowdfunding. Companies can also combine several of these models. Christopher Mims uses Apple as an example of a company that created a powerful ecosystem by tightly connecting its hardware, software, and services. This creates high switching costs but can also create problems with developers and regulators. Together, the readings show that digital companies must create networks that provide value while also managing competition and maintaining healthy relationships with users and business partners.

Outside Research

Outside research shows that digital platforms continue to face challenges involving competition, network effects, and users participating on multiple platforms. Jeitschko and Tremblay studied competition in two-sided markets and found that customers and businesses may choose to participate on more than one platform depending partly on pricing. This creates challenges for companies trying to keep users within their ecosystem. Bakos and Halaburda also studied multi-homing and found that traditional platform strategies may become less effective when users on both sides participate on multiple platforms. Another study by Rohn and colleagues examined the factors that make digital platform business models successful. Their research explains that digital platforms create value by connecting people, organizations, and resources within an ecosystem rather than relying mainly on physical resources. Together, these studies support the assigned readings because they show that successful platforms must create valuable networks while managing competition and preventing customers or businesses from easily moving between competing platforms.

Data Visualizations

Visualization 1: How has revenue changed over time for three major Northwind product categories?


SELECT CategoryName,
       SUM(od.UnitPrice * od.Quantity) AS total_revenue,
       strftime("%Y", OrderDate) AS year
FROM Orders
INNER JOIN "Order Details" od
ON Orders.OrderID = od.OrderID
INNER JOIN Products
ON od.ProductID = Products.ProductID
INNER JOIN Categories
ON Products.CategoryID = Categories.CategoryID
WHERE CategoryName IN ("Beverages", "Seafood", "Confections")
      AND year != "NA"
GROUP BY year, CategoryName
ORDER BY year
ggplot(data = myquery1,
       aes(x = year,
           y = total_revenue,
           color = CategoryName,
           group = CategoryName)) +
  geom_line() +
  labs(title = "Revenue by Product Category Over Time",
       x = "Year",
       y = "Total Revenue",
       color = "Category")

Visualization 2: How has revenue changed over time for three major Northwind product categories?


SELECT CategoryName,
       SUM(od.UnitPrice * od.Quantity) AS total_revenue,
       strftime("%m", OrderDate) AS month,
       strftime("%Y", OrderDate) AS year
FROM Orders
INNER JOIN "Order Details" od
ON Orders.OrderID = od.OrderID
INNER JOIN Products
ON od.ProductID = Products.ProductID
INNER JOIN Categories
ON Products.CategoryID = Categories.CategoryID
WHERE CategoryName IN ("Beverages", "Seafood", "Confections")
      AND year = "2022"
GROUP BY month, CategoryName
ORDER BY month
ggplot(data = myquery2,
       aes(x = month,
           y = total_revenue,
           color = CategoryName,
           group = CategoryName)) +
  geom_line() +
  labs(title = "Monthly Revenue by Category in 2022",
       x = "Month",
       y = "Total Revenue",
       color = "Category")

Recommendations for Industry

Executives building digital businesses should focus on creating strong networks without becoming too dependent on practices that limit competition. Companies should first make sure their platform continues to provide greater value as more users participate. They should also reduce multi-homing by providing useful benefits rather than simply making it difficult for customers to leave. Apple’s experience shows that high switching costs can strengthen an ecosystem, but excessive control can also attract complaints from developers and regulators. Current European regulation is already creating more opportunities for alternative app stores and greater interoperability between services. Companies should also consider combining revenue models instead of depending on only one source. Marketplace fees, advertising, subscriptions, and other services can provide several sources of revenue. Finally, businesses should regularly analyze trends in their own data. Tracking revenue and customer activity over time can help executives identify changes early and make better decisions about growth, products, and strategy.

References