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Platform Scale

How an emerging business model helps startups build large empires with minimum investment

By Sangeet Paul Choudary
15-minute read
Audio available
Platform Scale: How an emerging business model helps startups build large empires with minimum investment by Sangeet Paul Choudary

A new kind of business has emerged during the last decade. Facebook, Airbnb, YouTube, Twitter have exploded in popularity – but what do these companies have in common? They’re all platforms: they gather millions of users and achieve billion-dollar valuations, but instead of products, they offer something very different. Platform Scale (2015) offers an insightful analysis of the mechanisms that drive this new platform business model, and how it achieves skyrocketing growth.

  • Business students eager to learn about the new economy
  • Aspiring entrepreneurs, interested in the do’s and don’ts of a platform strategy
  • Social media users curious about the secrets of their favorite platforms

Sangeet Paul Choudary is the CEO of Platform Strategy Labs. He has written for several leading publications such as TechCrunch, Forbes, Wall Street Journal and Wired.

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Platform Scale

How an emerging business model helps startups build large empires with minimum investment

By Sangeet Paul Choudary
  • Read in 15 minutes
  • Audio & text available
  • Contains 9 key ideas
Upgrade to Premium Read or listen now
Platform Scale: How an emerging business model helps startups build large empires with minimum investment by Sangeet Paul Choudary
Synopsis

A new kind of business has emerged during the last decade. Facebook, Airbnb, YouTube, Twitter have exploded in popularity – but what do these companies have in common? They’re all platforms: they gather millions of users and achieve billion-dollar valuations, but instead of products, they offer something very different. Platform Scale (2015) offers an insightful analysis of the mechanisms that drive this new platform business model, and how it achieves skyrocketing growth.

Key idea 1 of 9

Business design is shifting from the old model of pipes to the new model of platforms.

The internet is revolutionizing the world: the way we communicate, the way we consume media and even the way we do business. In fact, the old model for doing business is slowly fading away.

For decades, the standard method for building a business involved using pipes. You can easily imagine the pipe model by visualizing a business at one end of the pipe offering products or services, and the customers at the other purchasing what’s on offer.

This model worked well for many years in traditional industries, and its sway was so strong that early digital business used a similar model. Take the first version of Amazon, which was simply an internet take on a classical marketplace. Software companies like Windows worked in a similar manner: they designed products and pushed them through the pipe to their consumers.

Since then, the rapid development of the internet has forged a new model. Two forces, in particular, have played a crucial role. First, we are increasingly interconnected by mobile devices that allow us to always be online. Second, goods are no longer produced in one single location. This decentralization allows companies to produce and sell in different places.

In consequence, pipes are fading into the background, and platforms are moving into the limelight.

Platforms are virtual environments where users can connect and exchange value with each other. They allow producers and consumers to interact, which means that producers are no longer limited to the old paradigm of producing goods, holding inventory and marketing products. Instead of creating the products themselves, businesses build platforms and let the users generate the value: like sellers and buyers on eBay, drivers and passengers on Uber, and video creators and viewers on YouTube.

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