Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You - PCC - ebook

A practical guide to the new economy that is transforming the way we live, work, and play. Uber. Airbnb. Amazon. Apple. PayPal. All of these companies disrupted their markets when they launched. Today they are industry leaders. What’s the secret to their success? These cutting-edge businesses are built on platforms: two-sided markets that are revolutionizing the way we do business. Written by three of the most sought-after experts on platform businesses, Platform Revolution is the first authoritative, fact-based book on platform models. Whether platforms are connecting sellers and buyers, hosts and visitors, or drivers with people who need a ride, Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary reveal the what, how, and why of this revolution and provide the first “owner’s manual” for creating a successful platform business. Platform Revolution teaches newcomers how to start and run a successful platform business, explaining ways to identify prime markets and monetize networks. Addressing current business leaders, the authors reveal strategies behind some of today’s up-and-coming platforms, such as Tinder and SkillShare, and explain how traditional companies can adapt in a changing marketplace. The authors also cover essential issues concerning security, regulation, and consumer trust, while examining markets that may be ripe for a platform revolution, including healthcare, education, and energy. As digital networks increase in ubiquity, businesses that do a better job of harnessing the power of the platform will win. An indispensable guide, Platform Revolution charts out the brilliant future of platforms and reveals how they will irrevocably alter the lives and careers of millions.

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Table of Contents

Section 1: The Power of the Platform

Section 2: The 10 Challenges of Platform Building

Section 3: The Future of Platforms


Table of Contents


Section 1

The Power of the Platform

Platforms create value by facilitating matches among users. They enable value creation by producers who are also consumers. The striking feature is since platforms don't own or control resources, they can grow faster than traditional businesses. The rise of the platform business model has already transformed major industries and many more transformations are on their way.

Platforms are a relatively new business model. Platforms consummate matches between users (who can be both producers and consumers) to create value. Platforms don't control resources and create value for everyone by providing an open and participative infrastructure for generating matches.

A few of the platforms which have grabbed the headlines to date include:

■Airbnb – which started in October 2007 with two budding designers who were looking for ways to help pay the rent on the loft they shared in San Francisco. They offered air mattresses and their services as part-time tour guides to people attending conferences. From that simple beginning, Airbnb has made offering affordable rooms to travellers its business. Today, Airbnb is valued at $30 billion – more than most of the world's largest hotel chains.

■Uber – which started in San Francisco in March 2009. Within five years, Uber was valued at $50 billion and has challenged traditional taxi industries in more than 200 global cities. Uber has become a major player in transportation – all without owning a single car.

■Facebook – which today has more than 1.5 billion subscribers. Facebook generates $14 billion in annual advertising revenue selling access to content generated by its own users.

Other successful platforms include Amazon, YouTube, eBay, Wikipedia, Upwork, Twitter and dozens more. Platforms are transformative business models which are radically transforming industries, the economy and society at large.

There are several reasons why platforms outperform pipelines across many industries. These include:

1Platforms can scale more efficiently – because they eliminate gatekeepers who slow things down. Anyone can publish on Amazon's Kindle platform without going through the hassle of finding a publisher. Consumers also like having no gatekeepers because they get greater freedom to select the products that fit their needs. Platforms also get away from bundles where you are forced to pay for junior staff in order to get access to the superstars in your field.

2Platforms beat pipelines because platforms can unlock new sources of value – without the traditional overheads of running a company. Airbnb doesn't own any properties but offers pricing and booking systems which are sophisticated as those operated by Hilton or Marriott. That means Airbnb can grow quickly whereas traditional hotel operators require decades of investment and hard work.

3Platforms replace just-in-time inventory with not-even-mine inventory – thereby exposing new supply to the marketplace. Consumers who have items they use only infrequently can rent them out to offset their sunk costs.

4Platforms use data-based tools to create community feedback loops – so you can gauge quickly the reputation of those who want to use your items. Rather than relying on managers, editors or supervisors the market itself can shape and influence market transactions.

5Platforms invert the firm – they shift the focus of business operations from being internal activities to external activities. Rather than doing things in-house, functions like marketing, IT, operations and even strategy building can get outsourced to others. Platforms allow greater business efficiencies to be injected back into the firm.