Book summary: The platform revolution

Three key metrics an online platform operator needs to focus on

  • Liquidity: likelihood a user will be able to find the inventory he is looking for
  • Trust: knowledge/signal on how well the inventory is going to do it’s job
    • maintaining quality while unlocking new areas of supply
  • Matching Quality: ease of finding the most relevant item for the task the user wants accomplished
    • curation:
      • needed to counter negative network effects
      • decide what not to show specific participant
      • gather better data on their users
      • improve their matching algorithms overtime
      • ensure manual curation is phased out overtime
        • once critical mass happens curation is turned over to algorithm

Network effects (two sided market place example)

  • Same side effects – positive / negative
  • Cross side effects – positive / negative

Viral effects

  • user getting more users to join

Design of a platform

  • focus on the why – the core interaction
  • components
    • the participants – producer and consumers
    • the value unit – from producer to consumer
    • the filter – help remove irrelevant value units

Operating the platform

  • To avoid Bloatware
  • monitor user behavior to reveal unexpected patterns – suggest new areas for value creation
  • user commitment is more important than user acquisition: retention and engagement
  • Standardize interface through APIs
  • Different life cycle requires different metrics
    • Actional
    • Accessible
    • Auditable

Incumbent versus new-entrant

  • existing value chains and complementary assets
  • new entrant needs differentiated launch strategy versus incumbent

Solving the chicken and egg

  • solve a real problem for one side first
  • piggyback on another platform
  • seeding with self created value units
  • provide incentives to attract key users to platforms – hot chics/models for dating sites
  • big bang – dump lots of money into marketing
  • evangelism – attract producers who will then induce their customers to come to platform
  • micro-market – focus on fully saturating one niche at a time


  • Be wary of destroying quality of value unit during monetization process
  • ability to monetize might increase dramatically when number of users decline
  • approaches
    • enhanced access
    • advertising
  • need to decide precisely where system can afford to create friction
  • only capture value after value unit has been created and exchange with satisfaction between producer and consumers

Platform openness

  • Platform sponsorship versus platform management
  • players
    • developers
    • users
    • managers
  • learned from cities – governance
    • giving partners a voice

Market failures

  • information asymmetry – one side uses facts for personal advantage
  • externalities
  • monopoly power
  • risk

Platform competition

  • leveraging the value of data
  • fostering innovation and then capturing value
  • preventing multi-homing – one person many platforms
  • redefining mergers and acquisitions

conditions for fertile ground needed for platform to arise

  • information intensive industry
  • high regulatory control
  • high failure costs
  • exanokes
    • education / classrooms
    • healthcare


  • Platform leadership, Annabelle Gawer and Michael A Cusumano

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