Apple, Google, Amazon, Alibaba. Platform-based businesses are now ubiquitous, disrupting industries from gaming to finance. And while the concept of a platform business is not new, the power of the internet has many companies considering a shift to a platform-based business model.
What is a platform? Simply put, it’s a business model (not necessarily a technological tool) that enables interactions among stakeholders in an ecosystem. Modern platforms initially proved successful in the IT industry, connecting different products and services. For instance, in the automotive industry, some car manufacturers have pivoted from selling cars to selling mobility concepts. The shift from a business model based on heavy, infrequent investment (a car) to one centred on less expensive, more frequent services (such as car sharing) has facilitated both recurring revenue for the car companies and a stronger bond with their customers.
Choose a platform
Different types of platforms exist, each with unique benefits for the owner and the stakeholders in the ecosystem. How do you choose the right one for your business? You could learn some lessons from existing platform companies and translate them into your industry. Here are three key models:
- Multisided platform. In a multisided platform such as Airbnb, the platform leader provides a marketplace where product or service providers connect with customers. In this case, the owner is like a service broker, an intermediary between the two sides, providing them with the means to communicate with one another.
- Industry platform. An industry platform provides the technological foundation on which other companies can develop applications or businesses. For example, Intel provides microprocessors to computer manufacturers such as HP or Lenovo, which build their own products with this underlying technology and sell them directly to their clients. In these cases, the owner is a solution integrator, not in direct contact with the customers.
- Multisided industry platform. A multisided industry platform is a combination of the two platforms above. In this case, the company owner provides the technological base for development by other stakeholders, but the platform owner also manages the relationship with the customer. For instance, Apple and Google provide the iOS and Android platforms and developer tools so that external developers can create applications that run on the platforms. The developers innovate and create extra services for iOS and Android, but Apple and Android then sell them to the clients. In this case, the platform owner is an orchestrator, gaining double value from the platform — enabling businesses to develop new services and then selling those services.
Because the multisided industry platform has proven to bring most value to owners, many businesses are moving in the direction of this business model. For instance, automotive original equipment manufacturers (OEMs) are entering the realm of multisided industry platforms by creating API platforms and thereby enabling external companies to develop a service ecosystem around the connected cars.
Make it work
How do you thrive in the multisided industry platform world? Focus on creating value for developers and customers. Here are three key points to building a successful multisided industry platform:
– Stay open. Open platforms grow much faster. Find ways to make your platform relevant to both other businesses and clients. It’s the eternal dilemma: What came first, the chicken or the egg? If you don’t have developers and apps, you won’t have clients, and if you don’t have clients, developers won’t be interested in joining you. Only an open platform that supports many use cases will become relevant.
– Be a good solution orchestrator. Understand your role as an orchestrator between the different sides in the marketplace. As platform leader, you must provide the tools and resources to developers to entice them to innovate on your platform. Moreover, you should strive to facilitate connections between developers and customers to strengthen your platform’s ecosystem.
– Grow your ecosystem. Finally, you’ll need to abandon the mind-set of guarding intellectual property. You must enable your partners to help the platform grow, rather than hoarding research and development internally.