The history of business development from pipeline to platform, from current value to stereo value matrix.
Editor’s note: This article is from WeChat public account “Hua Ying Capital” (ID: MeridianCapital), author He Lixin.
Go out in the morning to call a drop, lunch habitually hungry, weekend trips through airbnb’s homestay experience human experience… Internet platform incorporates the breath of our lives.
These companies themselves don’t even have a car, a restaurant, or a room, but they have instigated unimaginable influence over the past decade. They have been at the forefront of the global market capitalization list for years – we have witnessed the platform. the power of.
Why is the giant always the platform? What do you need to know in this platform age, whether it is an individual or a business? Through the book “Platform Revolution” co-authored by MIT professor Geoffrey G. Parker, we try to present the enterprise from the pipeline era to the platform era, revealing the underlying logic of the platform company.
“Platform” is never a new word.
The prototype of the bilateral platform in human history can be traced back to the birth of the market. From Africa to Europe, from open markets in cities and villages, to traditional stock exchanges in London, New York, are the vivid experiences of the word “platform” over the millennium.
The large machine production in the second industrial revolution, thanks to the economies of scale at the supply end
And today, with the popularity of the Internet, companies have experienced a shift from a traditional linear value chain to a complex platform value matrix. Digitization brings information about geometric progression and increasingly mobile multilateral relationships. The platform dominates, and enterprises rely on demand economies of scale and further present as network effects.
This platform and digital subversion of tradition is largely achieved in two phases:
The first step is to eliminate inefficient pipelines by efficient pipelines, such as the impact of TV news and digital news on the traditional newspaper industry. According to Pew Research Center data, the total number of newspapers in the United States declined in 2018, while digital news Still achieving a 17% increase.
Image source: journalism.org
In the second step, the platform devours traditional pipelines, such as Weibo WeChat and Quick Handshake, so that the right to spread is no longer exclusive to a small number of people and organizations. The marketing signals that have been issued by market departments and agencies are now Communication by the consumer group is a subversion of the nature of communication under the leadership of the platform model.
In the platform era, the Internet has not only played the role of sales pipeline, but also an innovative infrastructure and coordination mechanism. Specifically, the platform drives three types of disruption: decoupling of assets from value, mediation refactoring, and market gathering. The key distinguishing platform from traditional business is ownership and control.Partial separation, most activities are controlled by the user, not the owner or manager of the platform.
In an appropriate metaphor, the platform is an information factory, but does not control inventory, only provides a job site; does not directly control production, but fosters a culture of quality control – this is between it and the traditional pipeline business The most obvious difference.
Further questioning, how does this difference build a moat for platform companies? Why can the platform replace the pipeline?
The first reason is that the platform has eliminated the gatekeeper by scale, which makes scale more effective. In the pipeline economy, it is usually the gatekeeper who manages the value transfer from the supplier to the customer, and the efficiency is difficult to improve. For example, Yahoo’s original manual editing database, compared to Google’s web ranking algorithm model, the ceiling is obvious.
The goalkeeper theory in communication studies Source: wordpress
Second, the reason is that the platform has developed a new source of value creation. For example, compared to hotels with heavy assets, Airbnb quickly increases the stock of assets by registering landlords with idle houses, and does not involve costs such as land acquisition, construction, and hotel employee employment.
The last point is that the platform creates a community feedback loop with data tools. When the user reaches a certain amount, the value judgment and platform management are handled by the algorithm driven by the community judgment. For example, the evaluation data of the public comment, Taobao, etc. will become the reference basis for other users; the small fish court system, comprehensive behavior The data pushes court events to relevant users in a targeted manner, which effectively achieves mutual supervision and governance within the community.
Comparison of pipelines and platforms
Of course, traditional companies are not the same. Through horizontal and vertical integration, pipelines use data to connect and interact with multiple products and services, and there is also the possibility of evolving into a platform, although it is usually not easy. Both Nike and Adidas have tried to develop smart wearable device systems; Anderma has also acquired fitness platforms such as Myfitness and Endomondo.
02 The birth of core interaction, How does the platform work internally?
Let’s go back to the operating mechanism of the platform itself: How does the platform work internally? What are the links and key indicators that need attention?
Participants in the platform primarily exchange information, goods, services, or some form of currency. At this point, the role of the platform is to provide them with the basic settings for adding and using, including software tools and rules, so that the exchange is convenient and mutually beneficial.
The value creation of the platform is achieved by establishing a core interaction mechanism, which has three major components: participants, value units, and filters.
1. Participants: Includes producers and value consumers who create value. In different decisions, the identity of the participants can be converted to each other;
2, value unit: the most difficult to control and the most important element, the beginning of each core interaction is the creation of the value unit of the producer, such as the video of iQiyi, the resume of LinkedIn, the available vehicles of Didi Lists, etc. are all core value units;
3. Filters: There are strict algorithms, software-based tools such as search requests and algorithm recommendations.
When designing a platform, the first task is to determine what the core interaction is and define the participants, value units, and filters to complete the core interactions—a process that involves three steps of attraction, promotion, and matching.
When entrepreneurs evaluate the feasibility of a platform strategy on their own projects, it is essential to understand the scope of the industry to which they adapt. Which industries are more likely to be platformized? Information sensitivity, gatekeeper dependency, and industry fragmentation are important indicators:
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Information-sensitive industries: typically in the media and telecommunications industries, the more important an information resource is, the easier it is to be transformed by the platform.
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Unexpanded industries that require people to check: typical, for example, retail and publishing. Gatekeepers such as buyers and editors have a lot of room for innovation in the future.
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Highly dispersed industries: typically, for example, the catering industry, which can integrate thousands of scattered small-scale supplier information through the platform, thereby greatly improving market efficiency. This is what Yelp and public comment are doing.
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Information where information is extremely asymmetrical: typical, for example, used car marketfield. Participants have a strong enough willingness to obtain information about goods, services and prices to create a fair and efficient market environment.
cooperation: the more mature, the moreOpen
The symbiotic nature of the platform determines its openness, and the relationship between partners is particularly important. The closure of Facebook and the closure and final decline of its early competitor MySpace are a good contrast.
Former social giant MySpace, the traffic in 2008 even reached the top in the United States. Rejecting external developers to slow down their update iterations, eventually being overtaken by Facebook
The platform is more like an infrastructure, and a dynamic and healthy platform relies on the value created by partners outside the platform. There are three types of decisions about openness:
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Involvement of managers and sponsors: The management and sponsorship of the platform is divided into four quadrants according to different attributes and openness, including four modes: proprietary, authorized, joint venture and sharing;
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Developer Participation: Create core interactive functions of the platform through core developers; enable external extension developers to add enhancements and values to the platform through APIs; enhance data utilization capabilities of the platform through data integrators , enhanced matching and accurate recommendations;
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User Engagement: In particular, giving producers the freedom to add content to the platform, curating key access points to the platform through a screening and feedback system.
Openness and closure are not black and white, not the opposite ends, but a gradual open spectrum. And as the platform matures, it will become more open.
Competition: Multidimensional Strike, Dependence on Symbiosis
Traditional strategy is like traditional chess. Players are on the same level and strategizing. The competition in platform strategy is more similar to 3D chess. Competition in the platform field is usually subversive. For example, the biggest rival of TV stations is not another TV station, but a new streaming media platform like Netflix.
From 2D to 3D, competition becomesMore complicated
And in a three-dimensional ecosystem, there are dynamic checks and balances between platforms and platforms, platforms, and partners, partners, and partners, similar to biological co-dependence. Relationships are also more complex, and cooperation and co-creation often exist simultaneously with competition and are more important than the latter.
Profit: Value-added charges for free under the premise
The essence of value creation in the Internet is that the natural prices of goods and services distributed online must be free. Pipeline business usually charges for ownership or usage rights, while platform business needs to obtain partial revenue from the added value added based on the free service of basic services.
The most critical issue is who to charge, in the form of transaction fees, user-enhanced intervention fees, third-party providers charging community access fees, and subscription fees for enhanced content management.
Governance: Building an ecosystem
“The rules and ethics of digital commerce are moving through no-man’s land.” Internal and external governance is particularly noteworthy. There are four main reasons for market failures: information asymmetry, external effects, monopoly and risk. In particular, platform governance should consider information asymmetry and external effects arising from the separation of ownership and control. Because the spillover effect of the network on users is the real source of platform value.
The four commonly used governance tools are law, regulation, architecture (algorithm) and the market itself. Internal transparency and participation are the two key governance issues.
In the above-mentioned five-part process of online, cooperation, competition, profitability, and governance, different stages of the company focus on different key indicators:
1. Start-up phase: Focus on the characteristics and intensity of core interactions. Measured by liquidity, matching quality and trust.
2. Development stage: Focus on the growth and interaction of value interaction. For example, the ratio of consumers to producers, the interactive conversion rate, the value of the producer is calculated using the life cycle value model, and the consumer value is calculated by the consumption frequency, the search volume, and the sales conversion rate.
3. Maturity: Focus on new features to drive innovation and competitive/strategic threats. The platform at this stage should meet the three requirements of promoting innovation, high signal-to-noise ratio, and promoting resource allocation.
04 The future of the platform revolution
Kevin Kelly said in Necessity that “the incredible starting line has been created in the past 30 years – a solid platform for building great things. But the upcoming things will be different, they will surpass the present, And the coolest thing hasn’t been invented yet.”
Kevin Kelly
The platform is closely related to each individual. There are still many imaginations about the future that have never been released: the booming Internet of Things will add a new layer of connectivity to the platform and provide the impetus to bring people and devices through new value creation methods. Linked to each other; unmanned driving will plug the wings for Uber and other platforms; users will become increasingly fierce and the platform will become a high-flowing land; the platform will further improve the ecosystem, and the Super platform will become the new soil for the birth of the unicorn company…
“Who has openness and connectivity, who can reach the depths of the scene” – the future of the platform is still worth looking forward to.
Today’s interactive topic:
In your eyes, are the longboards and shortboards of platform companies?