A recently as a decade ago, the world was largely dominated by “pipeline” businesses with linear value chains. We would buy products at retail outlets, or possibly their online versions, stay in hotel chains when traveling and hail taxis one the street and nobody thought much about it.
Clearly, a lot has changed. Today, platforms like Amazon, Airbnb and Uber are dominating those earlier, linear business models. Two new books by prominent economists,MatchmakersandThe Platform Revolution, ably explain the dynamics of how platforms like these function as multi-sided markets.
Yet while understanding how platforms work as economic entities is both interesting and important, unless we’re planning on designing a platform ourselves — and very few of us are — it isn’t very helpful. The real value of platforms for most businesses today is that they allow us to access ecosystems of talent, technology and information.
In 2001, when Fabio Rosati left his job as Global Chair of Strategic Consulting for Capgemini to leadElance, the company was a startup in transition. Originally conceived as a platform to match companies with freelance contractors, it was now entering the nascent market for vendor management software.
Under Rosati, the business grew and began making money, yet he saw darker days ahead as competition stiffened. So he agreed with the investors to sell the software business in 2006, although the company would retain its name, a small staff, and some intellectual property to pursue an even bigger opportunity by returning to the platform model.
However, its experience in vendor management software showed that it could do vastly more than make matches between firms and contractors, it couldwiden and deepen the connectionsbetween them by monitoring work, offering training and certification in crucial skill areas and developing algorithms that would lead to more successful engagements.
Today, after having merged with its chief rival oDesk, Elance has been rebranded asUpwork. With over 3 million jobs are posted annually, worth a total of $1 billion USD, it is by far the world’s largest freelancer marketplace. 90% of its corporate customers who use the service rehire there.
In truth, platforms are nothing new. In medieval times, village markets and fairs served as platforms to facilitate connections between ecosystems of merchants and ecosystems of customers. More recently, enterprise software companies like SAP and Oracle used the database as a platform to control software ecosystems, much like Microsoft used the operating system to dominate PC’s.
Yet, Christian Gheorghe, CEO ofTidemark, sees two problems with that model. First, it inhibits innovation. Outside developers can only do what their proprietary partner allows them to.