“We are building a Platform”
That evening three companies presented their solutions at an IoT (Internet of Things) meetup at HP Enterprise Moscow headquarters, and this was the common phrase which presenters used to open their speech: “We are building a Platform…”.
And the fact was that they were not .
Young companies tend to use this buzz-word so often, that it seems saying “platform” in product description is supposed to beneficially affect the product itself.
Of course, a Platform with a capital “P” sounds respective — something what big guys like Google and Facebook do. Though, as Mr. Dmitriy Kalaev (director of accelerator programs at IIDF) said:
“Small startups saying that they are building a platform makes me doubt their product… platform is something only large companies with million-dollar budgets can do”
Building a full feature platform usually requires financing far out of reach of small and medium enterprises. But what are criteria to regard a business as a platform and when is it fair to use this buzz-word? Let’s look up in a dictionary:
“Platform is a business model that creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers” [1]
It follows, the “platform” as a business model is focused on creating means of connection between its users. It may be described as a digitally extended marketplace. Following this logic, I can suggest the following feature list for verifying a platform business model:
1. Effortless scalability (business could be scaled with minimum efforts)
2. Ensure connectivity (the core of business is a high-quality network)
3. Merge products (merge products to create value) [2]
4. Invite 3rdparties (allow others to build on your products)
5. Users are creators (users are the content creators) [3]
Instead of diving into discussion, let’s give this list a try. We will test this feature list on two large Russian companies, whose business models were regarded as a platform.
I. Yandex Market (easy example):
One of the fastest developing Russian companies is Yandex. With an official mission to create a balanced “internet ecosystem” and following the best foreign practises to create a sustainable company this company has managed to build and impressive portfolio of interconnected business blocks, but shall we regard its business model as a platform?
Of course, it is hard to encompass the entire Yandex ecosystem (check it: https://www.yandex.ru/all), so we will focus only on a single service “Yandex Market”.
Time to test our feature list!
1. Effortless scalability — TRUE.
Yandex supports the marketplace so any number of users can join it.
2. Ensure connectivity — TRUE.
Users use marketplace to interact with each other and Yandex helps to improve interaction quality.
3. Merge products — TRUE.
There are additional services which are built to enrich user experience, for example delivery, recommendation system and customer insurance.
4. Invite 3rdparties — TRUE. (no comments — this is a marketplace)
5. Users are creators — TRUE.
Users could engage in the process leaving a comment or up voting a product.
It follows that we can classify Yandex Market as a platform. This example may sound obvious, but here we have tested criteria to identify a platform. Next example is more complex.
II. Sberbank, Single Front-end System
A “Single Front-end System” was recently completed by the SberTech, the tech subsidiary of the largest Russian bank. Being a cross functional “platform” aimed to enhance user experience and to allow fast hypothesis testing, the system is supposed to be the first step of a Sberbank on a way to become an Open Bank.
Single Front-end System is expected to improve customer support, to stimulate a business development and to become a BigData Factory.
Here is our checklist.
1. Effortless scalability — FALSE (*) .
It is not clear whether the system is scalable or not.
2. Ensure connectivity — FALSE.
The connectivity is ensured only with the Sberbank systems at the centre, and this is not the same as connectivity between users.
3. Merge products — TRUE (*) .
The system is expected to allow startups to use Sberbank in the BaaS mode (not for now).
4. Invite 3rdparties — TRUE.
Sberbank invites 3rd parties to use its platform, though access is limited.
5. Users are creators — FALSE.
Businesses are creators of their own apps with application of Sberbank functions.
To sum up, in this system users are not creators and there are some doubts regarding connectivity and system scalability. It looks like Sberbank created a basis for Bank-as-a-Service (BaaS) form of business — not a platform as a business model. Building BaaS business is a way to turn bank into an open bank.
“Open bank is a system that provides a user with a network of financial institutions’ data through the use of application programming interfaces [4]“
Despite its name, “Single Front-end platform” is not a platform, but a set of closed APIs.
***
Barriers for building a platform are high, though the benefits may outweigh all costs. A well-designed platform, as a business model, is a self-developing structure, which may ensure business growth for years. There is no surprise that it is hard to create one.
Originally published at vladrasskazov.com on September 3, 2017.
