The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power

by Michael A. Cusumano, Annabelle Gawer, David B. Yoffie

A trio of experts on high-tech business strategy and innovation reveal the principles that have made platform businesses the most valuable firms in the world and the first trillion-dollar companies. Managers and entrepreneurs in the digital era must learn to live in two worlds--the conventional economy and the platform economy. Platforms that operate for business purposes usually exist at the level of an industry or ecosystem, bringing together individuals and organizations so they can innovate and interact in ways not otherwise possible. Platforms create economic value far beyond what we see in conventional companies. The Business of Platforms is an invaluable, in-depth look at platform strategy and digital innovation. Cusumano, Gawer, and Yoffie address how a small number of companies have come to exert extraordinary influence over every dimension of our personal, professional, and political lives. They explain how these new entities differ from the powerful corporations of the past. They also question whether there are limits to the market dominance and expansion of these digital juggernauts. Finally, they discuss the role governments should play in rethinking data privacy laws, antitrust, and other regulations that could reign in abuses from these powerful businesses. Their goal is to help managers and entrepreneurs build platform businesses that can stand the test of time and win their share of battles with both digital and conventional competitors. As experts who have studied and worked with these firms for some thirty years, this book is the most authoritative and timely investigation yet of the powerful economic and technological forces that make platform businesses, from Amazon and Apple to Microsoft, Facebook, and Google--all dominant players in shaping the global economy, the future of work, and the political world we now face. Supplemental enhancement PDF accompanies the audiobook.

Genres: Business, Technology, Management, Nonfiction, Economics, Law, Artificial Intelligence

Audiobook

Published May 7, 2019

Reviews

[Charles · Rating 2 out of 5]

This is a book that makes The Halo Effect: ... and the Eight Other Business Delusions That Deceive Managers so devastating in its criticism of a certain type of business book.

Let me start with a bit of context setting: the subtitle of this book is "Strategy in the Age of Digital Competition." None of this strategy offered in this book extends to a level beyond what you might get by reading a competently-written news article.

Most of the companies analyzed in this book reads like a who's who of the most popular platform companies in the news at the time this review is being written, and the advice and strategy offered is completely anodyne. This gets to the reason I brought up The Halo Effect in the first place: any strategy analysis offered here is highly biased by the success of the companies analyzed...It's not strategy that's being offered, it's the authors coming up with a post-hoc rationale that's really just a way of stating that the company is successful. It's Halos all the way down.

To demonstrate this, let me offer up a putative counterexample: the author's discussion of GE's Predix platform on pages 161-169, one of the few examples I hadn't heard about before reading this book. The authors conclude:

What GE learned, and what we can learn from GE, is that building a new platform from scratch can be a Herculean effort. We believe that building a platform was the right strategy for GE. Nonetheless, getting the various market sides on board, solving chicken-or-egg problems, creating sustainable business model, and designing acceptable governance rules was a massive, long-term task that seemed beyond the companies capabilities. Maybe even more important, few successful platforms have begun with such grandiose ambitions, and GE may have fallen into the trap of overreaching. GE leadership focused on the promise of platforms without truly understanding platform thinking and without internalizing the harsh realities of the digital revolution.

First of all, this book was published in 2019. I can find internet articles from 2018 discussing GE separating itself from digital platform efforts here and here and here.. Nevertheless, the author's state on page 166, "As we finished this book, it was too soon to tell whether GE would be able to transform itself into a platform company." In the paragraph I cited above, notice the use of hedged phrasing throughout: "can be a Herculean effort," "seemed beyond," "GE may have fallen into the trap of overreaching," and my least favorite, "the harsh realities of the digital revolution." These words allow the authors to "analyze" GE's "strategy" without actually saying anything meaningful. If authors believe that building a platform was the right strategy for GE (really, losing $1 billion+ is the right strategy?), then where did they go wrong? Was their problem overreaching? What makes their behavior an overreach, while Amazon's AWS service a success? Ahhh, maybe their problem was that they didn't succeed in executing it? If that's the case, then strategy is less relevant than execution, and the whole issue has been deferred from the noun "strategy" to the noun "execution," which is really a proxy for "success." Again, Halos all the way down.

The reason this matters, to me at least, is that I picked up this book hoping to at least challenge my thinking about how platforms operate and why some succeed and why some fail. What I got was a 240-page advertisement for why the big platforms of early 2020 matter, but no substantive analysis of the rudiments of success.

Despite the pointed criticism of the review above, I don't really have too much of a horse in this race, I'm just tired of running across highly-rated business books that claim to offer strategy when they really just offer hagiography of what's succeeding at the moment. I'm writing this review in the hopes that like-minded critical folks can converge on and reward books that actually offer meaningful strategic analysis.

[Vivify M · Rating 4 out of 5]

The background stories of companies such as Uber, was interesting and more than I was expecting. That alone, made this worth the read.
I appreciated that the book wasn't trying to sell any trend, and took a pragmatic and sober look at the topic. I found myself coming away with the disconcerting sense that the business of platforms are very complicated and unpredictable. But, found the formal definitions and practical considerations useful.
The thoughts on ethics and social factors, were more than lip service. And, I was happy that it engaged me on more than a commercial business level.
One things that stood out was what is possible even in regulatory, and seemingly restrictive environments, such as the US government.

[Daniel · Rating 3 out of 5]

This book provides advice for platform owners, and the rest of us who needs to work with the platforms. It is like advising two competing teams at the same time, and makes for a schizophrenic read.

The authors pointed out that building a successful platform is very hard and 90% fail, including giant successful companies such as Microsoft, Nokia, and RIM. They must get the right timing, solve the chicken-and-egg problem, charge all involved parties the right price, and fend off competitions.

To do business as a small or medium business owner, one must be very agile and not let the platform take over the business (just like Bezos effectively killed off Diaper.com or Zuckerberg copying popular features of Snapchat on Instagram). They should also try to support the competitor, or be in multiple platforms at the same time.

He thinks platform owners must play by the rules once they are successful, to avoid public and government backlash.

I think the authors are very nice to the platforms, perhaps they would do some consulting for them.

[Marks54 · Rating 4 out of 5]

This is one of the first fairly good business trade books on Platform Strategy. The content is vintage 2018 but the major platform firms at the time are included. The authors are well published and capable and are effective at making their points. Platform strategies are complex and the relationships between platform and non platform strategies are far from clear. The authors present some basic frameworks that seem to provide some good explanations. At the same time, the authors include some data analysis with their arguments. This is not necessarily persuasive but shows that they are trying to do a capable job at supporting their points. The survival rates for platform firms is not that high and these sorts of multi sided markets can change rapidly. Careful readers will look for more detailed books and perhaps some more detailed cases to look at company stories in more details. There has been lots of new materials in recent years.

This volume is a good start, however.

[Mikhail Filatov · Rating 3 out of 5]

There are some interesting anecdotes and thoughts, but the major issue of this book/approach is that there is no clear separation between "platform" and "product". The authors introduces two types of platform: innovation and transaction. But, e.g., it's absolutely not clear why Windows was\is a "platform" not a "product" on IBM PC platform. So the only true platform type is Marketplace.
And while App store is a very important business (really a platform) for Apple the real foundation of their success is a great product- iphone.

[Scott Wozniak · Rating 3 out of 5]

This book summarized what is required to build a platform business, and distinguishes between two types of platforms (one that facilitates transactions between two or more groups and one that creates new ways of doing things). It's got some good stories of platforms. I especially liked learning about those that failed. Too often we only hear about the successes.

But in the end, it didn't offer any new ideas or teach good strategies. It was just the basics.

[Andy De Lima · Rating 2 out of 5]

The books is well written and story based, it talks about many platforms and touches on how different platforms have developed and how. If you are looking for step-by-step guidance that is not for you. It’s generic and an overview about different types of platforms. It’s pleasant to read and easy to follow but it failed to fulfil what the cover promises. That is in my personal view.

[Rishabh Srivastava · Rating 3 out of 5]

A strategy book by business academics about the dynamics of platforms. Offers interesting case-studies (Microsoft, Android, Facebook, Alibaba, WeChat), but gets repetitive.

[Paddy · Rating 4 out of 5]

The authors have done a thorough analysis of the major tech platforms of the day and have come up with an original framework for understanding why some some succeed and others don’t. Why does a scrappy startup in a Harvard dorm go on to world domination while big companies like GE and Walmart spend hundreds of billions and remain largely irrelevant ? Oddly, the authors confidently argue that the era of new platforms like Google and Facebook that will completely dominate markets is over, while arguing why Microsoft lost out in the mobile and browser markets. If history is anything to go by, we’re all just waiting for the next Google of quantum computing ( which may well be Google) or the Amazon of voice recognition ( which may well be Amazon). The authors also point to the dangers to society of abuse by dominant firms like Amazon, Google, and Facebook who pay billions in fines and carry on with their business as if nothing matters. The underlying message in the book is clear: big tech firms will either collapse under their own weight or will need to broken up if we are to be saved from them. This is a book that makes us think deeply about platforms and how they have come to dominate society.

[Sam · Rating 4 out of 5]

The best thing about this book is the profound approach, which authors took to create it. The book is based on their more than 3 decades of experience and research of the platform phenomena. I liked the conceptual differentiation between transaction/innovation platforms. I'm not sure how useful this book will be in the years to come, but right now I can say that this is must read for IT managers and entrepreneurs.

Main points:

1) Critical issues impacting the dynamics of platform businesses:
- Network effects
- Multi-homing
- Differentiation and niche competition
- Barriers to entry

2) Strategy and business models
- Main agent of the platform
- Chicken-or-egg problem
- Right business-model
- Ecosystem rules

3) Common mistakes
- Mispricing one side of the platform
- Failing to develop trust
- Dismissing the competition
- Miss the opportunity window

4) New tricks for old dogs - BBB
Belong, buy or build

5) Platform burden
- Platform bulling
- Trust balance
- Contractor/employee
- Self-regulation

[Victo José · Rating 4 out of 5]

Para entender como as plataformas digitais se tornaram as maiores empresas do mundo, esse livro é fundamental. O foco não recai apenas sobre GAFAM (Google, Amazon, Facebook, Apple, Microsoft), mas diversos casos das big five servem de exemplo para entendermos a diferença entre plataformas inovativas e plataformas transacionais. Há diversas lições para gestores, especialmente quanto aos principais desafios (precificação, construção de confiança no ecossistema) e quando uma empresa tradicional decide entrar no mundo digital. Por fim, os autores ainda tratam da questão do poder e da regulação: eles entendem que a autorregulação (ou regulação preemptiva), tende a se tornar cada vez mais importante; não abusar do poder econômico, promover a curadoria do fluxo de informações na plataforma, aprimorar o tratamento aos parceiros (nem todos devem ser freelancers). Em suma, os autores observam um amadurecimento das plataformas, deixando de serem startups e assumindo responsabilidades por se tornarem negócios globais. Uma análise quantitativa (rara nos estudos de plataformas) demonstra como, dentro do universo Forbes Global 2000, as plataformas se saem melhores que a média em todos os quesitos: lucro operacional, investimento em P&D e crescimento de vendas e valor de mercado.

[Nanda · Rating 4 out of 5]

The Business of Platforms was my first book on platform business models.

4.5 stars, for authors', consideration of his audience. I think it is going to be hard to find another introductory book on Platforms business models.

4.0 stars, for the structure of the content and the case studies discussed in each part.

3.5 stars on suggested practical actions; most are hypothesis based on the history of platforms, there is no useful framework or suggestion a reader can take to understand the business of platform much narrow and deeper.

Overall 4-stars and this will be my first suggestion for any who wants an introductory on Business of Platforms.

[Rafael Ramirez · Rating 4 out of 5]

Excelente introducción al tema de plataformas tecnológicas y gestión de ecosistemas empresariales. Como ha sido ampliamente documentado, la organización de las actividades económicas está basada cada vez más en ecosistemas orquestados por plataformas tecnológicas que permiten la innovación abierta y/o conectan a oferentes y demandantes como era imposible antes del advenimiento de los mobiles y las tecnologías digitales. Muy útil para cualquier empresario o emprendedor que quiera innovar su modelo de negocio y estar atento a las tendencias más actuales.

[Salvatore Genuensis · Rating 4 out of 5]

A Primer for those interested in Digital Platforms:
This is an excellent primer on digital platforms written by known scholars in the field. I think it would be great for everyone who seeks a greater understanding of digital platforms. The book is rich in content and covers the essentials on digital platforms from a business-oriented perspective. Overall, the book has given me a greater understanding of digital platforms and industry dynamics. For the curious Joe, the book is a good start and an appetizer. Hence, the book deserves its four stars. If your curiosity has not been satiated the book provides many references for further reading. The authors themselves have worked extensively on that subject which I recommend as well.

[Mart · Rating 3 out of 5]

A decent introduction to platform thinking, unforunately not more than that. Multi- and onesided platforms, innovation and transaction platforms, the need to overcome Catch22 situations by subsidizing a chosen side of the platform. Interrupted by quite useless andecdotes. Need to find something more substantial next...

[Swarm Feral · Rating 3 out of 5]

a decent "insider look" at commerce, business, branding, etc on platforms. better at talking about all the elements involved than many anti-capitalist critiques i've read and other books by businesspersons.

[Theodore Kinni · Rating 5 out of 5]

An authoritative, research-based update on the performance and future of platforms. The authors find platform businesses are twice as profitable, grow twice as fast, and are more than twice as valuable as their conventional counterparts--with half the employees.

[Nisham · Rating 5 out of 5]

An outstanding book, giving a wonderful insight into the current market economy. The information on the book is very up to date. Explains how the market of platform business started, how it has evolved to change many concepts of conventional economics. Nice prediction into the future. Worth a read.

[Jake · Rating 3 out of 5]

3.5/5

Lots of good examples from the past few years. A topic I am digging into at work so it will help bring to light some strategies we can take there. Recommended from an education perspective and a interesting insight into many of the major technology companies today.

[Shoaib Burq · Rating 3 out of 5]

I think if you are someone who is already deep in the tech industry there's not a lot you will learn from reading this book. The ideas are not revolutionary in anyway. There most useful chapter for me was on common mistakes platform businesses might make. But even that was a bit underwhelming.

[Karen Mercer · Rating 5 out of 5]

Well structured book for learning the positives and negatives about platforms. The example stories were relevant without becoming too drawn out. Recommend this book for companies seeking network effects from a platform.

[Warre · Rating 2 out of 5]

Provides overall only a historical account about some platforms, how they got successful, and why they failed. Not the go-to book to learn a lot about pratical strategic advise for new/existing platforms, but certainly a good read to understand the history behind some popular platforms.

[Ken Hamner · Rating 5 out of 5]

Short, but informative book.

[Rajkiran · Rating 5 out of 5]

Excellent book. Very insightful with latest examples !

[Sue Chen · Rating 5 out of 5]

Very good summary of platform business model.

[Rupanwita · Rating 3 out of 5]

A good starting point for gaining understanding on platform models

[Mike Burrell · Rating 5 out of 5]

Really, really good and worthwhile.

[Tom · Rating 5 out of 5]

Very relevant for my role at IKEA

[Charles Dalton · Rating 4 out of 5]

Some good content in there

[Dirk Roets · Rating 4 out of 5]

Good read about multi sided platform businesses.