for X, Airbnb
for Y, Facebook for Z. These business models of the internet age have become all too familiar. But do we really understand what makes some of them click and not others? Why do so many companies that try the same model in different verticals – from a media website to a home services platform or food delivery app – risk biting the dust?
It’s because the platform model is trickier than it appears. Many entrepreneurs jumping into it don’t have a full grasp on the fundamentals underpinning the success of a YouTube or a Twitter or an Instagram. They look at the superficial features of a LinkedIn and adopt this, that, or the other feature.
Sangeet Paul Choudary, INSEAD
entrepreneur-in-residence and author of Platform Scale, likens it to an old Indian tale about six blind men and an elephant. Each one of them feels a different part of the elephant and comes up with his version of the object. The one who holds the trunk thinks it’s a snake; another one with his arms around the elephant’s leg describes it as a pillar; a third blind man with his palms on the side of the elephant visualizes a wall, and so on.
Choudary, who is the co-chair of MIT’s Platform Strategy Summit
and an advisor to 500Startups, helps the reader step back and see the elephant in its entirety. He begins by describing two business models, which he calls “pipes” and “platforms.”
Pipes represent the old way, with producers of things, services, or content at one end, and their consumers at the other. Platforms, on the other hand, use a plug-and-play model to connect multiple producers and consumers. Think of how Uber’s drivers or Medium’s writers use those platforms to reach their riders and readers.