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I had never thought about platform thinking before. It has emerged as a transformative concept that reshapes traditional business models and enables unprecedented innovation.
Authors Daniel Trabucchi and Tommaso Buganza Platform thinking: read the past, write the future Professors from Politecnico di Milano compellingly explore this concept and highlight its potential to revolutionize various industries. Their insights are backed by extensive research and real-world examples, highlighting how platform thinking can drive business success.
The essence of platform thinking
Platform thinking is the ability to integrate platform-based mechanisms at the core of digital business transformation. This goes beyond traditional linear business models that rely on a simple supply chain from production to consumption. Instead, platforms facilitate interactions between multiple interdependent customers and create value through network effects.
“A platform is not just a different business model; it's a true enabler of innovation,” explains Trabucchi. This mindset shift is critical to understanding the profound impact that platforms have on business operations and value creation.
Platform Evolution
The evolution of digital platforms over the past decade has fundamentally changed traditional business models. Companies like Uber, Airbnb, and Spotify have demonstrated the power of platforms to connect users and providers in ways previously unimaginable. But questions still remain. Buganza points out, “What's interesting is that all of these definitions are correct. This creates even more confusion among practitioners and academics.”
Understanding the historical context of a platform is essential to understanding its current and future significance. Platforms have evolved from simple marketplaces to complex ecosystems that enable seamless interaction between diverse stakeholders.
basic design principles
Successful platforms are built on certain design principles that differentiate them from traditional business models. Trabucchi and Buganza identified two main characteristics: a diverse, interconnected group of customers and the mutual value they create for each other. These elements create a self-reinforcing cycle in which the more users participate, the more valuable the platform becomes.
Trabucchi explains: “Platforms have two main characteristics: having multiple sets of interdependent customers and cross-side network externalities.” Companies like Airbnb, which connects hosts with travelers, and Facebook, which connects users with advertisers, are classic examples of this dual-customer approach.
Real World Applications: BlaBlaCar and Friendz
To illustrate the practical application of platform thinking, Trabucchi and Buganza highlight two innovative examples: BlaBlaCar and Friendz. A car-sharing platform, BlaBlaCar connects drivers and passengers to share the cost of travel. Founder Fred Mazzella's recognition of the inefficiencies of car use led him to create a community-focused travel solution.
Trabucchi says: “BlaBlaCar’s success lies in its ability to take an idle resource – in this case, an empty car seat – and turn it into a valuable asset for both drivers and passengers.”
Similarly, digital marketing startup Friendz is turning regular social media users into micro-influencers. Friendz harnesses the power of user-generated content by leveraging personal connections for brand promotion. Buganza said, “Friendz engages users in creative campaigns, allowing brands to leverage the credibility and reach of personal recommendations.”
Absorption capacity
A key concept in platform thinking is absorptive capacity – the ability to recognise the value of new information, absorb it, and apply it for commercial purposes. First defined by Cohen and Levinthal in 1990, this concept is crucial to understanding how companies can effectively implement the platform model.
Absorptive capacity allows organizations to continually adapt and innovate, turning new information into strategic advantages. Trabucchi elaborates. “Absorptive capacity is about developing the right glasses to read how and why a platform differs from traditional business models. Fostering innovation through new thinking is key.”
For example, Netflix's transition from a DVD rental service to a streaming platform is an example of absorptive capacity. By realizing the potential of streaming technology and customer data analytics, Netflix adapted its business model and grew into the world's leading entertainment platform.
Education and mindset change
For companies to successfully transition to a platform-based model, a fundamental shift in mindset and education is required. Trabucchi emphasizes the importance of understanding both linear and platform models, stating, “You need to develop a clear ability to read, understand the differences and implications between similar platforms, and identify equivalences.”
Buganza adds: “To fundamentally change the way we do business and create value, we first need to convince our employees. It's important to treat multiple clients as customers and develop services that respond to their needs.”
What's next?
Platform thinking offers a new perspective for businesses to navigate the complexities of the digital economy. By embracing this concept, companies may be able to unlock new opportunities for innovation, improve customer experiences, and drive sustainable growth. Trabucchi and Buganza's insights provide a roadmap for businesses to move from traditional models to dynamic, platform-based ecosystems.
“The ability to read the past and envision the future through platform thinking will be a determining factor in the success of companies in every industry,” said Trabucchi. By fostering a mindset of continuous learning and adaptability, organizations may be able to withstand the coming tsunami of digital transformation.
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