From Pipeline to Platform: Business Model Shift no.4

  • Business Model Shifts

In our fourth blog on the six fundamental business shifts we see happening today, we take a look at the business model powering some of the world’s largest, most prolific brands. Companies like Alibaba Group, LinkedIn, and Kickstarter (to name a few) have adopted what we’d like to call the Platform Shift, in which value is created in the interaction, not in the transaction.

Once upon a time, companies made stuff. They took raw materials and forged, well, actual tangible products. They then found a route to market – someone who could sell them – who then found someone who could market them. And then there were logistics to consider. And retailers. And… other people who found their way into the ecosystem. When demand was strong, the original company made more stuff.

 

Why is this shift happening?

The cycle continued. The industrial economy was in full swing. The problem is, when you have a long, convoluted chain involving lots of parties, everyone wants a piece of the cake. Which is fine… except margins end up being stretched as thin as a banjo string.

Not only that, but producer-customer relationships barely have any chance to exist – let alone flourish. Every relationship was transaction-focused: up and down the chain’s length and breadth. For everyone to prosper, everyone else had to mobilize enough to do so – to produce, deliver, and sell at pace.

The solution? There was a need to start looking for value in rich interactions, connecting people who need something with those who had something – in a way that benefits both parties.

 

Platform shift story: Alibaba

Founded in 1999 by the Chinese entrepreneur Jack Ma, Alibaba started with a simple website and a grand vision to connect international buyers and Chinese manufacturers. The aim? To build the future infrastructure of commerce. Over the last 21 years, they’ve achieved this by streamlining how business is done – satisfying both sides of the deal.

But it’s not just B2B sales in which Alibaba has excelled. As supreme platform builders, Jack Ma and co. have since crafted an ecosystem that is almost self-perpetuating in its way that it benefits all participants – from payment solutions (Alipay) to online retail (TMall).

And that’s just the start of the company’s 102-year plan…

 

A new mindset

Alibaba isn’t the only company creating vast platforms bubbling with rich interactions. Other examples (which are covered more in-depth in our new book) include companies such as:

  • LinkedIn, facilitating the needs of employees and employers to revolutionize networking.
  • Kickstarter, connecting people and businesses with investors to help launch ideas.
  • Apple, building a vast ecosystem of services to connect consumers with developers, software companies, and businesses.

At the very heart of this shift is the fact that all participants are seen as customers – they’re all serviced as such by the platform owner. They are all as equally important and treated as though they matter.

True, the customer is always right. But when everyone’s a customer, everyone feels valued, and everyone profits.

 

Interesting stuff, right? Don’t miss the next article in the series – covering the driving strategy behind companies like Beyond Meat, SpaceX, and Alphabet (Google) – The Exponential Shift.

And if you haven’t already – well now you can order our new book, unveiling the details of the six global business shifts happening now.

 

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