There are five key elements to a successful platform model:
Mark Cortez is director of the Digital Business Executive Masters. Esade
What do companies as diverse as Amazon, Uber, Airbnb, TaskRabbit, and Spotify have in common? All of these companies implement a platform business model, which means they create an environment that facilitates connections and interactions between different groups of users to exchange goods, services, and information.
The platform model, a new way of doing business made possible by the digital economy, Three Elements: Intermediating between two user/client groups, creating demand and supply within the platform, building a business based on third-party assets such as Uber drivers, AirBnB apartments, TaskRabbitt taskers, etc.
The success of these companies is due to their ability to leverage these three elements. Some may think this is a simple model of aggregating supply and demand. According to a McKinsey survey, creating new business models is a priority for 41% of executives, with platform models at the top of the list. However, Hundreds of companies have tried and failed to broker deals in this industry.Why? There are five key elements to a successful platform model:
1. Supply or demand aggregator?
Not all platform models are created equal, and companies must make a fundamental initial decision: should they focus on supply or demand? Any model that thinks you can get started by winning over users on both sides of the equation is bound to fail: you first have to conquer one side, and then convince the other side to use your platform.
Some operate by aggregating demand for already-existing supply, significantly reducing search-related costs for users. In the latter case, the platform makes it easier and more efficient for users to find the services they are looking for. The Fork and Expedia are two examples of this type of model.
Others aggregate supply against existing demand. The idea here is that the platform reduces acquisition and operational costs, such as payment methods, and therefore reduces access costs for clients and their transactions. One example is the logistics services that Amazon provides to vendors on its marketplace.
2. Incentives, Barriers, and Matching
The first step to success Engage your usersThis type of model requires volume. Why would anyone use Airbnb if they didn't supply accommodation in the places users want to visit? This means offering every incentive available to acquire users. For example, when entering new markets, Uber offers high commissions to drivers and free or low-cost trips to users.
The second step is Reduce frictionA platform's functionality should effectively reduce or eliminate transaction costs for users. Using the previous example, Uber, thanks to its algorithms, can guarantee that users will always find an available car, along with information about the estimated arrival time and the driver's rating. This significantly increases the usability of the service.
Finally, if the platform has users and the transaction costs are very low, Matching Phase It starts with the customer. This means continually improving features and value to encourage repeated usage, a key success factor in any revenue model. The key here is the use of data and artificial intelligence (AI) algorithms.
3. Different sets of metrics for each phase
Another key to success is understanding what stage each business is at and using the best metrics to measure its progress. The first stage became knownKey KPIs include number of registered users, user engagement, user acquisition costs etc.After this stage, the conversion stage begins.KPIs related to conversion rates and monthly recurring revenue (MRR) are key here. The growth and maintenance phase beginsAs businesses aim to achieve profitable growth and increase business volumes, fundamental metrics are KPIs focused on monitoring churn rates, average revenue per user (ARPU), and cross-selling.
4. Data at the heart of it all
There is no platform model for making data-driven decisions do not have The center of everything. AI and machine learning are the foundation to help the platform grow and innovate. These technologies make it possible to analyze vast amounts of data, identify trends and provide personalized recommendations. AI can also improve operational efficiency and automate processes, resulting in a more positive experience for users and greater value for businesses.
5. (Temporary) Competitive Advantage
Launching a successful platform model today is much harder than it was when Uber, Airbnb, and Booking came on the scene and dominated the market in their respective industries. The key for these companies was the lack of competition (which is why they are sometimes called “category creators”) and leveraging network effects (where a product, in this case the platform, becomes more valuable due to the fact that more people actually use it).
The pressure to succeed is It’s not just the industries, products and services that bring opportunity, but also the attempt to create a competitive advantage, even if only temporarily. This means finding a point of differentiation between you and your competitors that will allow your company to grow and successfully pass through the different stages mentioned above. If a company cannot reach the conversion stage, success is virtually impossible.
