Platforms: Doing business in a hyperlinked world

The last two decades have seen the rise of a new kind of business. Massive firms like Google, Apple, and Facebook do not just influence what products we buy. They are able to actually condition the spaces in which we think and live. This is accomplished through platforms. In Platform Revolution, Geoffrey Parker, Marshall Van Alstyne, and Sangeet Choudary reveal the ways in which digital platforms are transforming the world economy in truly fundamental ways.

The book is very thorough and well-researched. Parker and Van Alstyne are both academics who have studied digital platforms since the Dotcom Bubble. Sangeet Choudary based out of Singapore is a consultant and blogger, who has focused extensively on the growth of platforms for years.

One of the book’s greatest strengths is that the authors clearly define their terms. Thus, a platform is “A business based on enabling value-creating interactions between external producers and consumers. The platform provides an open, participative infrastructure for these interactions and sets governance conditions for them.”

Platforms are basically environments, generally based on digital technology, that facilitate business between third-parties that are essentially separate from the company who owns the platform. For instance, Facebook creates absolutely zero content on its own, but has become one of the world’s largest media companies by enabling others to easily create and share content. eBay is another classic example

The authors contrast this platform-based business model with the traditional pipeline-based one. In book publishing, for instance, before a book went to market it had to go through a series of editors and publishers—gatekeepers essentially. But in the age of the platform, anyone in world now can simply publish a book on Kindle with a few clicks

It is a central thesis of the book, that the platform based model increases efficiency and scalability by removing the gridlock of traditional gatekeepers. The authors use the network effect and other connected phenomena to explain how this works. The platform provides a space in which business transactions can easily occur. It helps consumers find producers and vice versa. Increased interactions on the platform tend to increase demand. For example, a guest has a great experience staying at an Airbnb and decides to become a host.

The authors are a bit too optimistic, perhaps. They tend to ignore the fact that these trust-based systems can easily be abused, except for a few hopeful words about the power of community curation. This is all well and good, but it is important to acknowledge that sometimes gatekeepers were in place for a reason. Big tech’s commodification of personal data is just one example of how the openness of platforms is not necessarily as innocent as it seems.

The book is very well written. It is able to maintain a good balance between business history and anecdotes and harder, more in depth analysis. Reading it, you learn a lot about the history of platforms and many platform-based firms. At the same time, the authors distill the idea of a platform down to its essence and unravel the single thread that connects Google, Uber, eBay, and Keurig.

The analysis of what platforms are and how they work is invaluable. The book was published in 2016, so some of what it says is certainly outdated given the ever changing nature of the topic involved. But it is fascinating to see how much of what the book presents is just taken for granted now.

Platform Revolution is available for purchase here.

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