A study of more than 250 platforms reveals why most fail – Michael A. Cusumano, David B. Yoffie, and Annabelle Gawer

Michael Cusumano, SMR Distinguished Professor of Management, MIT Sloan School of Management

From Harvard Business Review 

Platforms have become one of the most important business models of the 21st century. In our newly-published book, we divide all platforms into two types:  Innovation platforms enable third-party firms to add complementary products and services to a core product or technology. Prominent examples include Google Android and Apple iPhone operating systems as well as Amazon Web Services. The other type, transaction platforms, enable the exchange of information, goods, or services. Examples include Amazon Marketplace, Airbnb, or Uber.

Five of the six most valuable firms in the world are built around these types of platforms.  In our analysis of data going back 20 years, we also identified 43 publicly-listed platform companies in the Forbes Global 2000. These platforms generated the same level of annual revenues (about $4.5 billion) as their non-platform counterparts, but used half the number of employees. They also had twice the operating profits and much higher market values and growth rates.

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The Businesses That Platforms Are Actually Disrupting – David S. Evans and Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

From Harvard Business Review

Platforms are all the rage these days. Powered by online technologies, they are sweeping across the economic landscape, striking down companies large and small. Uber’s global assault on the taxi industry is well known. Many platforms, some household names and others laboring in obscurity, are doing the same in other sectors.

Surveying these changes, you might conclude that if your business isn’t a platform, you had better worry that one is coming your way. Everyone from automakers to plumbers should count their days as traditional businesses. And maybe you should jump on the platform bandwagon too. If it worked for Airbnb, why not you?

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Some of the most successful platforms are ones you’ve never heard of — David S. Evans and Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

From Harvard Business Review

When most of us think of multisided platforms, the ones that come to mind are those, like Apple and Facebook, that make heaps of money. Or unicorns like Uber that, if cap tables mean anything, someday will. Of course, anyone who really knows the history of platforms may recall the many that aspired to make gobs of money but never did and quickly died (think of the many B2B exchanges that never made it to the other side of dot-com bust). And don’t forget your brother-in-law’s great platform idea, which will make you both rich if only you would invest your life savings in his startup.

What’s amazing, though, is that there are many platforms that have created massive value, but have never made a profit, and don’t even strive to make money — on purpose.

Most likely, you have of one of the worldwide champs in this category in your wallet. MasterCard and Visa didn’t make, or even look, for profits for decades. MasterCard started as a not-for-profit membership association, in 1966, and Visa did the same, in 1971. Both associations managed their brands and ran the clearing and settlement systems for banks that issued cards or helped merchants accept cards. These card networks were allowed to charge their members just enough to cover cost and provide working capital. (For more on this, read Dee Hock’s book about starting up the Visa network.)

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