Why platform businesses need a new business model canvas?

I have written a couple of posts before on business canvases. In one post, I had collated and compared all the business canvases available under the sun.

Making Sense of All Product Canvases Under the Sun

I covered, Alex Ostwerwalder’s Business Model Canvas, Ash Maurya’s Lean Canvas, Shardul Mehta’s Product Canvas, Roman Pichler’s Canvas and few others.

However, the business canvases I had listed on the post were all piped businesses. Read my post to understand the difference between piped businesses and platform businesses:

Why should product managers wear platform thinking hats?

The value chains in a regular piped business is linear. In platform though, value creation happens in networks.

Sangeet Paul Chaudhary, author of Platform Scale told me in a podcast interview - “Companies have to move away from the thinking of „my“ product or „my“ service. In a platform world you become the orchestrator of multiple parties. Your job is no longer to develop new products, your job is to facilitate the transaction between the participants.”

Now, even though I had a conceptual understanding of piped and platforms, I had never worked on a platform product myself before and it was only now, that I am getting an opportunity to work in a platform product.

While doing research on putting across a business canvas for platforms, I chanced upon Platform Innovation Kit, which provided a business canvas meant for platform businesses, which made so much sense. Platform Innovation Kit was put together by the folks from Lean Platform Innovation and the canvasses are licensed under Creative Commons to be shared and improved by anyone who is willing to contribute.

I got a chance to interview Matthias Walter (@digitalahead), Founder, Platform Innovation Kit, on why platform products need a business canvas of their own.

Here’s how platform businesses differ from linear (pipe) businesses.

Linear Business — — — — — — — — — — — — — — — — --Platform Business

Linear Business:

• Sells a product or service to a consumer
• Owns one side of the transaction
• Products have inherent value

“I derive value from my use of a product”

Platform Business

• Facilitates a transaction between multiple parties
• Owns infrastructure that facilitates the transaction
• Platforms add network value

I derive value from other peoples use of the platform.

The multi/sided market model

According to the folks from Platform Innovation Kit, successful platforms are based on more than two sides — they are multi-sided. They bring together different roles in action — consumers, producers and partners. They facilitate a healthy transaction between these players and help forge a long lasting relationships.

Understanding the platform stakeholders

• Consumers: Consuming and utilizing the core value from the platform ecosystem. Can transform into the role of Prosumer when acting as consumer and producer. Example: AirBnB travellers, Uber riders, Youtube viewers etc.
• Producers: Providing the core value to the platform ecosystem, looking to enlarge their customer base and lowering the efforts for marketing.
• Owner: Owns the vision of the platform and its ecosystem. They are responsible to lower the friction of the core platform processes and to enhance the experience of the platform for all stakeholders.
• Partners: They are additional service providers looking for a better and broader market access. The biggest difference compared to the producers are that they are only indirectly involved into the exchange of the core values. Example: Wordpress theme developers, Salesforce Forge developers, Payment providers, Advertisers.

This is how a platform business model canvas looks like:

Core elements of the canvas:

1. Core Value & Mission: In the center of each platform business model is the core value traded on the platform. The core value is the connection between the stakeholders. Around this core the platform will provide additional value propositions. Examples: Uber → to get ride from A to B, AirBnB → to get a stay at location xyz, Youtube → entertainment
2. Stakeholders: On the outer ring position the key stakeholder (consumers, producers, partners). Think in roles, not in organizations. Trigger questions: Who is consuming the values?Who is producing the values? Who is providing additional services?
3. Value Proposition: On the dark grey ring define the key value propositions for each stakeholder role. There must be a benefit for all stakeholders — otherwise the whole business model will not work! Ask 5 times why to discover the true reasons — or use the Value Proposition canvas to get a deeper understanding of the jobs-to-be-done, pains and gains of the stakeholders.
4. Transactions: The transactions are inbound and outbound deliverables — tangible and intangible. Inbound: What values brings the stakeholder to the platform. Outbound: What gets the stakeholder from the platform? Money/Revenue: It’s important to map also the flow of the money -> this allows you to understand your business model — who paying for what and who is receiving the money.

Here is an example of a similar canvas for AirBnB: