One of the hardest aspects of launching any technology product successfully is to understand how the technology will affect human behavior. Platform businesses, as a whole, are very disruptive because the business model is fundamentally different than the existing, linear models. Therefore, human behavior is used to a linear model and now needs to adapt to a platform model. That means that the technology product(s) in a platform business have to bring about behavior change to some degree. This is difficult to pull off and extremely risky.
Find an industry that already has platform business models in operation.
These businesses all meet the high-level definition of a platform business as I describe here. However, they’re doing it with old technology, meaning they miss out on the unprecedented reach and scale that mobile and connected technology offers.
Marketplaces – think bazaars in ancient Rome and more recently shopping malls, connecting buyers and sellers. This is exactly what happens online in the Amazon Marketplace.
Night Clubs – night clubs bring together two (or more) parties and help them connect. Tinder does the same thing online.
Classifieds/Yellow Pages – When you wanted to find a local service provider you used to look to the Yellow Pages or Classifieds. But that was limited to your local area and wasn’t always up to date. Now, you use Google.
Old platforms were limited by physical location. Because they operated in a low-connectivity environment, shopping malls, nightclubs, and newspapers all required either physical proximity or physical distribution in order to connect people.
In contrast, today’s platforms are digital. While they make connect you to physical goods or services, they all use connectivity to connect you to other people online.
As a result, today’s platforms are open ecosystems. Anyone can sell on the Amazon Marketplace. Thresholds are put into place to regulate quality, but beyond that, closed environments are obsolete. Access is universal and easy for both consumers and producers. This means that the potential reach of platforms has gone from thousands and millions to hundreds of millions and billions.
Platform businesses in the 21st century are rich with data. This allows them to offer experiences customized on an individual level for both consumers and producers. If you buy a new iPhone, Apple will know which apps you have downloaded and allow you to reinstall those apps in a seamless manner. Google learns from your searches to help you find relevant results faster. The lack of data available to old platform businesses meant they had to offer one-size-fits-all services. For today’s platforms, this is no longer true.
The stereotype of enterprise software being old, antiquated and riddled with poor user experience choices is no longer true. Platforms often offer both consumer-facing and enterprise software, so that they can cater to the needs of both their consumer and producer user groups. Because of their open nature, today’s platforms can’t afford to offer their producers poor user experiences. That’s why many platforms, including Uber, Postmates and Handy, have dedicated apps for their producers.
So remember: If you want to build a new platform business, you should first look to see if there are any existing platform businesses in your industry. Look at how these existing platforms operate and figure out how you can improve on what they offer in each of these three aspects.
The good news is that the behavior you’re trying to change already exists, so your challenge will be much more manageable. Rather than trying to create a new behavior out of nothing, you’ll only have to adapt an old behavior to a new environment. Focus on changing one behavior at a time. This will make your job much easier and your chances of success much greater. Changing one behavior is still a hard task, but you can make it happen by making that existing behavior cheaper, simpler or more convenient.
This is exactly what Uber did with a behavior that most people were already familiar with: taking a taxi. The bigger change for Uber was on the producer side, where Uber had to introduce many first-time taxi drivers to the market. But by leveraging the existing behavior on the consumer side and providing a more convenient service, Uber was able to provide enough incentive to get new producers to join.
Learning from your users is an important first step in building any platform, and there’s no better place to look than existing platforms built with old technology.
If you want to build the next Uber, look around and see how you can improve on the experiences offered by old platforms. Then capitalize on that existing behavior and make the transaction more accessible, personalized or frictionless. Because you have to manage multiple user groups, building a platform will always be difficult. But this is as close to a recipe for platform success as you’ll find.
Filed under: Platform Innovation | Topics: platform innovation, platforms
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