Massive new startups like Uber taxis, Airbnb and many more are pioneering the ‘On Demand Economy’, implementing a Cloud-based On Demand Business Framework which overlays a ‘digital mesh’ across a marketplace of vendors, such as taxi drivers or travel accommodation.
The repeatable secret sauce is the Platform Business Model, described in detail through academic literature and popular business books.
For example the MIT book ‘Platform Revolution‘ describes these hyper-scale disruptors like Netflix, Uber, Airbnb, Facebook, Twitter et al, as the book describes:
“Facebook, PayPal, Alibaba, Uber-these seemingly disparate companies have upended entire industries by harnessing a single phenomenon: the platform business model.”
The book builds on prior MIT research, such as this detailed 2007 research report on Platform Networks, this highly recommended presentation Platform Strategy and Open Business Models, and in a simpler format in this presentation, which defines:
“A “Network platform” is defined by the subset of components used in common across a suite of products (Boudreau, 2006) that also exhibit network effects. Value is exchanged among a triangular set of relationships including users, component suppliers (co-developers), and platform firms.”
Throughout these materials they provide an anatomy of these business models, exploring dynamics such as “multi-sided pricing“.
Platforms are marketplace models, ranging from the people-centric services like Uber taxis and Airbnb accommodation, through to electronic distribution channels like Apple and X-Box. MIT examines the different permutations and shares those best practice insights.
The Platform Manifesto
MIT describes it as a transition to a multi-sided market model, which they capture eloquently in this presentation, via one scenario that describes the shift as ‘From Warehouse-Powered Store (with a goal of liquidating inventory) to Ecosystem-Powered Marketplace (with a goal of governing ecosystem interactions)”. (Slide 26).
Winning the Digital Transformation Game – Harnessing the Third Platform
Mike Rosen has a unique take on the Platform Business Model, describing it as the third in a generation of IT architectures.
In his OMG presentation Winning the Digital Transformation Game, Mike describes the overlay of Cloud, Mobile, Social and Big Data across the traditional legacy of hardware, software and telco services, constituting the ‘Third Platform’ and beginning around 2006.
He highlights the general explosion of the technology innovation ecosystem, everything from 3D Printers through Augmented Reality to the Blockchain, are each executing major levels of disruptive change, in parallel to one another.
As they intersect and synthesize so even larger virtual market opportunities are opened up, from digital currencies to entirely new app sets for the public sector to new mass market gaming niches.
This time of hyper-innovation will be best exploited by those organizations led by Chief Digital Officers, the evolution of the CTO role to reflect this increased strategic importance, and those who are practiced in building Platform architecture.
The presentation describes:
- Five organizational pillars of transformation: Leadership, Omnichannel Experience, Information, Operating Model and WorkSource.
- Three primary action drivers: Create expectation-altering customer experiences, use information for competitive advantage and create new revenue streams through connected services.
- Digital Marketplace core: A central IT design of a catalog of integrated, brokered, managed IT Business Services.
- An Enterprise Architecture Maturity Model: That defines an evolution from local agility to enterprise agility.
- A Performance Architecture: A management dashboard for synthesizing all of these initiatives to drive success and growth.
Mike then summarizes by describing how Business Architecture offers the skill set to define the implementation of these pillars, repeating the central theme that it provides a formal way of linking strategy with execution planning.
Business Model Canvas – Envisioning Platform Models
A Platform API only provides the mechanics of the model, and many attempted implementations have failed, so it is not a guaranteed recipe for success.
In short it can be built on but still needs original and creative thinking in terms of the new business models it can be used to achieve.
This selection of Youtube videos offer examples of such an envisioning process for the Platform model, to populate a Business Model Canvas based on these principles.
Other recommended reading includes:
- From Product to Platform – McKinsey explore successful Platform models, that transition from traditional products.
- 20 API models in 20 mins – John Musser, CEO of API Science and founder of ProgrammableWeb, discusses the progression of API business models and offers examples of companies that have successfully matched their strategy with the appropriate model. (also shared via this Slideshare presentation).
- Real API Models that Worked – ProgrammableWeb explores a number of startup scenarios that successfully employed an API model.
- Insights from the 2016 Platform Conference – Speakers from Google, Microsoft, Airbnb, Spotify, Volvo, and other companies offering broad insights into API scalability, future reliability, and use case assessments of fine grained technologies like microservices, GraphQL, serverless architecture and more.