We distinguish two main types of digital platforms. Innovation platforms allow third-party companies to add additional products and services into the core product or technology. Known examples of such platforms – operating systems Google Android and Apple iPhone, and Amazon Web Services. Different type of platforms – transactional. They ensure the exchange of information, goods or services. These include Amazon Marketplace, Airbnb and Uber.
Five of the six most expensive companies in the world operate on the basis of platforms. We analyzed the data over the last 20 years and found that 43 of the publicly listed platform, the company was in the Forbes Global 2000: with half the number of employees they managed to reach the same level of annual revenue (about $4.5 billion), which reach replatforming competitors. They also could boast twice as much operating profit and a much higher growth rate and market value.
However, to create a successful business platform is not so easy. “Platformname” like a land grab: companies feel they have to become pioneers, to assign the new territory to use the network effect and to erect barriers to entry to the market. Among the most obvious recent example – frantic efforts by Uber to conquer every city of the world and desire to organize an Airbnb rental on a global scale.
the Problem is that platform business models fail with alarming frequency. Identifying sources of failure, managers can avoid the obvious mistakes.
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