From Software Platforms to Business Platforms!!!

In Ancient Greece, emporiums were designated places near docks where traders could exchange merchandise. They were an early version of what we call today Platforms, a type of marketplace where people and businesses trade under a set of rules set by the owner or operator. Digitization and the Web have given rise to a new type of marketplace, starting with Software Platforms ( invisible engines based on written computer code), that serve as a base for other computer programs (Windows is the classical example).

These Software Platforms running on dedicated computing devices became the critical players in the first phase of  the third Industrial Revolution or Digital Revolution  that started around 1980. The second phase, which began around 2000, is focused on Business Platforms born  as Software Platforms that run on Web servers, and that help businesses and consumers buy goods and services

Platforms for Startups and Incumbents

Today Platforms work as the business framework, that allow for multiple business models to be built and supported. Companies invest in Platforms counting on the fact that future products can be developed faster and cheaper, than if they are built as a stand-alone. Rare is the startup that does not want to be a platform.  A growing number of incumbent firms, are also striving to build platforms.

Types of platforms

·         Software, that power many modern industries: personal computers, digital music, mobile phones, video games, advertising and online searches.

·         e-commerce, including Amazon and eBay, which connect sellers and buyers of products.

·         Service, including Uber and AirBnB,  which connect sellers and buyers of services.

·         Social Networks, bringing together consumers and advertisers.

·         IOT and Information, where some examples include:

a.     Wireless thermostats and smoke detectors, that additionally collect information, allowing the same provider to offer tailored energy and security services.

b.    Services that help customers improve how they run locomotives, jet engines and other gear.

c.     Market places for healthservices.

Characteristics

These modern platforms have the following elements in common:

·         They are “multi-sided”, since they have more than one group of customers.

·         They exhibit strong “network effects”, a growing group of one sort of customer attracts more of the other, which again draws in more of the first and so on.

·         They are “controlled by one company”, which dictates the terms of trade.

Number of Platforms

American companies in particular have been particularly succesful in building global digital emporiums.  In 2015, 44 platform firms based in Silicon Valley alone boasted a combined market capitalization of $2.2 trillion.

Limitations and Risks

·         Most products and services are not substantial enough to make a good platform.

·         Network effects can fizzle, once imbalances appear, such as having far more sellers than buyers.

·         Switching to a rival Platform has to be costly.

•        Platforms with a component in the physical world are likely to take more time to emerge than the purely digital sort.
•          Ultimately most firms will have no choice but to do business on somebody else’s digital property or have their own platform. 

There are references to “Platforms are the future—but not for everyone” http://econ.st/1TRiX0F, “What's The Difference Between A Software Product And A Platform?” http://onforb.es/1XJJMZT and  “Invisible Engines - How software platforms drive innovation and transform industries (MIT)”.