The Platform Business Model. I had the privilege of attending a keynote presentation recently, where Lital Marom shared her research and knowledge on what she terms the Innovation Framework and how to Think Big and Act Fast during a Crisis. For those of you who may not know, as I was not familiar with Lital, she is an internationally sought-after Speaker and Corporate Innovator known for platform business models, IoT, AI, blockchain and other emerging technologies.
Lital spoke of the need for businesses to create an Innovation Framework starting with Scanning the Market, Ideation, Creation of your Value Proposition and then Strategy Development. Sounds simple, right? Sounds straight forward and like other business knowledge you may already have; but Lital takes this one step further yet, into comparing what she says the “unicorns” all have in common. The unicorns being the true business disruptors that many of us idolize and strive to understand and to become. The first unicorn presented itself in 2004 with that being FaceBook and since then we have seen others such as Uber, AirBnB, LinkedIn, You Tube, and the list goes on. What makes these companies unicorns is that they are truly magical in the rate that they grow, scale and monetize their business.
What do these unicorn companies all have in common, according to Lital? It’s the Platform Business Model and with this, these unicorns of digital transformation make up the platform economy. The Platform Business Model is defined as “a centralized infrastructure that allows people outside the platform and network to connect and create value and exchange between them.” Lital speaks of the underlying patterns that create the core differences from a traditional company to a platform business which allow and enable the unicorns to grow and scale at magical rates. She speaks of them as having 3 business patterns:
Pattern 1: Business Flow. Traditionally, businesses have focused on the value chain and how to get product or services from the producer to the consumer. This model is a linear model which has worked traditionally but is now being tested with business disruptors entering the market. The Platform companies have business that flows into a “platform” that connects the producer to the consumer. In the case of Uber, Uber is the platform connecting the Drivers to the Riders.
Pattern 2: Business Structure. In the classic business structure, you would have senior management, middle management and your workforce within your organization. In a platform business structure, you might have your senior leaders and automation in the company with the majority of your workforce external to the business. In the case of Uber, most of the workforce, being the Drivers are external contractors to the company.
Pattern 3: Customer Expectations. Customers of today want everything delivered through digital platforms and they want everything to be instant, personalized, relevant, human, and contact-less. An example of this may be Skip the Dishes or Door Dash where it is instant, you can get your product that is personalized to you (your meal) at the click of a button and it is delivered quickly and contact-less; yet we still have the human element through a “live” customer service agent or bot when needed.
So how do these platform companies scale? They scale through three things. The platforms have open innovation, they are community driven, and they are database driven companies. Platform companies source innovation through open channels, they don’t see the community as their audience, but they see their communities as distributed employees and lastly, databases are the new dollar in that the data is the value. When you achieve this successfully, you achieve the Network Effect which is the driver of growth and scalability of a platform business.
So how does one become a platform company? You go back to the Innovation Framework where you scan the market, develop ideas, create your value proposition and strategy. But this time when you use the Innovation Framework you look at your business differently through the eyes of how you can become a platform business model. Lital speaks that all industries and businesses have the ability to achieve the platform business model. You simply need to Think Big and Act Fast!
All content in this blog is cited from the learning from Lital Marom’s Keynote address with full credit being given to her ingenuity, knowledge, and research. For more information on Lital Marom, please visit her website at www.litalmarom.com.