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BW Businessworld

Business In The Platform World

Business platforms are broadly categorized into innovative business platforms, transactional business platforms and hybrid business platforms.

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All one needs is a computer, a network connection, and a bright spark of initiative and creativity to join the economy.  – Don Tapscott

The 1980’s witnessed one of the greatest paradigm shifts in economics since the advent of the industrial revolution. The engine of the global economy shifted gears from factories that make products to enterprises that develop platforms. The most valued companies across the world, since the 90’s, are the software giants that created Platforms, which are now the drivers of the Information age. 

Although platform businesses have always existed in some form or another, the scale of networks now is beyond imagination. For those looking for exponential growth for their business it is important to adapt to the business platform strategies

Digital platforms have now become a vital aspect in our daily lives. From your personal computer, your e-wallet to your workstation, everything is connected to platforms. Platform businesses in a broader sense are spaces where multiple markets converge. Industry platforms are used by millions of individuals and thousands of firms to transact their daily business. Google, Amazon, Facebook are all examples of platforms used by people for several purposes.

At the core of their transformative impact on global economics is a shift in thinking. From linear product-based thinking to a creation of networks and ecosystems that give value to millions across the world. 

The appeal of industry platforms –Why they matter?

Industry platforms are foundation products or technologies that various firms can be built upon to create new products & services or transactions. They also get added complexity from these increasing connections. The most highly valued companies in the world are Platform Businesses. Microsoft, Google, and Amazon, each, has been valued exceeding a trillion dollars They derive great power from their scalability. 

Business platforms are broadly categorized into innovative business platforms, transactional business platforms and hybrid business platforms.

If you are starting out with a good product then see if you can add value by opening your product to a third-party complementary innovation. This makes your product more versatile and instantly attracts more users thereby transforming it into an innovative business platform. 

If you are a service provider then there is opportunity to generate value by connecting market sides like any broker. You need to do so without owning assets or even providing the service directly. This is the classical transactional business platform. This is why such platforms, when corporatized, get highest valuations because of low asset ownership and high scalability.

Once your business platform begins to grow, you can add elements of the other type of platform to create a hybrid platform. Typically, innovation platforms begin to grow access and distribution with a doubling down on the transaction side whereas the transaction platforms strive to add complements to build innovation advantage.

The qualifiers for an Industry Platform:

  1. Broking
     Your platform needs to play the role of matchmaker and bring two interdependent groups together. Amazon is a platform for vendors to meet potential customers. Some pressing need ought to be liberated from some monster barrier. Only then does it qualify to be catapulted into the platform league.
  2. Networking
     Network effect is a self-reinforcing positive feedback loop where potential value of each user increases with an additional user or compliment.

    Facebook started out as a platform to share memories, interests, and opinions. Many individuals opted to be on Facebook for making these interpersonal connections. These people would often invite their friends and family on Facebook. This is called direct network effect. This attracted vendors and advertisers to Facebook, this is called cross side or indirect network effect. 
  3. Tackling Contingencies
     When the presence of one group of targeted users is dependent on the presence of another. The best example of this problem is Airbnb. Airbnb needed hotel listings to attract users and needed users to attract listings. The value for users in using Airbnb exists only if they have large number of listings. So they got owners to list first. Their listings attracted the users. Network effects are bi-associated. It grows through mutual amplification. The key is to rely on your network effects to solve this problem. Throwing money to create one side of the network is as good as throwing the money. 

To create a winning business platform, you need not make the best product or provide the best service. You need to ensure that your network is good. This means that it should be easily accessible. It should have modularity and expandability. It should target a critical demand-supply shortfall and should be able to attract and sustain large ecosystems or networks. The growth model of your platform should depend on network effect. The rapid expansion of your platform should solve for your dependencies. This is what will ensure you find your niche in the vast internet of things and canalize the vast wealth flowing in the mainstream.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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broking platforms hybrid platform airbnb

Shubhranshu Singh

The author is a global marketer, story teller, brand builder, columnist, and business leader. His interests include studying social change, impact of technology on consumer lives, understanding young consumers, history and politics.

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