In today’s tech-driven business world, the term “platform” gets used in several contexts. It can mean a tech platform, intended as the place where software is executed in conjunction with hardware, or perhaps the digital space where it gets embedded.
In the business context, instead, the platform is a company that runs a model where, rather than offering a specific product, it enables the interactions between two or more players on that. One of the distinctive elements of platform businesses is network effects. Or the ability of the platform to get better for the next user as the previous user joins it.
I argue, there is a third type of platform that we can call “business platform” that is the platform platforms’, or the container of both the tech platform and the several platform businesses formed on top of that, combined with a new monetization and distribution model.
Proprietary and closed
Would you think your smartphone is as useful as it is if it didn’t have its apps inside? Apple was the first company to stumble on a “Mobile Business Platform” made of the encounter of the iPhone, plus its software, which enables also the development of applications.
The hardware, though, works as the “physical platform” or the foundation for the software side to develop. The hardware, in this case, is closed and proprietary.
Platforms and Policies
The software built on top of the hardware is the foundation of the tech platform. Usually, there is a part of it, which is closed (like the operating system) and another open part (like the store or marketplace, on top of which third-party developers can build applications).
On the open side, the company owning the tech platform will set the rules, and the policies for third-parties to respect to keep the tech platform in line with the core business while allowing it to grow as it adds functionalities via third-party applications.
On top of the partially-open side, third-party developers will be able to build their own applications, which will become the add-ons and tools to expand the hardware and built-in software. Just like the iPhone has apps that make it more useful, so the developer’s community expands the ability of the hardware and software built on it.
Distritbution and Monetization
For instance, on the App Store, developers know they can make money in a few ways (advertising, in-app purchases, premium products, and more). This sort of distribution and monetization creates the basis for an entrepreneurial ecosystem to become viable.
As the entrepreneurial ecosystem becomes self-sustained, as a side effect will enable the solid growth of the tech platform and, with it, the whole distribution model associated with it. From there, the platform platforms’ will build up.
Once the conditions above are met, the Business Platform (or the Platform Platforms’) will become the foundation of the business success.
As a conclusive example, when Apple launched the iPhone, that was just hardware and proprietary software. It was a great device, but still not as interesting. As Apple launched its App Store, the iPhone turned into a tech platform, where those apps could expand its functionalities many times over.
As the App Store grew, it also consolidated distribution and monetization models that enabled. That is when the iPhone turned, from hardware to “Mobile Business Platform” which after a decade is still alive and thriving.
Key Highlights of Business Platforms and Technological Modeling:
- Definition of Tech Platform: A tech platform is the digital space or environment where software is executed in conjunction with hardware. It may also refer to the company that facilitates interactions between multiple players rather than offering a specific product.
- Platform Businesses and Network Effects: Platform businesses rely on network effects, where the platform becomes more valuable as more users join. This is because each user contributes to the overall value and attracts more participants.
- Business Platform Concept: The idea of a “business platform” is introduced, which combines the tech platform with several platform businesses formed on top of it. This concept involves a new monetization and distribution model.
- Apple’s Mobile Business Platform: Apple’s iPhone is cited as an example of a mobile business platform. The iPhone’s hardware serves as the physical foundation for the software side, and the closed and proprietary operating system enables the development of applications.
- Closed and Open Aspects of Tech Platforms: Tech platforms typically have both closed (e.g., operating system) and open (e.g., app store) components. The company owning the tech platform sets rules and policies for third-party developers, allowing the platform to grow with third-party applications.
- Developer’s Community: Third-party developers play a crucial role in expanding the tech platform by creating applications and add-ons that enhance the hardware and built-in software.
- Distribution and Monetization: As the tech platform grows and the developer’s community expands, distribution and monetization strategies emerge, such as advertising, in-app purchases, and premium products.
- Entrepreneurial Ecosystem: The distribution and monetization strategies foster an entrepreneurial ecosystem, making the business platform viable and self-sustaining.
- Platform Platforms’ Emergence: Once the conditions for a self-sustained entrepreneurial ecosystem are met, the business platform (or platform platforms’) becomes the foundation of the company’s success.
- Apple’s iPhone Transformation: The example of Apple’s iPhone is used to illustrate how the introduction of the App Store turned it from a hardware and proprietary software device into a thriving mobile business platform.
Connected Business Frameworks
- Platform Business Model
- Apple Business Model
- Digital Business Models
- Types Of Business Models
- Business Strategy Examples
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