{"id":2088,"date":"2019-11-22T02:56:21","date_gmt":"2019-11-21T23:56:21","guid":{"rendered":"http:\/\/kusuaks7\/?p=1693"},"modified":"2024-02-22T12:54:21","modified_gmt":"2024-02-22T12:54:21","slug":"platform-models-are-coming-to-all-industries","status":"publish","type":"post","link":"https:\/\/www.experfy.com\/blog\/bigdata-cloud\/platform-models-are-coming-to-all-industries\/","title":{"rendered":"Platform Models Are Coming To All Industries"},"content":{"rendered":"\t\t
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Platforms are affecting even the most physical or remote industries. Photographer: Jonathan\u00a0… [+]\u00a0BLOOMBERG NEWS<\/small><\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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\n\t\t\t\t\t\t\t\t\tJust when we thought we were reaching the end of the unicorn parade, a new company has joined the ranks of billion dollar startups.\u00a0Last week, we saw the announcement of RigUp and its\u00a0$300M growth financing<\/a>\u00a0by Andreessen Horowitz. \u00a0Now valued at $1.9B, RigUp connects oil rig workers with rig operators.\u00a0Although many may have thought that Oil & Gas were relatively safe from business model innovators, apparently no industry is safe from the growth of platform business models\u2014and the unicorns that are capturing all the capital, talent, suppliers and customers.\u00a0Unfortunately, most corporate leaders and boards of legacy firms think that platform businesses aren\u2019t coming to their industry or seeking a foothold relationship with their customers or suppliers. Yet still, platform business models are emerging in every industry seeking to disrupt every industry stronghold.\n\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Why do Platform Companies Matter to Your and Your Industry?<\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThe Platform business model is clearly today\u2019s economic winner.\u00a0Rather than seeking to control the means of production (creating and selling products, services, or technology), platform companies focus on the means of connection \u2013 connecting and facilitating the interactions between buyers and sellers, suppliers and consumers, or even just friends and families.\u00a0And they generate revenue by collecting a \u201ctoll\u201d from each interaction on their platform.\u00a0Increasingly, platforms gather data and use to feed artificial intelligence that helps manage the platform\u2014an essential step due to the scale of due to scale of their organization \u2013 e.g. numbers of buyers and sellers on their platforms and data that is exchanged \u2013 they also rely on the help of AI to manage the millions, if not billions of interactions a day.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tMost leaders and boards argue, wrongly so, that this business model started with Uber or Airbnb and does not apply to their industry or company\u2019s economics.\u00a0This confidence is unfounded.\u00a0In fact, platform business models have been around for decades.\u00a0Companies like Visa and Mastercard, along with NYSE and NASDAQ realized the value of controlling the means of connection and harvesting the derived data decades ago.\u00a0More recently, entrepreneurs and venture capitalists have realized that this same business model could be applied to all industries and by so doing could wring out the inefficiencies of any industry, as opposed to creating software companies that remove the inefficiencies inside a company.\u00a0As a result, there are hundreds of start ups seeking Unicorn status by bringing platforms to new industries. Because legacy companies, have been slow to adopt and activate their latent networks, The have left a large opportunity for new platforms to enter their industries as most companies remain focused on the means of service or production.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Platforms can be found across industries\u00a0AIMATTERS<\/small><\/span><\/p>\nLegacy business models can\u2019t compete with the low scaling cost (near zero due to the fact that platforms leverage other\u2019s assets \u2013 be they friends, cars, houses) and rapid growth (driven by network effects) of platform business models.\u00a0These advantages are what has led investors to price platforms at a premium\u2014their values are often four times higher per dollar of revenue generated than companies using legacy business models.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Platforms on average have the highest market value to sales ratios\u00a0\u00a0AIMATTERS<\/small><\/span><\/p>\nDespite the many advantages and imminent disruption of platform business models, few legacy companies have transformed their core business model to become platforms in a meaningful way.\u00a0Strategy innovators in these firms run up against\u00a0framing, cognitive and blocking<\/a>\u00a0biases<\/a>\u00a0and the lack of digital and platform\u00a0business model leaders<\/a>\u00a0on their boards and among their executive team. \u00a0To put this in context, we found that from the period of 2007 to 2018, only 12% of companies changed their primary business model.\u00a0Those that did change what they invested in \u2013 new intangible assets and technologies to create new business models over a 10 year period reported saw\u00a040% higher revenue growth<\/strong>\u00a0and received\u00a030% higher market capitalization to sales ratios\u00a0<\/strong>compared to the companies that \u201cstuck to their knitting\u201d and did not change their business models\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Building a Platform Company<\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tTransformation is never easy, but the payoff is large.\u00a0While most companies are focused on cost optimization and new products, platforms expand their view externally to coordinate across and entire industry.\u00a0This foundational shift in focus requires a completely new lens for leaders.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tTo begin this process, leaders must understand exactly what platform businesses entail so they can begin to reframe their thinking:\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t1.\u00a0\u00a0\u00a0\u00a0Platforms use\u00a0two-sided models\u00a0<\/strong>where the organization acts as a point of connection between external groups that want to transact, exchange information, or socialize.\u00a0For example, with Uber it is drivers and riders.\u00a0For Visa It is merchants and buyers. For Facebook it is me and you.\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t2.\u00a0\u00a0\u00a0\u00a0The company\u00a0creates direct relationships\u00a0<\/strong>with all of the users of the platform, both producers and consumers.\u00a0Only by owning these interactions can the platform recruit the members it needs and also obtain the data it needs to manage the platform and add further value.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t3.\u00a0\u00a0\u00a0\u00a0The platform\u00a0adds value by curating\u00a0<\/strong>the interactions on its platform.\u00a0That is to say, the platform does not merely act as a pass-through or a bulletin board.\u00a0The platform provider often provides security, helps users identify the content they need, and incentivizes the desired behavior form all parties.\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t4.\u00a0\u00a0\u00a0\u00a0The platform is a\u00a0digital environment<\/strong>\u00a0which means that it can scale up and down rapidly as needed and at near-zero cost.\u00a0Once the platform is created, additional users and transactions create very little load, meaning that growth and extension are easy to manage.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t5.\u00a0\u00a0\u00a0\u00a0The company uses\u00a0AI to create personalization at scale \u2013 e.g. it uses the data from each interaction and transaction to anticipate wants and needs \u2013 whether froma customer or supplier<\/strong>.\u00a0\u00a0The result:\u00a0platforms earn trust, build support, and generate repeat business.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Every Company can Become a Platform Business Model<\/strong><\/h3>\n<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThe opportunity exists to build platform business models in every industry, although some, like transportation, have seen platforms attack their status quo approaches with significant capital and new capabilities, while others remain open to new business model innovation.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tWhatever your industry, platform plays are coming.\u00a0You can be a part of them, or risk being overwhelmed by well-funded unicorns coming after your customers.\u00a0To get there \u2013 start with a new definition of your business, apply\u00a0our PIVOT Playbook<\/a>, and measure the right things \u2013 given that what you measure is what you manage and value.\u00a0Every industry faces a clear and present danger from new business models.\u00a0Transformation does require new talent, new KPIs, and a bold attitude, but it\u2019s a heck of a lot more fun than wasting away in a legacy business model with eroding profits, shrinking revenues and declining customer engagement.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

The Platform business model is clearly today’s economic winner. Rather than seeking to control the means of production, platform companies focus on the means of connection,  connecting and facilitating the interactions between buyers and sellers, suppliers and consumers, or even just friends and families. And they generate revenue by collecting a “toll” from each interaction on their platform. Platforms gather data and use to feed artificial intelligence that helps manage the platform, an essential step due to the scale of due to scale of their organization.<\/p>\n","protected":false},"author":69,"featured_media":2833,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[187],"tags":[95],"ppma_author":[1627],"class_list":["post-2088","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bigdata-cloud","tag-big-data-amp-technology"],"authors":[{"term_id":1627,"user_id":69,"is_guest":0,"slug":"barry-libert","display_name":"Barry Libert","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/?s=96&d=mm&r=g","user_url":"","last_name":"Libert","first_name":"Barry","job_title":"","description":"Barry Libert is the co-founder of AIMatters, an AI startup serving the C-Suite with the first AI powered strategy platform.  He serves on a number of boards and advises CEO of startups and large enterprises on becoming AI-first companies. He also co-wrote The Network Imperative: How to Survive and Grow in the Age of Digital Business Models published by HBR. "}],"_links":{"self":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/2088","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/users\/69"}],"replies":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/comments?post=2088"}],"version-history":[{"count":4,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/2088\/revisions"}],"predecessor-version":[{"id":36090,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/2088\/revisions\/36090"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/media\/2833"}],"wp:attachment":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/media?parent=2088"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/categories?post=2088"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/tags?post=2088"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/ppma_author?post=2088"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}