The Platform Business Model

collaboration

This is part 2 of my Digital Transformation series.

Human Hardwiring?

Collaboration is probably baked into our social DNA, it is something that we naturally do when interacting with our families and communities. Collaboration has however been at odds with capitalism, a system which puts us into competition with one another.  As the marketplace moves from competition to collaboration, our basic economic model gets reconfigured to focus on what can bring us together rather than what sets us apart. This new process forms the basis of the platform business model, a model in which digital platforms are used for building collaboration, communities and commerce.  Sangeet Paul Choudary takes us deeper into this concept elaborating on thePlatform Stack with his new book Platform Revolution.

The Platform Business Model in action

Take Uber and Airbnb, the poster children of platform collaboration.  Both are specifically built to directly connect suppliers to consumers. For Airbnb it connects hosts with guests, and for Uber it connects car owners with passengers. Their platform business models bypass many traditional market layers by allowing both suppliers and consumers to reach each other directly, thereby creating a large network based upon collaboration of commercial interests. This is certainly both a new business and social model which is the antithesis of active competition espoused by traditional capitalism and traditional business strategy pundits like Henderson and Porter for example.

Another key factor in the platform based business model is the effective use of resources. In Robin Chase’s book, Peers Inc., she documents the value of monetising non-performing resources. In the case of Uber, it is the application of idled private cars which are used to transport people instead of sitting in parking spaces. For Airbnb, it is renting out an unoccupied guest room in your home. The platform based businesses are actually driving greater utility and efficiencies in all aspects of our lives.

Capitalism Under Pressure

The platform business model which is driven by collaboration and utilization of non-performing resources is replacing traditional capitalism which relies on competition for limited resources. This digital transformation is changing our world and the way we conduct business.  One final observation, nothing happens in isolation. There are other forces currently at work in capitalism, namely the rise of the financial services industry, the movement of capital into real estate, and the movement of capital into the securities market of stocks and bonds.   All of these forces are applying extreme pressure to the traditional capitalist cycle.

 


Tim Haynes is Chief Digital Officer at Human Capital Group Asia.

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