[margin_note_link](marginnote3app://note/F3AEF122-6A1A-498C-9A87-86358BFB8AA9) ## 1. today A platform’s overarching purpose is to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants. Because platform businesses create value using resources they don’t own or control, they can grow much faster than traditional businesses. Platforms derive much of their value from the communities they serve. Platforms invert companies, blurring business boundaries and transforming firms’ traditional inward focus into an outward focus. The rise of the platform has already transformed many major industries—and more, equally important transformations are on the way. ## 2. network effects Whereas giant industrial-era firms were made possible by supply economies of scale, today’s giants are made possible by demand economies of scale—expressed as network effects. Network effects are not the same as price effects, brand effects, or other familiar growth-building tools. Frictionless entry and other features of scalability maximize the value-building impact of network effects. A two-sided market (with both producers and consumers) gives rise to four kinds of network effects: same-side effects (positive and negative) and cross-side effects (positive and negative). A growing platform business must manage all four. The key to minimizing most negative network effects is quality curation, which increases the chances of a happy match between producer and consumer. ## 3. architecture - The design of a platform should begin with its core interaction—one kind of interaction that is at the heart of the platform’s value-creation mission. - Three key elements define the core interaction: the participants, the value unit, and the filter. Of these, the value unit is the most crucial, and often the most difficult to control. - In order to make the core interaction easy and even inevitable, a platform must perform three crucial functions: pull, facilitate, and match. All three are essential, and each has its special challenges. - As a platform grows, it often finds ways to expand beyond the core interaction. New kinds of interactions may be layered on top of the core interaction, often attracting new participants in the process. - It’s important to design a platform thoughtfully to make mutually satisfying interactions easy for large numbers of users. But it’s also important to leave room for serendipity and the unexpected, since users themselves will find new ways to create value on the platform. ## 4. distruption. - Platforms are able to outcompete pipelines because of their superior marginal economics and because of the value produced by positive network effects. As a result, platforms are growing faster than pipelines and taking leading positions in industries once dominated by pipelines. - rise of platforms is also disrupting business in other ways. It is reconfiguring value creation to tap new sources of supply; reconfiguring value consumption by enabling new forms of consumer behavior; and reconfiguring quality control through community-driven curation. - rise of platforms is also causing structural changes in many industries—specifically, through the phenomena of reintermediation, separation of ownership and control, and market aggregation. - Incumbent companies can fight back against platform-driven disruption by studying their own industries through a platform lens and beginning to build their own valuecreating ecosystems, as Nike and GE are doing. ## 5. launch (8 ways to launch) - difference between platform businesses and traditional pipeline businesses: in platforms, pull strategies designed to encourage virality are more important than the push strategies (such as advertising and public relations) used in conventional marketing. - 8 strategies for successful platforms to solving chicken-or-egg problem: follow-the-rabbit, piggyback, seeding, marquee, single-side, producer evangelism, big bang adoption, micromarket - 4 keys for platform’s expansion speed accelerated through viral growth: sender, value unit, external network, recipient ## 6. monetization (capturing value created from network effects) - 4 was to creat value by managing platform: access to value creation, access to market, access to tools, and curation. Monetization is about capturing a portion of the excess value created. - Techniques for monetizing a platform include charging a transaction fee, charging users for enhanced access, charging third-party producers for access to a community, and charging a subscription fee for enhanced curation. - crucial monetization choices is deciding whom to charge, since the difference in roles played by various platform users means that charging them can have widely differing network effects. - Given the complexity of the monetization challenge, platform managers should take potential monetization strategies into account in every decision they make regarding platform design. ## 7. openess (defining can/cannot do) - There are three kinds of openness decisions that managers face: those regarding manager/sponsor participation, developer participation, and user participation. - Management and sponsorship of a platform may be controlled by a single firm, by different firms, or by groups of firms. The four possible combinations lead to differing patterns of openness and control, with various advantages and disadvantages. - The open/closed dichotomy isn’t black or white. There are shades of gray, and benefits and drawbacks to every point on the spectrum. Sometimes, similar platforms choose to compete on the basis of differing openness policies. - Maturing platforms often evolve in the direction of greater openness. This demands continually reevaluating and adjusting curation processes to ensure consistently high quality of platform content and service value. ## 8. governance: increase value by creat (increase value and enhance growth) - Governance is necessary because absolutely free markets are prone to failures. - Market failures are generally caused by information asymmetry, externalities, monopoly power, and risk. Good governance helps prevent and mitigate market failures. - The basic tools for platform governance include laws, norms, architecture, and markets. Each must be designed and implemented with care in order to encourage platform participants to engage in positive behaviors, incentivize good interactions, and discourage bad interactions. - Self-governance is also crucial to effective platform management. Well-run platforms govern their own activities following the principles of transparency and participation. ## 9. metrics: how to measure what matters? - Since the value of a platform is derived primarily from network effects, platform metrics should ultimately seek to measure the rate of interaction success and the factors that contribute to it. Interaction success attracts active users and thereby enhances the development of positive network effects. - During the startup phase, platform companies should concentrate on metrics that track the strength of characteristics that enable core interactions on the platform, including liquidity, matching, and trust. These characteristics can be measured in a variety of specific ways, depending on the nature of the platform. - During the growth phase, platform companies should focus on metrics that are likely to impact growth and enhanced value creation, such as the relative size of various portions of the user base, the lifetime value of producers and consumers, and the sales conversion rate. - During the maturity phase, platform companies should focus on metrics that drive innovation by identifying new functionalities that can create value for users, as well as metrics that can identify strategic threats from competitors to which the platform needs to respond. ## 10. strategy: how platforms change competition - Platform competition is like 3D chess, involving competition at three levels: platform against platform, platform against partner, and partner against partner. - In the world of platforms, competition becomes less important that cooperation and co-creation. Control of relationships becomes more important than control of resources. - Among the methods that platforms use to compete with one another are preventing multihoming by limiting platform access; fostering innovation, then capturing its value; leveraging the value of information; nurturing partnerships rather than pursuing mergers and acquisitions; platform envelopment; and enhanced platform design. - Winner-take-all markets exist in certain platform markets. They are driven by four main factors: supply economies of scale, network effects, multihoming and switching costs, and the lack of niche specialization. In winner-take-all markets, competition is apt to be particularly fierce. ## 11. policy: regulation ## 12. tomorrow