In today's tech-driven business world, the term "platform" gets used in several contexts.
It can mean a tech platform intended to be where software is executed in conjunction with hardware or perhaps the digital space where it gets embedded.
In the business context, instead, the platform is a company that runs a model where, rather than offering a specific product, it enables interactions between two or more players.
One of the distinctive elements of platform businesses is network effects. Or the ability of the platform to get better for the next user as the previous user joins it.
I argue that there is a third type of platform that we can call "business platform," that is, the platform platforms', or the container of both the tech platform and the several platform businesses formed on top of that, combined with a new monetization and distribution model.
Proprietary and closed
Would you think your smartphone is as useful as it is if it didn't have its apps inside? Apple was the first company to stumble upon a "Mobile Business Platform" made of the encounter of the iPhone, plus its software, which also enables the development of applications.
The hardware works as the "physical platform" or the foundation for the software side to develop. The hardware, in this case, is closed and proprietary.
Platforms and Policies
The software built on top of the hardware is the foundation of the tech platform. Usually, there is a part of it which is closed (like the operating system) and another open part (like the store or marketplace, on top of which third-party developers can build applications).
On the open side, the company owning the tech platform will set the rules and the policies for third parties to respect to keep the tech platform in line with the core business while allowing it to grow as it adds functionalities via third-party applications.
Developer's Community
On top of the partially open side, third-party developers can build their own applications, which will become the add-ons and tools to expand the hardware and built-in software. Just like the iPhone has apps that make it more useful, the developer's community expands the ability of the hardware and software built on it.
Distribution and Monetization
As the tech platform develops and the developers' community grows, it will also bring with itself a few distribution and monetization strategies, which are intrinsic to the business platform.
For instance, on the App Store, developers know they can make money in a few ways (advertising, in-app purchases, premium products, and more). This sort of distribution and monetization creates the basis for an entrepreneurial ecosystem to become viable.
Entrepreneurial Ecosystem
As the entrepreneurial ecosystem becomes self-sustained, as a side effect will enable the solid growth of the tech platform and, with it, the whole distribution model associated with it. From there, the platform platforms' will build up.
The Platform Platforms'
Once the conditions above are met, the Business Platform (or the Platform Platforms') will become the foundation of the business success.
As a conclusive example, when Apple launched the iPhone, that was just hardware and proprietary software. It was a great device, but still not as interesting. As Apple launched its App Store, the iPhone turned into a tech platform where those apps could expand their functionalities many times over.
As the App Store grew, it also consolidated distribution and monetization models that enabled. That is when the iPhone turned from hardware to a "Mobile Business Platform," which, after a decade, is still alive and thriving.
The Platform Paradigm: A Dive into Case Studies
1. Apple's App Store: A Revolutionary Mobile Business Platform
Proprietary Hardware: Apple's iPhone provided a controlled yet versatile environment.
Ecosystem Emergence: The launch of the App Store transformed the iPhone from a communication device to a multi-functional platform.
Outcome: Apple crafted a thriving developer community, enabling a myriad of apps and business opportunities. This led to Apple's dominance in the mobile device market.
2. Airbnb: Redefining Hospitality through a Sharing Platform
Business Model: Connect homeowners (hosts) with travelers (guests) seeking unique lodging experiences.
Network Effects: As more hosts listed properties, more guests joined, and vice-versa.
Outcome: Airbnb disrupted the traditional hotel industry by leveraging a peer-to-peer platform model, optimizing user experiences based on reviews and ratings.
3. Amazon Marketplace: Retail's Digital Evolution
Initial Phase: Began as an online bookstore.
Transformation: Evolved into a marketplace where third-party sellers could list products.
Outcome: Amazon capitalized on the network effect. As more sellers joined, buyers had a wider variety, and more buyers attracted even more sellers. The platform strategy solidified Amazon's position as an e-commerce giant.
4. Uber: Transportation's Platform Revolution
Business Model: Connect drivers with riders via a mobile application.
Network Effects: As more drivers became available, rider wait times decreased, attracting more riders. Conversely, more riders meant more business for drivers.
Outcome: Uber's platform approach disrupted traditional taxi services globally, offering a more efficient, often cheaper, and user-friendly alternative.
5. Microsoft Windows: The Software Platform Pioneer
Foundations: Offered an operating system that could run on various hardware configurations.
Open for All: Encouraged third-party developers to create applications for Windows.
Outcome: Windows became the dominant PC operating system worldwide, with a vast ecosystem of software applications enhancing its utility.
6. Facebook: Social Networking Turned Ad Platform
Initial Offering: A social networking site to connect college students.
Evolution: Opened up to the general public and incorporated an ad platform.
Outcome: Leveraging user data and network effects, Facebook offers targeted advertising, making it one of the most powerful ad platforms globally. Third-party integrations and the Facebook Marketplace have further expanded its platform model.
7. Spotify: Streaming Music as a Platform
Business Model: Offered a vast library of music to stream, breaking from the traditional music purchase model.
Platform Evolution: Introduced Spotify for Artists, allowing artists to directly upload and monetize their music.
Outcome: Spotify transformed music consumption habits and became a significant player in the music industry, with playlists, podcasts, and direct artist interactions.
Recap: In This Issue!
Types of Platforms: In the tech-driven business world, the term "platform" can refer to a tech platform where software is executed, a digital space where software gets embedded, or a company that enables interactions between multiple players. Yet there is another kind of platform, which looks more like an ecosystem than a company, that's the Platform Platforms' (or "business platform) and it's comprised of a few key components.
Business Platforms: A "business platform" can be considered the combination of a tech platform and the platform businesses formed on top of it, along with a new monetization and distribution model that enables a whole new ecosystem on top of it.
Network Effects: Platform businesses benefit from network effects, where the platform becomes more valuable to users as more participants join and interact on it.
Proprietary and Closed Hardware: Companies like Apple create proprietary and closed hardware, such as the iPhone, which serves as the physical platform or foundation for software development.
Software as the Foundation: The software built on top of the hardware forms the foundation of the tech platform. It consists of closed components (e.g., operating system) and open components (e.g., app marketplace) where third-party developers can build applications.
Developer's Community: Third-party developers contribute to the platform's growth by building applications that expand the capabilities of the hardware and software.
Distribution and Monetization: Growing tech platforms and developers' communities bring about distribution and monetization strategies. For example, Apple's App Store allows developers to earn revenue through various means such as advertising, in-app purchases, and premium products.
Entrepreneurial Ecosystem: The combination of a successful distribution and monetization model creates a viable entrepreneurial ecosystem, enabling the platform to thrive and grow.
The Platform Platforms: When the conditions for a business platform are met, it becomes the foundation for business success. For instance, Apple's iPhone transformed into a "Mobile Business Platform" with the introduction of the App Store, consolidating distribution and monetization models.
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Ciao!
With ♥️ Gennaro, FourWeekMBA