Amid all the discussions about ecosystems, networks and platforms at the MIT IDE July Platform Summit, Sangeet Choudary drilled down to offer specific tips on getting started and designing what he calls “interaction-first” business models.
Choudary, the founder of Platform Lab and author of the new Kindle book, Platform Scale: How an emerging business model helps startups build large empires with minimum investment, told attendees that platform businesses differ significantly from other types of Internet businesses.
In these new models, transactions are no longer conducted along “linear pipes” as they were in industrial-era businesses. In that model, value was created upstream and delivered downstream to customers. With platforms, Choudary said, the goal isn’t to create more efficient pipes. Instead, platforms –like AirBnB or You Tube– must create an infrastructure for external consumers and users to create value.
The lines between consumers and creators are blurring, and companies will increasingly compete and create value based on the strength of their ecosystem, not individual resources. In other words, processes are being replaced by interactions and the platform has to be designed to enable these key interactions, Choudary said.
Among other key points of his presentation, Choudary said:
- Going forward, designers need to rethink the goal of the business in these new terms with emphasis on interactions.
- “Don’t start with technology, start with the interaction and remove friction wherever it exists.”
- A multi-sided platform like LinkedIn is not a site, but a place where interaction occurs. Each business may define value differently—content, providers, services—and that will determine how the platform is built, as well.
- Platforms struggle with infrastructure because they need to be both plug-and-play and open/participatory at the same time.
- Achieving a balance between these two conflicting influences can be reached in two ways: managing access with good governance and gatekeepers and creating better content and access filters, according to Choudary. The right mix will depend on the site: Twitter has very few filters, for instance, but AirBnB has many, and more complex, filters.
Choudary is also a co-author, along with Geoffrey Parker and Marshall Van Alstyne, of the upcoming book: Platform Revolution: How Networked Markets Are Transforming the Economy – and How to Make Them Work for You , due out in March 2016.