The Power Of Platforms
Platforms lift you up.
Over the past year, I’ve become fascinated with platforms as a business model. This concept was first introduced to me by Michael Lachapelle, who then pointed my attention towards the work of Sangeet Paul Choudary.
In Sangeet’s ebook Platform Power, he describes a platform business model as a way to:
“Enable creation and exchange of value between users, with the firm (startup) acting as an infrastructure enabling users to interact”
The first of 2 platform models I want to unpack is the Value Platform Model from Sangeet Paul Choudary.
VALUE PLATFORM MODEL
Within this model, the total value of your platform should be directly correlated to the interactions that happen on top of the platform.
PLATFORM: Your platform should always start by solving a core problem for your customer. From there you can start building features that help your user solve those core problems.
VALUE: The Value Box above is not the technology or customer growth, but rather the network effects you are able to generate.
EXAMPLE: If we look at Airbnb, to apply this model successfully, every feature that is built should be built around the center, which is to optimize listings. If executed correctly, the theoretical outcome is that the closer each new feature is aligned with the “center” the more intuitive the user experience.
To conclude, the potential network effects generated on top of the platform are therefore enabled by the units, which are the centers, that are created on the platform.
PLATFORM MONETIZATION MODEL
Credit for this visual model goes to Michael Lachapelle while the theory belongs to Sangeet Paul Choudary
PLATFORM, PRODUCER, CONSUMER: The core tenants of this model include the platform, producer and consumer. The platform’s currency is the interactions, the producer is the value creator and the consumer is the value user.
SEED: The seed is the minimum amount of content or information needed in order to start an interaction.
MAGNETS: These are the incentives to the participants.
TOOLBOX: Helps showcase the producer’s value while allowing the consumer to find the value they are looking for.
MATCHMAKING: This involves the data management to build more trust over time.
In summary, you want to ensure 3 elements are working together:
- Get the producer and consumer roles on board
- Provide them the tools to interact
- Use data to match the roles
When it comes time to thinking about monetization there are 4 high level paths to consider:
 Freemium – Pay for better tools, or higher value (i.e LinkedIn)
 Access – Pay for access to the other side of the platform (i.e Dating Sites)
 Transaction – Taking a % fee of transactions (i.e Airbnb)
 Advertising – Fee to access platform user (i.e Facebook)
BONUS: E-commerce – Selling goods directly to the end user (i.e Amazon)
ARE YOU MISSING OUT?
When it comes to defining your Unique Value Proposition and establishing a competitive advantage in today’s digital landscape, it’s no longer sustainable to just “build a better mousetrap.” Instead of trying to compete on product features and functionality, consider how you can connect what you’re building with others to co-create value. Enabling others to create value along side you, might just be the the framework you need, to help your business grow in the networked world we live in today.