What is a Platform Business and should you try becoming one?

There is a lot of talk about platforms and sometimes it's a bit fuzzy what that term specifically refers to. However, one notion of platform is very well defined and that's that of a platform business. Should you maybe even try becoming one because they are so profitable?

Traditional businesses own the "means of production", i.e. they produce products by sourcing whatever inputs they need and then turning these source materials into the products that they sell. This works very well but one of the big problems is that these businesses are sometimes challenging to scale because the entire supply chain must be scaled.

Pure platform businesses connect consumers and producers but they don't themselves produce the product that they make available, i.e. they own the "means of connection" instead of the means of production. Platforms can scale relatively easily because production it outsourced, meaning that as long as the platform can handle the increased load of making connections, this leads to a very low marginal cost.

In practice, we will probably see more and more hybrid models where businesses still engage in production in the traditional sense, but they are adding platform-y aspects to their products for differentiation and the ability to outsource innovation and customization.

If you have good examples of hybrid business models, please let us know in the comments! The video is using Apple's #iPhone as the poster child for a successful hybrid product, but there are probably many other great examples out there as well.


00:00 Introduction
00:44 Traditional linear business model
02:32 Platform business model
05:05 Hybrid business model
07:30 Wrap-up


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