Platform Economy Myth #1: Every Platform Business Is A Marketplace
Over the next few weeks, we’ll analyze the sacred myths of the platform economy and reveal the real practices that platform businesses have mastered. This is work from our report, “Earn Your Place In The Platform Economy.”
Myth #1: Every platform business is a marketplace. Reality: Every platform business starts with a killer app for customers. Some earn marketplace status.
Practice #1: Integrate Forward To Embed Services Into Your Customer’s World
In our research of 33 platform business founders and executives, nobody once raved about marketplaces or ecosystems or even network effects, but they all had an intimate understanding of the value they could deliver to customers via APIs (see the figure below). They knew exactly which customer problem to solve with an embedded service and what it was worth.
Borrowing from the book Topple: The End of the Firm-Based Strategy and the Rise of New Models for Explosive Growth, we call this strategy “integrating forward,” where a company becomes deeply engaged in its customers’ success. The payoffs of an embedded service are stickiness and insights into what customers need. To build your platform business, develop three value competencies:
- Serve your customers one by one, and learn to love their problems. Every platform business founder we interviewed has deep empathy for their customers’ aims and issues. Fieldwork, not arm’s-length research, underpins this understanding.
- Then learn suppliers’ problems, and solve them, too. Suppliers will try out new platforms that have plenty of customers, but they’ll defect to rivals just as readily, so platform businesses need to ensure adequate supply if they are to maintain their growth, and hence, make it easier for suppliers.
- Use insights to continually improve your services. With a digital connection to customers and suppliers, you will aggregate reams of data that hold powerful signals of success and failure. Armed with this data, you can learn and rapidly adapt to your customers’ needs.