The Platform Economy: What You Need to Know for Your Business to Survive It?

Today, we see the advent of new sophisticated digital advancements one after the other faster than most people can comprehend and keep up with. This includes an emerging business model that has revolutionised the economic landscape and set up a cascade of radical changes in how we live our lives.

Google, Amazon, eBay, Etsy, Facebook, Salesforce, Apple, Uber, and Airbnb. Aside from phenomenal success being some of the most valuable companies worldwide, worth hundreds of billions of dollars, they are also all based on platform business models.?

But what is a platform business model? How do you create one, or at the very least, take part in another’s ecosystem? In this article, we discuss everything you need to know about the platform economy and how you can open up new possibilities by leveraging digital technologies regardless of your industry.

Let’s dive right into it.

What Is The Platform Business Model?

Digital platforms can be diverse and different from one another in terms of structure and function. For example, Google is an online search engine, Facebook is a social media network, Amazon and eBay are marketplaces, Airbnb is an online property rental platform, and Uber is a ride-hailing service.?

Nevertheless, they are all examples of platform business models. They create a technology-based interaction between supply and demand or producers and consumers. Multiple sides of the market can also interact on a wider platform. YouTube is an example of a multi-sided platform that caters to several participants, including content creators, online viewers, advertisers, and online search engines. Ultimately, the platform’s role is to enable that interaction and make it smoother, reliable, and trustworthy.??

Key Characteristics of Platforms

Beyond digital innovation, the platform business model stands out because it takes a holistic approach that provides:

• Value Creation?- In the platform economy, interactions — through trade or social media currency in the form of likes and shares — promote value creation.?
• New Value?- Creates new sources of income, professions, and revenue streams on the producer side and unlocks value from passive assets.?
• Network Effect?- It creates a thriving ecosystem that feeds on fast and frequent usage and interaction. The more users a platform has, the more attractive it becomes to others. Both parties mutually benefit because they cannot create value without the other.?
• Technology -?For?Kenney and Zysman, the algorithmic revolution and cloud computing are the pillars of the platform economy. Platform businesses are facilitated by the latest technologies, such as artificial intelligence, machine learning, Blockchain, Internet of Things (IoT), and 5G, restructuring key aspects of industries and the economy.
• Data Collection?- Platform business models typically take advantage of AI or machine learning to create an intuitive data collection flow with every interaction.
• Scalability and Global Reach -?Creates the possibility for businesses to grow exponentially and for creators to become a viral success overnight.

Types of Platform Business Models??

Unlike traditional linear business models, which are product- or service-led, the platform business economy aims to promote value creation by focusing on pain points, designing an interaction between two or multiple parties, and matching supply and demand fulfilment.

Currently, we can see the convergence of three business models dominating the platform economy. These include:?

• Transaction Platforms?- These online platforms’ overarching purpose is to be digital matchmakers. They serve as a marketplace or virtual meeting place. Examples of transaction platforms include ride-hailing companies like Lyft and Uber (curates location-based matches) and Tinder (matches common interests in user dating profiles).
• Innovation Platforms- A platform business model to create new platforms or optimise existing ones with technology-based or idea management solutions. Examples of innovation platform companies include Salesforce, Microsoft, Linux, Oracle, and Apple.
• Integration Platform- Integration platform businesses consolidate and combine multiple steps in their distribution process. Highly integrated platforms include Google, Alibaba, Apple, and Amazon.

How to Make Your Business Thrive in a Platform Economy?

According to?UNCTAD?(2019), the total market value of platform companies (with $100 million in market capital) was roughly more than $7 trillion in 2017― 67% higher than in 2015.?

Platform giants like Google reign over 90% of the market for Internet searches. In comparison, Facebook accounts for 66% of the global social media market and is the top social media platform in more than 90% of economies worldwide. The reports credit their rapid rise in market position to:

• Positive network effects — the more users they have, the more valuable they become
• Aggressive data collection capabilities - the accumulated data gives insight into consumer behaviours and how to improve its products and services

Needless to say, we can expect no signs of stopping or slowing down the platform economy in the future. Instead, it will continue to go full throttle in disrupting every industry imaginable that will get in its way while inspiring the creation of new ones that will render traditional practices obsolete. And believe me, you’ll see it coming for you, no matter what niche or industry you’re in, sooner or later.

So, how are you going to go about this? Will you be a champion or a casualty of the consequences of the platform economy? Here’s what I recommend you do.?

• Accept that platforms are here to stay because believing otherwise won’t change anything.
• Examine problematic areas of the linear value chain business. Identify the everyday frustrations and poor customer experiences.
• Disrupt from within — before someone does. Be a troublemaker and challenge the status quo. This will pave the way for you to come up with out-of-the-box solutions.
• Reassess your growth opportunities. Start in a niche but think global.
• Take a deep dive into the available data to prove your business model.?
• Collaborate with experts, customers, peers, competitors, and other community members.
• Define your minimum viable product that proves your value chain. Launch an experiment in the market.
• Pay attention to design — it’s everything. Take time to design your customer experience, interactions, and architecture strategically.

Want to find out how your product or service can become a platform business???Book in for a quick chat with me today.