A platform company generates value by enabling interactions, transactions, or relationships. A platform company leverages network effects (direct/same side or indirect). Platform companies are also known as platform business models, given their intrinsic way of creating value for users.
What is the level of digitalization?
- Level one: tech and digitally-enabled
- Level two: tech-enhanced
- Level three: platforms and interactions
- Level four: business ecosystem
The platform business model
The platform business model requires a paradigm shift, as you need to think about “how do I sell my product” to “how do I enable others to interact and transact on top of the platform?”
This is the essence of platform business models.
Platform business models are based on three main premises:
- Network effects.
- Control points.
- Economic/Non-Economic Incentives.
The most crucial aspect of kicking off a platform and scaling it is network effects.
Platforms and network effects
Yet, platform business models also require a considerable amount of maintenance, engineering, and understanding of complex dynamics.
And thus, they need to make sure negative network effects are prevented.
Beware of negative network effects
In general, negative network effects can be classified in:
To understand them to read the following case studies:
Inside business platforms
The epitome of it is Apple’s ecosystem.
Connected Business Model Types And Frameworks
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