Step 12 - Building and Maintaining a Platform

Finally, we need to revisit the definition of platforms. It is a business model that creates value by facilitating exchanges between two or more interdependent groups, typically consumers and producers. Note that the most valuable companies in the world are platforms (Google, Amazon, etc.).

Leading platform expert Sangeet Paul Choudary identified the four steps needed to build a successful platform (as opposed to a successful product):

1. Identify a pain point or use case for a consumer.

2. Identify a core value unit or social object in any interaction between a producer and consumer. This could be anything. Pictures, jokes, advice, reviews, and information about sharing rooms, tools, and car rides are examples of things that have led to successful platforms. Remember that many people will be both producers and consumers; use this to your advantage.

3. Design a way to facilitate that interaction. Then see if you can build it as a small prototype you can curate yourself. If it works at that level, it will be worth taking to the next level and scaling.

4. Determine how to build a network around your interaction. Find a way to turn your platform user into an ambassador. Before you know it, you will be on a roll.

To implement platforms, ExOs normally follow four steps in terms of data and APIs:

1. Gather: The algorithmic process starts with harnessing data, which is gathered via sensors, people, or imported from public datasets[n1].

2. Organize: The next step is to organize the data. This is known as ETL (extract, transform, and load).

3. Apply: Once the data is accessible, use algorithms and artificial intelligence such as machine or deep learning to extract insights, identify trends, and tune new algorithms and artificial intelligence. These can be realized via tools such as Hadoop and Pivotal or even (open source) deep learning algorithms and artificial intelligence such as DeepMind or Skymind.

4. Expose: The final step is exposing the data in the form of an open platform. Open data and APIs can be used in such a way that an ExO’s community develops valuable services, new functionalities, and innovations layered on top of the platform by remixing published data with their own. Examples of companies that have successfully exposed their data this way are the Ford Company, Uber, IBM Watson, Twitter, and Facebook.

We can’t emphasize the following strongly enough:

“The world that is emerging is very different from the one we’ve known” - George W. Bush

Power is becoming easier to acquire but harder to keep. Thanks to strong viral and social network effects that allow startups to scale rapidly, it is now easier than ever to start new companies and disrupt industries. But when it comes to social networks, the reverse is also true. Facebook, for example, is an incumbent, and its network effects and lock-in make it hard to usurp—underscoring the great advantage a platform has over a product or service.

In her book, The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business, Rita Gunther McGrath illustrates that we can only obtain what she calls Transient Competitive Advantages via platforms and purpose, community, and culture (i.e., an ExO).

#[1] For more on how to create effective value propositions, we recommend reading Osterwalder’s new book, Value Proposition Design: How to Create Products and Services Customers Want.