The rise of the platform business

Understanding the pivotal role of platforms for corporates and start-ups alike.

Laure and Benoit Reillier are co-founders of Launchworks, an ‘expert platform’ that specialises in helping organisations on their digital transformation journey. Last year, they published ‘Platform Strategy’, a handbook to ‘unlock the power of communities and networks to grow your business.’ The book was based on many fascinating insights from their combined experience of working in leading tech and dot-com companies.

Since the industrial revolution, most businesses have been modelled on the traditional value chain in which raw materials are transformed into products and sold at a margin. But in the last 20 years, we have seen the emergence of a new type of platform businesses, such as eBay, Amazon, Apple, Facebook, AirBnB and Uber.  In fact, two thirds of the total value of the 270 global ‘unicorns’* are platform businesses.

The core of these businesses is in harnessing the power of communities. Apple doesn’t only manufacture iphones, tablets and computers, it also provides an incredible marketplace for apps. Amazon, as well as being an online retailer, is also a gigantic marketplace for other sellers.

Running a platform business is like running two businesses at the same time. Whether it is ‘buyers and sellers’ or ‘users and producers’, each side will have its own value proposition and the trick is to grow both sides at the same time to achieve critical mass. This can be a hard thing to do, known as the ‘chicken and egg’ challenge. As Laure neatly described the problem: ‘it’s no fun being the only person on a dating site’.

What all successful platform businesses have in common is a business model that attracts, matches, connects and enables people to transact. Instead of a value chain, it creates an entire ecosystem.

Platforms are not binary. It is not always necessary to turn your business into one. Apple and Amazon have both demonstrated that it can be successfully combined with a traditional model.

According to Benoit, the biggest risk is ‘running the wrong software in your brain’. The mind-set you need is about being open, not closed; influencing, not controlling; co-creating rather than producing. Millennials completely ‘get it’ when the Board doesn’t!

 

* A unicorn is a privately held start-up company valued at over $1 billion.