What The Emergence of the Platform Economy Means for Businesses

By Nina Gass

geralt / Pixabay

Make no mistake about it. We live in a world where the “the platform platform economy” isn’t just disruptive, it’s killing long-lasting and successful business models. Amazon shook up the retail industry, Napster and iTunes decimated the music industry, Uber and Airbnb are radically changing the transportation, hotel and travel industries.

But, what exactly is the “the platform economy” and how is it impacting businesses?

The Rise of the Platform Economy

MIT Professor Michael Cusumano offers a pretty clean definition:

“A platform or complement strategy differs from a product strategy in that it requires an external ecosystem to generate complementary product or service innovations and build positive feedback between the complements and the platform.

“The effect is much greater potential for innovation and growth than a single product-oriented firm can generate alone.”

Extremely simplified, a platform business serves as a connector between interdependent people and the product or service they are seeking. It’s like saying, “to be in that business you have to know someone.” A platform is the someone.

To get that paper written, you need the software on the computer along with the technologies and processes that were developed in order for you to get that white paper written and published.

The whole software, tech, processes and everything else that goes with it is the platform that allows you to do your paper. It is the medium that facilitates for you in order for you and others to connect together.

Because of this, platforms are linked to the concept of network effects – where the more products or services it offers, the more users it will attract.

There are four major types of platforms:

  • Innovation platforms where developers offer complementary products and services. Think of the offerings from companies like Windows, Oracle, and Salesforce.
  • Transaction platforms assist individuals and institutions to find each other, such as Amazon, Airbnb, Uber.
  • Integration platforms is a technology, product, or service that is a transaction platform and an innovation platform, like the Apple Store.
  • Investment platforms have developed a platform portfolio strategy and act as a holding company, Priceland and OpenTable are examples.

Regardless the specific platform they all share these four common traits:

  • Connects workers or sellers directly to customers.
  • Allows people to work when they want.
  • Sellers are paid for a single task or good at a time.
  • Payment passes through the platform.

While the “platform economy” has skyrocketed over the last decade, it’s not a new concept.

Old Model, New Concept for Payments Businesses

Back in 1957 Walt Disney diagrammed a brilliant strategy. He showed how his studio would eventually produce characters and stories that would fuel (and be fueled by) a web of businesses. The businesses would range within the larger scope of television, music, theme parks, publishing, and merchandise.

In 1964, IBM’s System 360 family of mainframes featured a common hardware architecture and operating system. This allowed customers to upgrade the systems without having to rewrite their applications. This was followed by the Wintel platform in the 80’s and the internet boom of the Go to the full article.

Source:: Business 2 Community

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