A trait shared by the fastest growing and most disruptive companies in history—Google, Amazon, Uber, AirBnb, and eBay—is that they aren’t focused on selling products, they are building platforms. The ability to leverage the network effects of a platform is something that the technology industry learned long ago—and perfected. It is what gives Silicon Valley an unfair advantage over competitors in every industry; something that is becoming increasingly important as all information becomes digitized.
The authors say that the move from pipeline to platform involves three key shifts:
- From resource control to orchestration. In the pipeline world, the key assets are tangible — such as mines and real estate. With platforms, the value is in the intellectual property and community. The network generates the ideas and data — the most valuable of all assets in the digital economy.
- From internal optimization to external interaction. Pipeline businesses achieve efficiency by optimizing labor and processes. With platforms, the key is to facilitate greater interactions between producers and consumers. To improve effectiveness and efficiency, you must optimize the ecosystem itself.
- Value the ecosystem rather than the individual. Rather than focusing on the value of a single customer as traditional businesses do, in the platform world it is all about expanding the total value of an expanding ecosystem in a circular, iterative, and feedback-driven process.
This means that the metrics for measuring success must themselves change. Companies such as Walmart, Nike, John Deere, and GE are working towards building platforms in their industries. John Deere, for example wants to be a hub for agricultural products. But not every industry is ripe for platforms because the underlying technologies and regulations may not be there yet.