Platform Revolution: A book review by Bob Morris

Posted on: March 27th, 2016 by bobmorris

Platform RevolutionPlatform Revolution: How Networked Markets Are Transforming the Economy—And How to Make Them Work for You
Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary
W. W. Norton & Company March 2016)

How to accelerate connectivity and interaction, thereby dominating your competitive marketplace

The title of this brief commentary refers to the rise of the platform as a business and organizational model on which Geoffrey Parker, Marshall Van Alstyne, and Sangeet Paul Choudary focus in their brilliant book.

They pose two interesting questions: How can a major business segment be invaded and conquered in a matter of months by an upstart with none of the resources traditionally deemed essential for survival, let alone market dominance? And why is this happening today in one industry after another?”

Again, the answer is “the power of the platform,” a new business model embraced by Airbnb, Uber, Alibaba, and Facebook…and previously by Amazon, YouTube, Wikipedia, iPhone, Upwork, Twitter, KAYAK, Instagram, and Pinterest, among others. As is also true of the Worldwide Web that Tim Berners-Lee devised more than twenty years ago, the platform’s core functions are connectivity and interactivity. Its overarching purpose is to “consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants.”

Unlike the traditional linear value chain, platforms scale more efficiently and more quickly by eliminating gatekeepers; unlocking new sources of value creation supply and demand; using data-based tools to create community feedback loops; and centering on people, resources, and functions that exist outside the operations of a platform business such as Uber, “complementing or replacing those that exist inside a traditional business” such as a taxi cab company.

This is a key point because scaling is best viewed as rightsizing. This is what Geoff Moore has in mind in his latest book, Zone to Win: Organizing to Compete in an Age of Disruption. He makes clever use of an extended metaphor from the gridiron, offensive and defensive coordination. As he explains, “making the number on the back of the established lines of defense” is a painfully wasteful response to waves of new opportunity. “This brings us to the heart of the crisis of polarization: At the core you must deliver on two conflicting objectives. On the one hand, you must maintain your established franchises for the life of their respective business models, adjusting to declining revenue growth by optimizing for increasing earnings growth…At the same time, every decade or so you must get your company into one net new line of business that has exceptionally high revenue growth.”

This precisely why platform companies can gain a competitive edge so quickly. They also follow Michael Strategy’s advice: “The essence of strategy is choosing what not to do.”

These are among the several dozen passages of greatest interest and value to me, also listed to suggest the scope of Parker, Van Alstyne, and Choudary’s coverage:

o Airbnb (Pages 1-12, 21-26, 64-71, 142-143, 192-195, 229-233, and 253-254)
o Google (3-7, 21-25, 30-33, 49-50, 140-141, and 214-217)
o Apple (6-7, 52-53, and 152-153)
o Uber (16-18, 20-26, 30-32, 36-38, 459-51, 211-213, and 249-254)
o Internet/Databases (24-25, 42-44, 60-63, 72-79, 91-92, 107-113, and 283-289)
o Negative network effects (26-32, 112-115, and 229-234)
o Social networks (39-40, 134-135, 223-224, and 252-252)
o Facebook (41-50, 90-91, 98-103, 131-135, and 216-218
o Amazon (54-56, 69-73, 157-158, 176-178, 204-218, and 242-243)
o Competitive platforms (60-62, 73-77, 87-88, 96-97, 131-134, 152-154, and 207-227)
o Disintermediation (68-69, 71-72, 161-162, and 170-171)
o eBay (83-84, 112-113, 161-162, and 169-171)
o Decision-making in platforms (139-140, 187-188, and 253-256)
o Connectivity platforms (200-201)

Parker, Van Alstyne, and Choudary are to be commended on their skillful use of several reader-friendly devices that include “Takeaways from Chapter…” sections that focus on key points in each chapter, Figures (such as 1.2. “Some of the industry sectors currently being transformed by platform businesses, along with examples of platform companies working in those areas” and 7.3. “Four models for managing and sponsoring platforms.” Also, a “Glossary (295-300), “Notes” (301-323), and Index (325-335). These and other devices will facilitate, indeed expedite frequent review of key material later. That said, I am dismayed by the fact Platform Revolution and other business books are still being published without an Index.]

These are among Geoffrey Parker, Marshall Van Alstyne, and Sangeet Paul Choudary’s concluding observations: “The purpose of all these [platform revolution] constructs should be the unlocking of individual potential and the building of a society in which everyone has the opportunity to live a rich, fulfilling, creative, and abundant life. It’s up to all of us – business leaders, professionals, working people, policy-makers, educators, and ordinary citizens – to play our part in marking sure that the platform revolution brings us closer to that objective.”

I agree with them. The healthiest organizations really are those with a workplace environment within which personal growth and professional development are most likely to thrive. Therefore, winning this latest “revolution” – as is true of winning all others in business – involves making necessary adjustments to a platform that is most appropriate to initiating or responding to the challenges of a global marketplace that seems to become more volatile, uncertain, complex, and ambiguous each day.

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