Online platforms, 4 things you need to know
- Business Model Innovation
The major growers of the past ten years have been companies with a platform business model. Are you also considering your own online platform? This checklist will provide some assistance.
- Know: not everything is a platform
The term ‘digital platform’ is thrown around a lot these days. If you take the true definition, it’s thrown around too often. In this context you ought to consider a platform as an online marketplace where users and producers of a service meet. If you remove one of these customer segments, the business model is broken. A website with a lot of visitors is not necessarily a platform. Neither is an online shop where one party offers something.
Take, for example, New10, an initiative in which credit applications are automatically assessed on the basis of an algorithm. Interesting for sure, but with ABN AMRO as the only provider it’s not an online platform. But imagine that in the future everyone will be able to offer capital on there. Suddenly, the online store has become a platform.
‘Facebook has users but no producers.’
Uber, Airbnb, Tinder and Marktplaats are all typical examples of a platform. Facebook, on the other hand, isn’t. The reason is simple: there are users, but there are no producers. Unless you consider that a user produces content and Facebook links it to the advertiser. It is only with that angle that you’ll be able to label Facebook as a digital platform.
- Central to the business model
Ever heard of Lime? If you’ve ever been to San Francisco or Madrid, you probably have. This electric scooter is a hit in the cities where it is available. And that’s not just because it’s so easy to travel that last mile through the city on the way to your destination. The key to success is the business model.
In the old pipeline idea, the producer would have developed the product and put it on the shelves of MediaMarkt for a fixed price. Price and product features would be central to advertisements on the internet and billboards. Just like the creators of the Segway have done before (which for that reason has never really been successful).
“In Lime’s business model, they’re called the Juicers.”
The Lime inventors took a very different approach indeed. You can find them anywhere in the city, activate it with an app, drive to your destination and lock it all in the same app. Payment is per kilometre and entirely automatic. Makes sense, doesn’t it? But where is the other customer segment, you’re probably wondering. In Lime’s business model, they’re called the Juicers. This group of people press ‘find Limes’ in the app, take a scooter home and recharge it. For a student with a fixed electricity bill this is a super attractive way to earn a quick extra buck.
You see two customer segments here as well. And both of them have their own value trigger, a concept which we’ll discuss later on.
– The user wants to go from A to B quickly and cheaply.
– The Juicer earns a quick extra buck.
- Without a growth strategy, you stand no chance
For your platform to succeed, you need volume. Many users, many producers. That’s why Bolt (formerly Taxify) is having such a hard time. Having to wait more than half an hour for a taxi from this Uber-challenger does not really invite users to use the service for another time.
Airbnb’s growth story is classic. At the time, the founders made good use of the Craigslist advertising network. By building a smart bot, listings on Airbnb appeared on Craigslist with a single click of a button. Airbnb used the huge popularity of the network. The result? Enormous traction.
‘We call this the piggybag strategy.’
To sit on the shoulders of a much larger party is what we call the Piggybag strategy. You can do this by means of a hack, which may be disputed from an ethical point of view. On the other hand, you can also just knock on the door of a larger player who is active in your market segment and explore the possibilities for cooperation.
That’s how the startup Dytter does it. This new platform links people with a care need to freelance care providers directly, without the intervention of a large provider. The founder, a Dutchman who lives in the United States and had been surprised by the viscous process of finding the right care for his father, is now working closely with home care agency Cordaan. Working together, they recruit care providers for the platform. In this way, Dytter builds up the volume, and Cordaan offers its own care providers the opportunity to earn some extra income.
- Add clear value
Your platform business model can’t survive without a sufficient number of value drivers. Not only for the user, but also for the producer. We pointed this out with Lime earlier. Let’s take Uber as an example this time, what benefits do both client segments of the platform experience?
User (taxi customer)
- Getting a taxi fast
- Clear price
- No hassle with checkout
Producer (taxi driver)
- Extra income opportunities
- Having to wait less
- No hassle with administration
What’s noticeable about this list? The benefits are simple and obvious to everyone. This is therefore an absolute prerequisite for the success of a platform. It is the only way to get enough adoption. Do you need more than one sentence to explain a value trigger? Then there’s something wrong with your proposition.
‘Grandma didn’t use taxis at first, but she does use Uber now.’
As an Uber user you can see where your taxi is and what you’re going to pay. All very clear. New customer segments will automatically emerge as a result. Grandma, who couldn’t afford a taxi before and found it all a bit too exciting, now takes an Uber. The same thing happens with the producers. Students borrow Dad’s car and earn some extra money at night. A situation that would never have been possible in the old model.
In this way the platform is like an infinitely long chain on which more and more beads are strung. We call this the network effect. And it’s this very exponential movement that makes the appreciation of platform companies like Uber, Airbnb and Tinder go through the roof.
Building a platform
Do you want to set up a platform yourself? Ask yourself if you want to build a platform or if you want to be part of it. Does being a platform fit in the DNA of the company and do you have enough know-how to generate traction? Or is it smarter to connect to an existing platform and make your business futureproof?
We’ll be happy to help you find the right answer, let’s connect!
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