The Platform Canvas is a framework proposed by Marcel Allweins, Markus Proesch, and Ted Ladd, leaned on Osterwalder and Pigneur’s Business Model Canvas. Other than the Business Model Canvas which focuses on traditional businesses, the Platform Canvas is devoted to identifying and interpreting the unique elements of multi-sided platform companies and their network dynamics.
What is the difference between a pipeline and a platform business model?
Pipeline business model
The “traditional” businessmodel, or pipeline business model creates value in a linear fashion that resembles a straight line between producer and consumer. Products or services are sourced, created and shipped from internal operations to the external customer. The central focus of such a business lays with the internal value chain. The pipeline business model is often associated with the industrial era where product manufacturing and service creation followed a linear business model structure.
Platform Business Model
Multi-sided Platforms also referred as matchmakers or marketplaces have existed since the dawn of time but have transformed in the age of internet and smartphones to become a dominant business model in today’s economy. A platform business model creates value by facilitating the exchange of products and services between two or more independent external groups. The platform’s key activities revolve around coordinating the external ecosystems rather than an internal production process. A platform business thrives through co-creation of value and a user base that grows through positive network effects.
The Platform Canvas in a nutshell
The Platform Canvas consists of 12 building blocks that represent the essential elements of a platform business. The framework’s structure represents the two mirroring external sides of producers and consumers that come together creating value through their interaction.
Think about how Uber doesn’t own cars themselves but is more successful than any taxi business just by connecting drivers and passengers.
Consumer Segments consist of the groups of customers, their needs and their personas. In the example of Uber that would be the ride hailing people that look for a ride from A to B. This element includes things like the geography and demography of that target market.
Producer Segments are the user groups that offer the services or goods consumed by the Consumer Segments. Uber’s drivers are the producers that offer their car and their service of driving people around.
Consumer Value Propositions are the benefits the platform offers to the Consumer Segments. It describes the very reason the consumers participate. Riders using Uber desire a cheap and convenient way to get from A to B fast.
Producer Value Propositions compile the value the Producer Segments gain by offering products or services on the platform. This is often a form of monetary gains. Drivers use Uber to earn some money and often value the flexibility of riding on their own schedule.
Consumer Substitutes are other entities consumers have access to in order to cover their need describes in the value proposition. These can be current competitors or future competitors. A direct competitor like Lyft is a substitute to Uber, as well as traditional cabs or even bike sharing stations.
Producer Substitutes are current or future alternatives producers have to make use of their resources. This can be in the shape of other platforms, entities or through other channels. Uber drivers often seamlessly switch to Lyft or could offer their vehicle through car sharing platforms instead.
Interaction is where the value is created and the exchange between the user segments is made. This dimension describes how the two sides correspond and interplay to deliver the offered value propositions. Through the Uber app, the drivers and ride-hailers are matched, they communicate and rate each other.
Facilitation describes all the measures the platform business has to undertake in order to practically enable that Interaction. This includes technologies as well as rules and regulations. Uber, for instance, provides the payment system for the transaction between drivers and passengers and they established a multi-step safety screen for drivers.
Stimuli is the upper top element on the canvas. This element holds the measures the platform can undertake in order to attract the different segments to the platform and engage them into participating.
Moving to the “lower” part of the canvas. These elements are invisible to the users and focused primarily on the business success.
The initial costs of a platform are typically lower than those of pipeline businesses, but there are other expenses that are more prominent which is all disclosed in the Cost Model element. Operational costs and software development are costs found in most modern platform businesses, along with different promotional measures. To attract more users, Uber regularly subsidizes rides which increases their costs.
Platforms can employ an array of different revenue models, from subscription to pay-per-click. Monetization captures where the revenues are coming from, the procedure that are in place in order to ensure that the platform generates revenue. Uber’s main revenue stream consists of the ride transaction fees. They also make heavy use of additional services like Uber Eats or Uber Cargo.
The last element of the Platform Canvas is Metrics,which contains the many trackable indicators that describe the performance of the facilitators and checks the value propositions. that happens within a platform. This element also tracks developments in the Cost Model and Monetarization to monitor the platform’s financials.
Business Model Canvas vs Platform Canvas
The Business Model Canvas is the most acknowledged framework for business model development and analysis. However, the intent of the canvas was to help pipeline organizations and ventures succeed as it falls short in many aspects of developing and analyzing platform businesses.
The Business Model Canvas fails to capture the multi-sidedness of platforms and other elements simply don’t apply to this type of business model or are inaccurate. It has also been criticized for ignoring the external environment (substitutes) which is essential in the platform-economy where imitation of competitors is more likely than in an asset-based sector.
Key takeaways
The Platform Canvas is designed specifically to assist in business model development or analysis for platforms. Establishing all the elements that are unique to this type of business model, internally and externally. The canvas is created with the dynamics between the elements in focus which is essential to capture the fundamentals of the network effects.
We’re entering a new era where platforms companies rule the economy and have exceeded all expectations of what we thought was possible when it comes to growth and size. A booming technological market with accelerating development, promises of lightning fast connections and various uncertain factors threatening status-quo have formed the perfect environment for the ongoing platform revolution.
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
