How we define a business platform goes a long way to shaping how we see the new economy. In my view there is no satisfactory definition out there yet.
Alex Moazed, CEO of Applico Inc, had a go at defining it recently:
A platform is a business model that creates value by facilitating exchange between two or more interdependent groups, usually consumers and producers.
The definition has the advantage of brevity but it doesn’t encapsulate what platforms are really about and how they function.
Along with David Card, SVP at GigaOm research I have been searching for a more encompassing decision for a new paper on IT-Business integration, due to be published end June.
We’re clear that many things are described as platforms even though they have quite different characteristics.
Netflix’s description of its internal processes suggests these are now largely “platform” based. Their cumulative effect is to enable an exchange. But organizing a whole enterprise around platforms suggests the concept has to mean much more than exchange.
It’s clear from this that “platform” can be a powerful term for internal reorganization.
Another feature of a platform is that it enables other people to create or produce. In that context it usually also facilitates exchange, as Alex Moazed says.
These platforms also tend to be tightly coupled to ecosystems, or loose groups of people who use a shared production resource such as an SDK and a “platform”.
Then there are platforms that are very much about exchange marketplaces like eBay and Etsy.
And GE stakes a claim for its industrial data initiative also to be called a platform. In this case GE generates data from its global installed base of energy turbines and offers that out to a developer community via data APIs.
What about Expedia’s transaction platform, which 5,000 businesses now use as the back office to small scale travel businesses?
Or AirBnB’s, which is a resource sharing platform, as is Uber’s. And yet, then again Quirky has developed a platform that is almost wholly production orientated, and so too has GrabCad, a platform for engineers who want to share designs. Isn’t Kickstarter a platform? And the Respect Network, a platform for storing personal data.
There are huge differences between these projects and yet there is also commonality.
The commonality is the enabling factor. They are not selling a product to a consumer. They are enabling financing, production and transaction. These factors mean the platform is the economy. It is facilitating the factors of production and exchange.
More formally it facilitates the sharing of core services, the development of co-productive resources, and the development of marketplaces.