Platform Revolution

Co-authored by Geoffrey Parker, Sangeet Paul Choudary, and Marshall Van Alstyne the Platform Revolution Book is a comprehensive guide for companies building platforms or competing in the platform economy. Deep-dive into the what, how, and why of creating a successful platform businesses get a conceptual understanding of the key drivers of value creation in the platform economy including network effects, economies of scale, virality, scalability, monetization and launch strategies, platform governance and regulation.

An introduction to platform business models

What are platforms? Unlock the power of platform business models. Explore their dynamics, network effects, and transformative potential in this insightful introduction. of a successful platform business.

Key Takeaways

1. A platform’s overarching purpose is to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants.
2. Because platform businesses create value using resources they don’t own or control, they can grow much faster than traditional businesses.
3. Platforms derive much of their value from the communities they serve.
4. Platforms invert companies, blurring business boundaries and transforming businesses’ traditional inward focus into an outward focus.
5. The rise of the platform has already transformed many major industries—and more, equally important transformations are on the way.
6. How to build a business model that can orchestrate supply and demand and get to network effects.

 

“An authoritative guide to the role of online platforms: what they are, how they work, and what they mean for business and economics. Platform Revolution demystifies the concept by providing clear prose, insightful examples, and practical lessons.”

― Hal Varian,  Chief economist, Google, and author of Information Rules

1. A checklist of the critical 10 questions that you should constantly seek to answer while building platforms and marketplaces.
2. Where giant industrial-era firms were made possible by supply economies of scale, today’s giants are made possible by demand economies of scale—expressed as network effects.
3. Network effects are not the same as price effects, brand effects, or other familiar growth-building tools.
4. Frictionless entry and other features of scalability maximize the value-building impact of network effects.
5. A two-sided market (with both producers and consumers) gives rise to four kinds of network effects: same-side effects (positive and negative) and cross-side effects (positive and negative). A growing platform business must manage all four.
6. The key to minimizing most negative network effects is quality curation, which increases the chances of a happy match between producer and consumer.

 

The guiding principles of platform design

Platform design involves balancing  infrastructure, governance, market dynamics, and participant incentives to enable interactions in its ecosystem.

Key Takeaways

1. The design of a platform should begin with its core interaction—one kind of interaction that is at the heart of the platform’s value-creation mission.
2. Three key elements define the core interaction: the participants, the value unit, and the filter. Of these, the value unit is the most crucial, and often the most difficult to control.
3. In order to make the core interaction easy and even inevitable, a platform must perform three crucial functions: pull, facilitate, and match. All three are essential, and each has its special challenges.
4. As a platform grows, it often finds ways to expand beyond the core interaction. New kinds of interactions may be layered on top of the core interaction, often attracting new participants in the process.
5. It’s important to design a platform thoughtfully to make mutually satisfying interactions easy for large numbers of users. But it’s also important to leave room for serendipity and the unexpected, since users themselves will find new ways to create value on the platform.

 

“Thorough and often provocative.”

― Jeremy G. Philips, The Wall Street Journal

 

Platform disruption: Transforming industries

The platform revolution is disrupting and transforming traditional industries in a number of ways. 

1. Platforms are able to outcompete pipelines because of their superior marginal economics and because of the value produced by positive network effects. As a result, platforms are growing faster than pipelines and taking leading positions in industries once dominated by pipelines.
2. Platform revolution is disrupting business in other ways. It is reconfiguring value creation to tap new sources of supply; reconfiguring value consumption by enabling new forms of consumer behavior; and reconfiguring quality control through community-driven curation.
3. The rise of platforms is also causing structural changes in many industries—specifically, through the phenomena of re-intermediation and market aggregation.
4. Incumbent companies can fight back against platform-driven disruption by studying their own industries through a platform lens and beginning to build their own value-creating ecosystems, as Nike and GE are doing.

“In a very cohesive and comprehensive way, the authors provide deep conceptual insights and rich practical advice on platforms, the most important business organizations of our time.”

—Ming Zeng, chief strategy officer, Alibaba

Also Read : Bigtech platforms in healthcare

 

8 proven strategies to launch a successful platform

The chicken-or-egg problem is a common challenge faced by platform businesses, especially in the early stages. It is the challenge of attracting both producers and consumers to a new platform, when both sides need the other to be present for the platform to be valuable.  

This book provides in-depth understanding of the chicken-or-egg problem and proven strategies to overcome the challenge

1. One difference between platform businesses and traditional pipeline businesses is that, in the world of platforms, pull strategies designed to encourage virality are more important than the push strategies (such as advertising and public relations) used in conventional marketing.
2. Successful platforms use one of eight proven strategies for solving the chicken-or-egg problem: the follow-the-rabbit strategy; the piggyback strategy; the seeding strategy; the marquee strategy; the single-side strategy; the producer evangelism strategy; the big bang adoption strategy; and the micro-market strategy.
3. The speed of a platform’s expansion can be accelerated through viral growth. This depends on four key elements: the sender, the value unit, the external network, and the recipient.

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PayPal, YouTube, Stumbelupon’s piggyback strategy

Micro-Market Strategy

 

Platform Monetization : Capturing value created by network effects