Platforms, Platforms, and lastly, Platforms

The World Economic Forum has recently placed platforms as the cornerstone of the future of economic growth and society.

One of the more important forces shaping the Digital Economy is the emergence of platform-based ecosystems. Commercial forecasts predict that there will be over 75 billion connected electronic devices, enabled by digital platforms by 2025 (Statistica, 2019). Companies developing new value propositions based on platform principles have become increasingly attractive to venture capitalist firms. Multi-billion dollar companies such as Apple, Google, Amazon and Microsoft have all adopted platform principles as part of their competitive strategies. Other examples of platforms in the videogame console, urban transport and hotel industries include Sony PlayStation, Uber, and AirBnB.

Platforms are understood from a much wider scope besides the digital infrastructure and application. They can be closely linked to the notion of ecosystems, spanning business, social, economic domains. A good term to describe the above is industry platform (Gawer, 2014). The other type of platform that is probably the most known, is multi-sided market platforms. These essentially enable the exchange of product and services between two or more groups of people, typically consumers and producers. The term two-sided market was originally coined by Jean-Charles Rochet and Jean Tirole (1991) to describe businesses with two interacting sides. Most platforms tend to exhibit features that crossover both types., e.g., Google's search platform connects consumers and product advertisers, while Google's Play Store allows Android smartphone users download apps from third-party app developers.

Industry platforms and multi-sided markets should not be confused with product platforming. Product platforming is the development and implementation of technology components or subsystems that are shared across multiple products or product lines. Product platforming requires modularity in the design of the product architecture (Meyer, Osiyevskyy, Libaers, van Hugten, 2018).

In contrast, industry platform planning includes micro-economic logic of multi-sided markets in the analysis. In other words, multi-sided industry platform dynamics takes into consideration the co-creation of consumer value, and market creation and demand mechanisms based on network effects, besides modular production architectures and operating costs (Salazar and Allen, forthcoming).

What is really important to highlight here is that our received wisdom on the competitive behaviour of product-based businesses, is proving to be counter-intuitive when trying to understand platform competition. 

Industry platform ecosystems are made of customers and partners complementing the offer of the core platform working in a collaborative arrangement that is actively shaped by the platform owner but that promotes value co-creation and sharing (Salazar and Lee, 2014).

Keep tuned for future articles ...

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