Platforms, which are commonly associated with a technical stack or operating system, have moved out of the technical world and entered the wider business world. In fact, 7 of the 10 most valuable companies in the world now follow the platform business model.

From Amazon to Apple and Alibaba, these tech-based companies have disrupted the traditional way that business is done, operating across multiple industries and accommodating the creation and interaction of communities and economies through international borders. 

There is no holding back the winds of change, as McKinsey predicts that this “could account for more than $60 trillion in revenue by 2025, or more than 30% of global corporate revenue.” However, McKinsey also found that less than 2% of established businesses have risked doing so. 

There are prime opportunities to capitalise on adopting a platform business model, several of which I will detail in this article whilst also looking at our own experience when rapidly developing a platform project. 

Defining Platform Businesses

A platform business promotes various forms of interactions between individuals and communities, governing such activities with rules and regulations.

Although today’s biggest platform businesses are founded on digital spaces, the model has been in existence since the beginning of primitive economies, dating back to town squares where merchants set up shops to hawk their various wares. These markets eventually evolved into shopping malls, which in turn have evolved into the online space we are all familiar with. 

The modern iteration of platform businesses is powered by a technological infrastructure that allows for scaling on a global level. Traditional business models rely on the creation of products and services, which are then sold to consumers. The platform business model, on the other hand, creates value by facilitating interactions, whether they may be one-time financial transactions or long-term social collaborations (e.g. the virtual auction house of eBay or the code-sharing community of GitHub).

Different Types of Platform Businesses

It’s important to note that not all platforms are created equal, as some can generate a higher return on investment than others. Understanding the structure and dynamics of each type can help decision-makers pick the one that can better fit the business:

• Aggregation platforms

Relevant resources are aggregated to let users easily access which ones they need. An aggregation platform typically revolves around users making short-term transactions, with the platform owner and organiser overseeing transactions. Amazon, AliExpress, and Etsy operate on this platform.

• Social platforms

Connections between people with common interests are fostered to drive community engagement. The focus is on long-term relationships that grow into large networks with little to no involvement from the platform owner. Facebook, Twitter, and Reddit are some of the biggest social platforms online.

• Mobilisation platforms

Users are brought together to accomplish tasks that require large-scale collaboration. Like with social platforms, mobilisation platforms also encourage long-term relationships. A business-oriented example would be the global supply chain management company Li & Fung, while a non-profit example would be the open-source software platform Linux.

• Learning platforms

Participants share their insights with each other to develop skills and improve their competencies in learning platforms. There is a great possibility for deeper relationships between users compared to other platforms, as there are more opportunities for growth through the distribution of knowledge and participants are actively seeking to learn.

Case Study: PPE Hive

Platforms can be rapidly deployed and we won’t look further than our very own PPE Hive—a platform that connects producers of personal protective equipment (PPE) with distributors and those who are in need. 

We began working with Automated Architecture (AUAR) at the start of the UK lockdown to address the increased demand for PPE in the healthcare sector due to the COVID-19 pandemic. With PPE Hive, users can either request for 3D-printed face shields or offer to deliver them. The web-based platform also lets users check what the community is currently providing and what it lacks.

Its current beta release sees users requesting for PPE in the Bristol area pro-bono. Its adaptive architecture, meanwhile, allows for future use with other public needs apart from PPE in a post-coronavirus world.

Today, we are excited to be working with an entrepreneur on a new platform that could revolutionise collaboration across pharmaceutical companies. There will be more to come in the near future.

Why Now is the Time to Think About Platforms 

Simon Torrance, a leading expert in business model transformation, explained that the slow adoption of the platform model is brought by the fact that this strategy was not taught to today’s corporate leaders at business school. He added that only a few non-digital companies fully comprehend the model.

However, competing in tomorrow’s business arena calls for planning to shift to this model today. Doing so results in a host of benefits, including:

Scale faster and better

The core distinction of the platform model is that the users are the ones that invest the resources to create value, whether it’s in the form of content, products, or apps. Instead of having to rely on accumulating capital, it’s about getting more users on the platform. 

Business platforms also enjoy near-zero marginal costs of manufacturing and distribution. Information goods that are most commonly traded in digital platforms such as apps only have the initial cost of creation to consider. Copies can then be reproduced for minimal resources and shared online without any of the fees usually associated with physical transportation.

Build a self-sufficient community

A platform creates more value whenever a user joins it. For example, a new craftsperson who sets up a store on Etsy adds a new line of products for customers to choose from. A consumer who joins Etsy means more business opportunities for merchants; that same consumer can also leave reviews on product pages that other users can find useful. Supply and demand are both generated and answered by the users.

The growth of communities on a platform itself becomes a selling point for even more producers and consumers to join the platform. There’s less of a need for direct advertising when people who are not yet part of the platform are attracted to it because of its growth and perceived value. 

Better communication and efficiency

As this business platform aims to provide its users with everything they need to keep engagement high, the result is a centralisation of tools and resources on the platform. It then becomes so much easier and more efficient for businesses to have internal and external communications, whether it’s interfacing with coworkers or customers.

Model benefits both B2C and B2B industries 

The prevailing opinion is that the business platform model works mostly for B2C industries. However, there is a rising trend among B2B industries as well in adopting the model. 

Laure Claire Rellier, COO of Launchworks & Co and thought leader on platform business models, names Siemens’ railway products and solutions platform MoBase (previously known as Easy Spares), the B2B marketplace Amazon Business, and the legal services provider Lexoo as evidence of the platform model’s B2B relevance. Rellier also predicts B2B platforms to emerge from sectors such as manufacturing, transport, and agritech, to name a few.

Progress from Production to Platforms

Consumers congregate in their many millions on just a handful of platforms created by the most successful global companies in the world today. It’s beholden on other enterprise to catch up and transition from production pipelines if they really want to capitalise on the paradigm-changing benefits of the business platform model. 

Calvium can help you rapidly experiment and make the transition to a platform business through the rocket model process and agile development. Schedule a consultation with us today to find out more.