“The Entrepreneur Building Digital Companies to Shape the Future”
PLATFORM THINKING
“Read different to think differently; world is already into rat race.” ― Aman Jassal
All successful Internet-driven Companies such as Amazon, Google, Microsoft, Facebook, Snapchat, Uber, Airbnb, and GTBank all have things in common. They built
Platforms/Ecosystems which facilitated exponential growth while offering imerse value. This Ecosystem based mindset upon which platforms are built to create value
with network effect . In 2050, most companies will be digital, hence the need to focus on Platforms thinking as a requirement to build a successful Internet Company.
WHAT IS A PLATFORM
Platform is a business model that creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. Such models facilitates trade( supply and demand of goods and services while defining the rules of engagement) on the Internet.
PLATFORM STRUCTURE
NOT JUST A BUSINESS MODEL: A NEW GAME
“The latent abundance of your inner most resources matters less. What matter most is the impact you can make with your inner resources and the distinctive footprints you
can leave with what is within you. The excuse not to dare is there for everybody. When you see so many people crowded at the entrance, think of the roofing and if the roofing
is too high, think of the next door and if the next door is not penetrable, create a door within the wall.” Ernest Agyemang Yeboah
For the first time in the world( thanks to Internet), people can now design platforms that scale globally without the huge overhead cost, Imagine what Amazon
would be operating completely offline (without internet platform). This new game, therefore requires a new thinking .
● A shift from conventional linear(Pipes) to networked(Platform) thinking. Platforms generally turn conventional businesses inside-out.
● In the world of Platforms, competition is no longer a zero-sum game. It therefore creates a Winner Take ALL Situation!: “ To be second is to be last!”
● Traditional industries created winner-take-all through supply-side economies of scale while Platforms create winner take all through demand-side
economies of scale
DIGITAL PLATFORMS? WEBSITES OR APPLICATIONS
Although Digital platforms come in form of websites or apps, however, the underlying model, design and architecture, is design deliberately to facilitate
transaction between supply(producers) and demand(consumers) as well as accommodate 3rd parties while the service is design for scale.
STRATEGY MODELS PLATFORMS ADOPT TO WIN
“That’s been one of my mantras – focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s
worth it in the end because once you get there, you can move mountains.” Steve Jobs.
Model 1 : Own the Ecosystem
Model 2: Monitor Ecosystem activity and own the most important resources that emerge (mostly from innovation from data generated)
Model 3: Leverage the value of data
Model 4: The new M&A. Buy someone who has already built your platform.
Model 5: Monitor adjacent and indirect competition
Model 6: Superior user experience and technological design
LINEARED VS NETWORKED THINKING
“The real opportunities lie in the other way, be bold and courageous to seek and do something different” – Samuel Ekpe
1. Linear Thinking
Here products offering all services along the value chain. This creates pipes as such businesses competed based on optimizing the value chain to deliver value more
efficiently.it is quite straightforward – you create a product, push it out and eventually sell it to the customers. Value is produced upstream and consumed downstream,
producing a linear flow.
In the industrial age, the service industry was predominantly Linear based, until Internet came offering democratization. Most manufacturing as well as consumer
good runs on this model. Television and Radio linearly spewing out content at us. Our education system also operate this way, where teachers push out their ‘knowledge’ to
children. The problem however is that Linear models do not yield a more scalable path without the overhead cost. The question therefore is: What is a better way? This,
therefore requires a new mindset!.
- 2. Network Thinking
Here products offering leverages on 3rd party partners to create and offer collective value as well as extend its services. As such this creates an Ecosystem-like
appeal where network effect is created and collective value rendered. Platforms can be online or offline, an example of offline businesses running as a platform is Dell, it
manufactures products according to client specification by leveraging on 3rd party technology hardware partners, while they focus on assembling and Quality Assurance
and Control.
For Online Platform such as Facebook, Uber, and Slack, They allow users to create and consume value. At the technology layer, external developers can extend
platform functionality using APIs. At the business layer, users(producers) can create value on the platform for other users (consumers) to consume. This is a massive shift
from any form of business we have ever known in our industrial hangover. - 3. Comparison: Linear Thinking Vs Networked Thinking
To scale and win the war of dominance, the Linear thinking must be refrained from as much as possible. We must embrace the Networked (Platform) thinking.
Blogs run on a Linear(Pipe) model, but Twitter and Medium democratized it with Network(Platform) model.
● An ecommerce store like Zappos works as a Pipe as well, but Platforms like Amazon and Alibaba democratized and dominated.
● Single-user SAAS runs on linear model where the software is created by the business and delivered on a pay-as-you-use model to the consumer, while
cloud platforms like Google cloud, AWS, Azure, Alibaba Cloud and other cloud services allow 3rd Party developers and businesses create products with their
tools, host their services, however charge monthly hosting fee. This model has led to democratization of the SAAS model.
THE END OF LINEAR MODEL
In the future, every company will be a tech company. We already see this change around us as companies move to restructure their business models in a way
that uses data to create value, moving from linear to networked business models, from dumb pipes to intelligent platforms . All businesses will need to move to this
new model at some point, or risk being disrupted by platforms that do.
There are two types of business models: Pipes (Linear) and Platforms (Networked). Startups that don’t realize this fail. Startups with the best technology
often fail because they build for the wrong business model.
HUGE OPPORTUNITIES FOR STARTUPS (UNDERDOGS )
The vast majority of companies use pipe model, although many specialists advise Startup entrepreneurs to build their business on the platform model otherwise
they might be disrupted by those that do. The most common mistake companies make is being based on a platform model but using a pipe thinking. This is a recipe for
failure.
ELEMENTS IN PLATFORM MODEL DESIGN
There are three elements to consider in a platform design:
1. User acquisition in both models. In a pipe model, the focus should solely be on converting shoppers into buyers. Whereas in platform thinking, your attention
has to be concentrated in attracting consumers and producers, stimulating producers to produce, and consumers to buy as such, platform based enterprises have to make sure that their product is attractive for both producers and consumers. The situation is a bit different in a pipe model where the focus is mainly on offering a product which is attractive to consumers.
2. Governance And Management: Since you are not getting involved with all process, a framework for management must be designed to Facilitate interaction and protect network effect on the platform.
3. Monetization in both cases . It is quite straightforward in a pipeline, where it is done by determining what the costs are to get the product through the pipeline
and charge the consumer enough for that and make a profit. However, in platform, it is a little bit more complicated. We need to determine whether monetization comes from both consumers and producers and whether one subsidize another. Also, consider any third party revenue source such as API fees or advertising.
PLATFORM BUILDING BLOCKS
There are be three defined building blocks when talking about a successful platform strategy.
1. A Toolbox which creates a connection by making it easy for others to plug into your platform.
2. A magnet which creates a pull that attracts both producers and consumers to the platform with something called social gravity.
3. The matchmaker element which fosters the flow of value by making connections between producers and consumers. For instance, Google matches the supply and demand of online content, while eBay, matches relevant buyers to relevant products.
ON ARCHITECTING PLATFORM IN A NUTSHELL
1. Beyond building a product, website, web applications or mobile applications, Focus on connecting supply with demand and defining rules of engagement.
2. Platforms inevitably creates ecosystem where value is created for customers by leveraging on 3rd party partners.
3. Utilization of Data and algorithm provides opportunity to learn more and improve user experiences on the platform. No one plows the field just by thinking about it. Go ye therefore to multiply and to work on building your Internet company to a Unicorn!
We owe the world a change.!
