In today’s rapidly evolving business landscape, businesses need to adapt and innovate to stay competitive. One such innovation is platform thinking — a fresh perspective on how businesses can grow and thrive. This comprehensive guide will explore the concept of platform thinking, its key principles, examples of successful platform businesses, and how you can apply it to your organization.
Platform thinking is a strategic approach that focuses on creating value by facilitating exchanges and interactions between various types of customers. This approach differs from traditional linear business models, which typically focus on producing goods and services and selling them to customers. Instead of simply being a producer or a consumer, platform thinking encourages businesses to act as enablers, connecting various stakeholders to create new value propositions and revenue streams.
What is a Platform? The Platform Thinking Game!
The word platform is so widely used that it makes it almost useless! We call platforms Apple, Netflix, Airbnb or Google...but they are not built on the same principles!
There are 3 main typologies of platforms in the field of multi-sided platforms:
Transactional Platforms like Airbnb, Uber, or the Amazon Marketplace. They enable a direct (one-to-one) transaction between the two sides, the two groups of customers (such as travelers and hosts for Airbnb or buyers and sellers on Amazon Marketplace). The more users on the one side, the more value for the customers on the other side, this is the power of cross-side network externalities.
Orthogonal Platforms – Client-as-a-Target: like newspapers or Google the search engine, they sell one to many eyeballs, not transactions. Still, two customers (such as readers and advertisers), that are not transacting one-to-one through the platform, but the orthogonal customer (advertisers) want to reach the first side as a target. The more readers, the more value for the advertisers, but the reverse is not true. Therefore, cross-side network externalities are unidirectional.
Orthogonal Platforms – Client-as-a-Source: like Netflix or Strava; in this case, the platform gathers data from the end-users that are aggregated, anonymized, and offered to external customers (like municipalities in the case of Strava) or internal department (like movie production in the case of Netflix). Still two customers, and still unidirectional cross-side network externalities, but in this case the end users are a source of data, not a target.
Source: "Platform Thinking - Read the past. Write the future." Daniel Trabucchi and Tommaso Buganza, 2023
Platform Thinking as a Tool to Foster Innovation!
Platform thinking is essential in today’s interconnected world because it allows businesses to evolve toward something more valuable, and more interesting. Relying on transactional and orthogonal logic anyone can foster innovation, being already a platform or even an established (linear value chain-based) organization.
Amazon moved from having its e-commerce portal, based on a linear value chain, to the creation of a marketplace (transactional platform) then used as the basis to evolve towards various platform strategies (Amazon B2B; Prime Video; Kindle Direct Publishing, ...).
"Platform Thinking represents a strong and impactful way to foster innovation whether you are a native digital platform, a digital service or an established liner value chain."
John Deere moved from being a “traditional” machinery producer to managing a real service hub based on data, relying on strong orthogonal logic, by adding sensors in the machines that can influence precision agriculture and transactions with various stakeholders.
CVS moved from being one of the biggest retailers in the States to managing (also) a digital platform, CVS Health Virtual Primary Care, getting on board new (transactional) customers as physicians and therapists to open to digital care.
It may mean exploiting the current sides and adding new platform logic (as Spotify that adds Spotify for Artists relying on the data coming from listeners, as an orthogonal exploitation) or may mean an extension, bringing on board new sets of customers (as the restaurants in Uber, creating Uber Eats, generating a transactional extension).
Written by Daniel Trabucchi & Tommaso Buganza ©TheNTWK
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Platform Renaissance
Recently, we had a Platform Renaissance event hosted by Marina Planas, Daniel Trabucchi, and Tommaso Buganza, organized jointly with Symplatform, Osservatori Digital Innovation, Politecnico di Milano.
Daniel Trabucchi and Tommaso Buganza presented the findings of the research on how S&P500 companies approached Platform Thinking. While 92% of companies from the S&P 500 have developed one or more platform initiatives, a deep analysis reveals that only 30% of them are developing real platforms. Daniel & Tommaso also presented 'Platform Thinking Compass,' giving examples of the real companies' cases.
Explore more about 3Cs trends in platforms: Cost consciousness, Consortium, Circular Platforms, presented by Peter C. Evans, interviewed by Elisabetta Puglielli.
Platform Renaissance, A Decade of Platform Thinking panel discussion with platform strategy experts - Prof. Annabelle Gawer, Geoff Parker, Marshall Van Alstyne, covered topics such as generative AI, fake news, platform governance, B2B platforms, and incumbent firms adopting a platform approach.
Milja van 't Noordende, who moderated Lessons Learned from Innovating through Platforms, with Thierry Fabing, Oliver Birk, Carlotta Dainese, Gabriele Rosani, highlighted key advice from the panel for established companies looking into innovating through platforms.
Find out all the takeaways and recordings of each session in our community.