Can You Mix and Match Your Way to a Platform Business Model?
The success of platforms such as Airbnb and Uber has sparked a platform boom. Suddenly, start-ups as well as established players want a piece of this lucrative pie.
But it’s not just a matter of following recipes accurately. To succeed, businesses need to understand the different flavours and ways to combine them, so that the “pie” will satisfy an appetite.
A primer on platforms
There is a clear distinction between platforms and pipes as business models. With pipes, firms create value and push them down to customers. Examples include all traditional manufacturing businesses, media companies and even education systems.
A platform is an environment generally owned by a company, but their customers almost become suppliers (creating their own products/businesses) by adding additional value to the the company’s own products and then selling or sharing them with other customers.
Other key definitional terms for platforms:
- There must be direct interactions between consumers and suppliers — not to be confused with reselling business practices, where the middleman buys from suppliers and resells it to consumers.
- There can be more than two groups of participants, i.e. a multi-sided platform. Example: LinkedIn facilitates exchanges among job seekers, recruiters and advertisers.
Different platform flavours
Now let’s dive into some key characteristics of platforms.
A platform facilitates the exchange of value between two or more groups of participants, often consumers and producers.
Gamification
Applying game elements to non-game contexts, companies hope to encourage desirable behaviours from either employees or customers. With regards to platforms, gamification can manifest itself through:
Leaderboards
Games are inherently competitive. Companies can tap people’s desire to display their achievements by incorporating a ranking system into their platforms. For instance, Pizza Mogul by Domino’s incentivises pizza producers by awarding bonuses to top-selling “Moguls” each week.
Milestone-specific rewards
These are aimed at encouraging power users, thereby increasing the platform’s credibility. For instance, Uber drivers earn bonuses after driving certain numbers of trips; Airbnb hosts enjoy exclusive perks and higher revenue potential by striving to be Superhosts.
Social selling and “Me-tailing”
If a platform facilitates social selling, it allows integration so that users can leverage their social connections, build their own “brands,” and even sell directly through social networks such as Facebook, Twitter etc.
For example, Etsy — the marketplace for handcrafted and vintage items — integrates with a commerce platform to make posts on social networks shoppable.
“Me-tailing” is the next step for retailing, which involves hyper-personalisation. Domino’s cites their Pizza Mogul initiative as an example. Here, me-tailing means giving consumers control over how they want to personalise their pizza as well as the related marketing campaigns.
Other ways to apply me-tailing in platforms:
- Contextually relevant offers, e.g. Netflix suggests films to watch based on users’ preferences.
- Convenience, e.g. eBay lets sellers give buyers the option of picking up items from well-known retailers alongside postal delivery.
Crowdsourcing
Used as a way to show appreciation for user input, crowdsourcing has helped companies like Domino’s utilise “free” product ideas. Only after a few months of the Pizza Mogul’s launch, Domino’s attracted 30k moguls, more than 100k pizza designs, and 5k user-generated promotional videos. Thus, Domino’s has not only crowdsourced new menu items, but also sales and marketing resources.
Users can also contribute capital, as with Kickstarter, or talent, as with Freelancer. The caveat? Sometimes, too many cooks spoil the broth.
Community building
Social networks lend themselves naturally to building communities, but product/service exchange platforms take it to another level as they have highly engaged user groups that share similar interests.
That is when user-generated content comes into play. Examples: stories created by users about users in Airbnb’s Community Center; discussions on Etsy’s Community Forums.
Simply adding equal quantities of all flavours and stirring is more likely to create a potluck soup than an appealing pie. To truly make it work, we need to understand the core elements of a platform…
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