Abstract
To analyze a startup or an existing business under the light of this strategy can be useful to produce insights on how these connections can be created between producers and consumers and how a company could develop some of the elements or characteristics of a platform business. Strategic management templates like business model canvas are focused on the business models in a generic way. This chapter proposes a specific approach, an analysis of the business model, oriented by the most successful and impactful business strategy of the digital age, the platform strategy.
TopBackground
Christensen (1997) proposes that the disruption of markets typically forms a double curve in the form of an S, which describes the gains of performance of innovation, after an early stage characterized by a level of efficiency even lower than the former version of a solution.
With shorter product development cycles, thanks to the adoption of the agile methodologies and the increasing importance of time to market due to the digitalization (Hofmann, 2020), a curve used to illustrate the disruption in the digital era could have a different shape, representing brief iterations, several versions and a very short period of lack of efficiency, to rapidly achieve high levels of performance (Fig.1).
This kind of turbulence in markets, characterized by the erosion of its boundaries, called Digital Disruption, a process of creative destruction that transform industries by changing the previous boundaries and approaches (Karimi & Walter, 2015) for value networks, value creation, and value capture, the primary components of a business model (Koen et al., 2011).
In this disruption process, there is a strategy that plays a central role: the Platform Strategy.
Research from MIT (Cusumano et al., 2020) shows that in 2017, 60% to 70% of the unicorns - startups valued at US$1 Billion or more - as so as the top-ranked companies by market capitalization, that represented in 2020 more than US$6.3 trillion in market value, were platform businesses.
Figure 1. Source: The Author. The main difference of Platform Business when compared with Product Business is the presence of the network effects, a phenomenon that occurs when the benefit an agent get from an action changes as a consequence of a variation in the number of agents doing the same action (Liebowitz & Margolis, 1994).
Platform Business Models exist basically in two types: innovation platforms, on its top, are created innovation by third parties, like IBM Watson, Facebook for Developers, GitHub, and Sony PlayStation; and transaction platforms, that serves as intermediaries for direct exchange or transactions – eBay, Ali Baba, Google Play, TripAdvisor. There are also hybrid platforms like Apple, Facebook and Amazon, that intermediate transactions and host innovations as well (Cusumano et al., 2020).
Key Terms in this Chapter
Crypto Native: A cryptocurrency investor that has the necessary knowledge to use crypto financial instruments in an independent way.
Blockchain: A decentralized, distributed, and oftentimes public, digital ledger consisting of records called blocks that are used to record transactions.
Unicorn: Privately held startup company valued at over $1 billion.
Creative Destruction: The dismantling of long-standing practices to make way for innovation.
Disintermediation: The removal of intermediaries in economics from a supply chain, or “cutting out the middlemen” in connection with a transaction or a series of transactions.
Decentralized Applications: Apps that have their backend code (smart contracts) running on a decentralized network and not a centralized server.
Fintech: A public offering in which shares of a company are sold to institutional investors and usually also retail investors.
Commits: Savepoints within Git's version control.
IPO (Initial Public Offering): A public offering in which shares of a company are sold to institutional investors and usually also retail investors.
Agile Methodologies: Set of principles and practices intended to improve the effectiveness of development processes, based on incremental and interactive steps.
API (Application Program Interface): A connection between computers or between computer programs.
Circular-Economy: A model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products as long as possible.