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Scalable platforms

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Platforms are everything on which we create. They are a trade show, a website, a river, a floating city, even a skateboard. Platforms are the base upon which we all business, and what we build to exchange value by creating opportunities for all kinds of interactions. The ability to design a platform that successfully scales value creation for all participants involved is a task fit for architects.

To become scalable, the platform must exploit digital angles to offer new benefits to its users. It must create a delivery system that can be reconfigured into different contexts, and do so by creating an innovative business model.

Let’s first understand platforms.

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Scalable platforms

  1. 1. SCALABLE PLATFORMS BEREND-JAN HILBERTS VALERIA MECOZZI MENNO VAN DIJK
  2. 2. SCALABLE PLATFORMS
  3. 3. 3 MAIN MESSAGE SUB TITLE Platformsare everything on which we create. They area tradeshow, awebsite, ariver, afloating city, even askateboard. Platformsarethebase uponwhich we all business, and what we buildto exchangevalue bycreating opportunitiesfor all kinds ofinteractions. The abilityto design a platformthat successfully scales value creation for all participants involved is atask fit for architects. To becomescalable, theplatformmust exploit digital angles to offer new benefits to its users. It mustcreate adelivery system that can be reconfigured intodifferent contexts, anddo so by creating an innovative business model. Let’s first understandplatforms.
  4. 4. 4 ROLES DIFFERENT ROLES CAN BE DISTINGUISHED ON ANY PLATFORM
  5. 5. 5 MAIN MESSAGE SUB TITLE LIQUIDITY There areno two standardplatforms. It is importantto understandthis, as platforms comein manydifferent forms, makingthem virtually impossibletoreplicate. The shared featureofany platformis that theycreate themeeting point between interactions and transactions, wherekey performances aredesigned between consumers. Every platformdistinguishes two types ofroles: The first areparticipants:thebuyers interacting with sellers, informationcreators and consumers, and communitymembers. Thanks to participants interchangingtheir roles, digital platformshave spawned anew class of“prosumers”. The other role,that of theprovider,architects the interaction between users bybecoming thearbiter ofaccess &architect ofrules, whilecreating an infrastructureof reliable, secureand cost-efficient access, and strongdataintelligence.
  6. 6. 6 LIQUIDITY THE KEY SUCCESS FACTOR
  7. 7. 7 MAIN MESSAGE SUB TITLE Liquidityhereis defined as the volumeof usage, makingthis the key success factor of anyplatform. Think of it as aparty: theproviderneeds to design thepartyinto acompelling experience toattract manyinteresting guests and ensurethey mingle and have fun.No guests, no party. At thesametime, positions ofplatformsare notoriouslyfickle. “Professional” (orheavy) users mightswitch providers,quicklytaking liquidity with them. Platformstherefore need a minimum level ofliquidityto get started. This typically originates froman “over-the-counter” niche market. Consider that liquidityattracts liquidity. It is a chicken-or-eggconundrum–doyou need users or providers first?If onlyonetype ofparticipant groupis present and theother is missing,nothing will happen. To solve this, platformproviders often subsidizeoneside.
  8. 8. 8 VALUE CREATION EXPERIENCE CREATE AND TRADE VALUE
  9. 9. 9 MAIN MESSAGE SUB TITLE All megacities have aplatformbase that provided its participants, its citizens, thechance to create and exchangevalue. Acity comprises marketplaces, new arrivals, and constantupgrades. The sameinteraction yields different values for different types ofusers, and newforms of businesses are developed. In theonlineworld,a platformlike YouTubeis rich with learning tutorials,as well as entertaining clips. How they coexist andwhat theygenerate per user becomes thevalue oftheplatform. Anothervalue creation it that contributionto the platformincreases social status. The Huffington Post has featured thousands ofarticles without paying its writers – braggingrightswereenough of acurrencyto many. Similarly, manyWikipedia editors contributeto gain professional respect. The platformsfunction as atransaction point, but ifparticipants do not capturesufficient value from their contribution,liquiditydries up.
  10. 10. 10 HEAVY USERS THE EXPERIENCES OF THEY WHO MATTER MOST
  11. 11. 11 MAIN MESSAGE SUB TITLE The Zephyr Boys redefined skateboardingwhen they began takingadvantage ofabandoned pools duringamid-1970sCaliforniadrought.This ingenuityturned thesportinto somethingentirely new, taking it all the way tothe Olympics in 2020. When younger users start shifting to other platforms, the older,less active generation will invariably follow. At thesametime, manydigital platforms havethe advantage ofan accumulated valuethat is created throughmanyinteractions and transactions that arecaptured in thedata. A professional user is less willing to switch to aplatformthat is moreobscure and less relevant. Imagineimportingall ofyour likes, posts, purchases, contacts fromFacebook to anew platformto get thesamevalue. Thus, theexperience of yourheavy users matter most.As the youthstart to migrate, it is worth asking:what is thenext Facebook?
  12. 12. 12 ARCHITECT AND ARBITER THE PLATFORM ITSELF PROVIDES THE BOUNDARIES
  13. 13. 13 MAIN MESSAGE SUB TITLE A platformdesigns boundarieswhose rules shape user behavior. The platformprovider is also the arbiter that enforces the rules andpunishes unacceptablebehavior. Clearly stated rulesare a non-negotiablepart ofyour platform. The boundariesneed tobe neither strict norloose, because strictness restricts maneuvering space. Without amarginon which to operate, participants have noroomto invent newinteractions and transactions, killingprogress.Alternatively, leniency reduces reliability and theeffectiveness ofthe platform. Rules also removefriction and encourage interaction and growth.Gutenberg’s innovative printingpress famouslyaugmented and expanded thenumberofwordsavailable from 50thousandto 1 million.Consider, then, howTwitter’s 140- character rulebegan changingouronlinelanguage onceit coined thefirst hashtag.
  14. 14. 14 PROVISION OF INFRASTRUCTURE THE CRITICAL FUNCTIONALITIES ARE IDENTIFICATION, CLEARING & FULFILLMENT
  15. 15. 15 MAIN MESSAGE SUB TITLE Think of yourinfrastructureas thebridges we cross. Identification, clearing andfulfillment of purposeareits critical functionalities, so howdo you –practitioner– knowthat your counterparty can betrusted?Or that atransaction is received and confirmed onboth sides and then followed upon? Think about howyou uploadphotosto Flickr or post aitem for saleon eBay. These are thetools and technologies needed to createcontent and shapeinteractions on theplatform. Wetrust that ourmaterial is safe and protected, in addition agreeing to terms ofuse. Infrastructureprovisionis aboutreliable, secure and-cost efficient access. Mundaneif you do not get it, but a life missionif you do.Many platforms, like bridges,do this partwell, butwhat happens when despite goodintentions very little interaction is generated? Do notforget a key factor. ARCHITECT & ARBITER THE PLATFORM ITSELF PROVIDES THE BOUNDARIES
  16. 16. 16 MARKET MAKERS NEEDED PLATFORM PROVIDERS ACTIVELY “MAKE” THEIR MARKET
  17. 17. 17 MAIN MESSAGE SUB TITLE Platformproviders playan active rolein “making” their market. They provideincentives to pull participants to actively engagewith the platform. They’re shown thebest way to interact meaningfullyand relevantly. Think of theuniquevantage pointfirst created by theHomeShopping Network. The userswere its most active promoters.Forthefirst time, real housewives were selling homeproductsto other housewives. Merging genreformulasand targeting their nicheaudience, thenetwork was ableto work with asmaller budget,while providingbig-league protection toits novices. They offered floor prices, and aplatformto showcase newproducts.Some ofits presenters even becameovernight celebrities that were ableto branchoff into newbusinesses, and theproductshave spawned countless innovations. HSN also provided productquality assurance, with clear returnpolicies if theproduct was delivered in subparconditions. ARCHITECT & ARBITER THE PLATFORM ITSELF PROVIDES THE BOUNDARIES MARKET MAKERS NEEDED
  18. 18. 18 MARKET MAKERS NEEDED PLATFORM PROVIDERS ACTIVELY “MAKE” THEIR MARKET DATA AS THE OIL IN THE MACHINE THE OIL THAT KEEPS YOUR ENGINE RUNNING
  19. 19. 19 A platformspurnslots ofdata, which in turn drives further valuecreation by feeding them in smart algorithms,e.g., Amazon’s“users likeyou bought…”.Datais theoil that keeps yourengine running. Datareduces search costs and increases relevance: finding theperfect contact, informationor deal fit for you. Matchmaking sites are exclusively data- specific and have spurnedabrandnew segment of dating in this digitalera. Usagedatashows what is most popular,which in turnattracts moreviewers or rates. Notehow credibleyour counterpartis an Airbnbtransaction. Beaware that dataprovision can also betoo much. Full transparencycan reducetradingmargins or opportunitycreation to adegree that exchange becomes impossible, e.g.,lowest priceanywhere for an e-commercesite.
  20. 20. 20 STUMBLING BLOCKS
  21. 21. 21 Creating platformsthat can scale is a challenging endeavor, and stumblingblocks areabound. We’ve listed afew that are imperativeto ensuring that what you’ve builtwon’t crack underpressure. 1. The absenceof asufficiently valuable primary productorservice. Is your product100%clear? 2. No informaltrading market is forming,and users arenot organicallysharingor discussing theneed for yourproduct.Areyou surethat you’ve tapped into an unspokenneed? 3. Starting too broadinstead ofstarting with dominatinganicheof heavy special users; not focusing onniche users. 4. An insufficiently fragmented stream ofsupply and demand. DATA AS THE OIL IN THE MACHINE
  22. 22. 22 5. Platformshave fixed costs and allowingfor them to befree is awasted effort. Free liquidity is tempting when lookingto generate more users (look at freemium), butacritical mass of users willing to payis critical. If theplatform has littlevalue, your introductioncost is typically very lowand/or free, and growthwill becomea struggle. 6. Startingwith aclumsy, costlyinfrastructure platformthat was never designed to handle largevolumeofusers is acommonpitfall. Here we gointo software thinking,so you need to think likean architect that can handlelarge volume, etc. Invest in the expertise. 7. Donot forget to giveyour heavier users the incentives needed to continueusingyour productas it evolves. DATA AS THE OIL IN THE MACHINE

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