Why do most social networks never take off? Why are marketplaces such difficult businesses? Why do startups with the best technology fail so often?
There are two broad business models: pipes and platforms. You could be running your business the wrong way if you’re building a platform, but using pipe strategies.
In a recently published article entitled, “Disrupt or be Disrupted: Why Platform, Not Pipeline, Will Save Your Business,” author and expert, Tim Clark, writes:
“Certainly, the adoption of technology has fundamentally changed the productivity of companies and created better products. But evolving from this traditional “pipeline” business of making widgets to one where complimentary services huddle around a platform-like community is actually the way to go.”
Clark writes that Apple has become one of most important companies not because of the iPhone, but because it has an app store, a platform where 40,000 developers make apps. “We get value from the platform because we can download apps and connect with others,” said Joachimsthaler in an interview with Clark. “The platform is where the value is created.”
“On the other hand,” Clark writes, “Nokia collapsed because they didn’t have a platform—not because their phone was inferior.”
So how do you avoid this?
Joachimsthaler believes you need the following ingredients to make a great platform:
Facilitates interactions between parties
Open, third party developers or ecosystem
Creates value on top of technology
Creates value for all parties involved (social currency)
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