More on this book
Community
Kindle Notes & Highlights
Started reading
October 6, 2019
The platform model underlies the success of many of today’s biggest, fastest-growing, and most powerfully disruptive companies, from Google, Amazon, and Microsoft to Uber, Airbnb, and eBay.
We have written this book because we believe that digital connectivity and the platform model it makes possible are changing the world forever. The platform-driven economic transformation
The answer is the power of the platform—a new business model that uses technology to connect people, organizations, and resources in an interactive ecosystem in which amazing amounts of value can be created and exchanged. Airbnb,
As we’ll explain, practically any industry in which information is an important ingredient is a candidate for the platform revolution.
In fact, in 2014, three of the world’s five largest firms as measured by market capitalization—Apple, Google, and Microsoft—all run platform business models. One
Another, Apple, nearly went bankrupt a few years earlier—when it still ran a closed business model rather than a platform. Now
platform is a business based on enabling value-creating interactions between external producers and consumers. The
Yet today’s platforms, empowered by digital technology that annihilates barriers of time and space, and employing smart, sophisticated software tools that connect producers and consumers more precisely, speedily, and easily than ever before, are producing results that are little short of miraculous.
with a platform, a pipeline is a business that employs a step-by-step arrangement for creating and transferring value, with producers at one end and consumers at the other. A
Every platform operates differently, attracts different kinds of users, and creates different forms of value, but these same basic elements can be recognized in every platform business.
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.”3
transformations in almost every corner of the economy and of society as a whole, from education, media, and the professions to health care, energy, and government.
Note that platforms are continually evolving, that many platforms serve more than one purpose, and that new platform companies are appearing every day.
Network effects refers to the impact that the number of users of a platform has on the value created for each user.
David Sacks’s napkin sketch suggests a second dynamic at work in the growth of Uber,
dynamic at work in the growth of Uber, one we refer to as a two-sided network effect.5 In Metcalfe’s telephone example, phone users attract more phone users. But in the case of Uber, two sides of the market are involved: riders attract drivers, and drivers attract riders. A similar dynamic can be seen in many other platform businesses. In the case of Google’s Android, app developers attract consumers, and consumers attract app developers. On Upwork (formerly known as Elance-oDesk), job listings attract freelancers, and freelancers attract job listings. On PayPal, sellers attract buyers, and
...more
two-sided network (i.e., one with both producers and consumers) has four kinds of network effects. It’s important to understand and consider all four when designing and managing a platform.
same-side effects
cross-side effects
Good platform husbandry seeks to reinforce positive network effects, creating and strengthening as many positive feedback loops as possible.
They are valuable because of the communities that participate in their platforms.
The reasons were the same: the network effects both organizations had created.
So where do we start in designing a new platform? The best way is to focus on the fundamentals.
Thus, every platform business must be designed to facilitate the exchange of information.
On Facebook, photos, links, and posts with personal or other news are exchanged among users, while on YouTube videos are exchanged.
Upwork, for example, provides clients with built-in tools to manage remote service delivery, so digital goods created by a freelancer, like slide decks and videos, can be exchanged directly through
The platform’s goal, then, is to bring together producers and consumers and enable them to engage in these three forms of exchange: of information, of goods or services, and of currency.
The core interaction involves three key components:
professionals connecting with other professionals.
Participants + Value Unit + Filter → Core Interaction
When designing a platform, your first and most important job is to decide what your core interaction will be, and then to define the participants, the value units, and
the filters to make such core interactions possible.
Thus, platforms are “information factories” that have
As you can see, a focus on the value unit is extremely important if you’re
pull, facilitate, and match. The
It must facilitate their interactions by providing them with tools and rules that make it easy for them to connect and that encourage valuable exchanges (while discouraging others). And
One aspect of facilitating interactions is making it as easy as possible for producers to create and exchange valuable
In some cases, increasing barriers has a
positive effect on usage.
Balancing the three functions. All three key functions—pull, facilitate, and match—are essential to a successful platform.
YouTube employs a strong pull and deep understanding of the use of data in matching, while Vimeo differentiates itself through better hosting, bandwidth, and other tools for facilitating production and consumption.
platform design begins with the core interaction.
Moodswing
As we’ve seen, adding new features and interactions to a platform can be a powerful way to increase its usefulness and attract more users.
illegally. Over time, many of the Internet distributors found ways to leverage granular data about consumer choice so as to serve their customers better than the traditional pipelines ever did. Business revolutions such as these embodied Andreessen’s vision of “software eating the world.” Today, having attained the status of a cliché, his vision needs an update: “Platforms
One of these advantages is superior marginal economics of production and distribution.
We are hopping into strangers’ cars (Lyft, Sidecar, Uber), welcoming them into our spare rooms (Airbnb), dropping our dogs off at their houses (DogVacay, Rover), and eating food in their dining rooms (Feastly). We are letting them rent our cars (RelayRides, Getaround), our boats (Boatbound), our houses (HomeAway), and our power tools (Zilok). We are entrusting complete strangers with our most valuable possessions, our personal experiences—and our very lives. In the process, we are entering a new era of Internet-enabled intimacy.9
Market aggregation. Platforms are also creating new efficiencies by aggregating unorganized markets.
Amazon Marketplace, Alibaba, and Etsy provide online sites where vendors of thousands of kinds of products from around the world can offer their wares
Platform businesses, then, are disrupting the traditional business landscape in a number of ways—not only by displacing some of the world’s biggest incumbent firms, but also by transforming familiar business processes like value creation and consumer behavior as
