'Platform' is a somewhat overused word these days and yet, as I wrote over on the agile business blog, speaks to arguably one of the most fundamental shifts in business models and thinking of the digital age. It is however, poorly defined (and often mis-used), and so it's worth dwelling on what exactly defines a platform business model and how we might understand some of the key characteristics.
In that piece that I wrote on the shift from pipeline to platform organisations (drawing from Van Alstyne, Parker and Choudary's article on the new rules for strategy) I talk about how platform models are nothing new but also how digital has brought a heightened level of significance and new contexts to the idea. If you are a platform, you sit within an ecosystem comprised of multiple components typically including owners, providers, producers, and consumers:
‘Platform businesses bring together producers and consumers in high-value exchanges. Their chief assets are information and interactions, which together are also the source of the value they create and their competitive advantage.’
The dynamics of ownership, scalability, interaction, data are therefore all different from more linear, pipeline-type models.
Similarly, Hugh Durkin describes here how platform models are as old as the hills - money, TV, Shopping Malls are all examples of platforms that bring together different participants in 'multi-sided' relationships. Platforms are often distributed and intangible (you can't see all the developers creating apps for Google Play for example, but you can see the result of their relationship with the Android platform). Digital has arguably brought even greater intangibility by facilitating the flow of value through data and APIs. Hugh gives three key characteristics that help to further define what a platform is:
True platforms serve multiple types of consumers (where products typically serve one type of customer). An example might be Spotify who serve music lovers, record companies and artists, and then multiple businesses who have integrated Spotify into their own services and the developers that enable that integration.
True platforms facilitate efficient value exchange (between all the constituent players in the ecosystem)
True platforms exhibit shared common standards (the terms that ensure the participants can transact easily and fairly)
If what you are building exhibits all three of these characteristics, then you are probably building a platform. Anything else is a product. But the organic nature of platforms and ecosystems is important to acknowledge. I hear a lot about ecosystem design and whilst I think there is benefit in mapping out potential sources of value, it's important to set up a platform model in a way that allows it to evolve easily in response to changing competitive or consumer contexts.
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