How to make sense of platform businesses take a look

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What Makes Uber Different from Android?: How to Make Sense of Platform Businesses Take a look at the companies that recently have received billion-dollar-plus exits, IPOs or valuations. High on that list would be Uber , Airbnb , Amazon , Square , Apple , Google , YouTube , Twitch , LinkedIn , Twitter , Facebook and Whats App . What do these companies have in common? They are all platform businesses, and platforms are taking over our economy. Rather than owning production and inventory like most traditional businesses, platforms simply facilitate the exchange of value between consumers and producers. This approach allows platforms to scale without increasing costs , which is what’s driving the stratospheric valuations you see for platform businesses today. Judging by the recent mega-trend of startups trying to be the “ Uber for X ,” the “ Airbnb for Y ,” or even the “ Tinder for Z ,” many entrepreneurs have taken notice. There’s now a would-be platform for just about everything . But while platforms are increasing in number, they’re still by and large poorly understood. They all enable exchanges between consumers and producer, but what really differentiates one platform from another? As a Platform Innovation™ Company , Applico has spent a lot of time grappling with all of these questions, and through a mix of hands-on experience with clients and in-depth analysis and research, we’ve managed to break down platforms into a couple distinct types. What Kind of Platform Are You?: Uber vs. Android The most fundamental split in platform types is based on a platform’s core value proposition. In general, platforms create value by reducing search and transaction costs and by enabling innovation in complementary products or services. But if you look closely at different platforms, the core value each of them delivers tends to focus mostly on one of these imperatives. (And for good reason, since for any new platform, trying to deliver on more than one core value proposition at a time is often a death sentence.) Take Uber, for example. The transportation-network company has unified a fragmented industry and made it easy for potential customers to connect with drivers. Before Uber, getting a ride on demand usually required calling the number of a specific business, which had limited availability and often highly variable quality, and coordinating with them to get picked up. Anyone who has spent hours of their life waiting for a late or lost car while dealing with an ineffective or unhelpful dispatcher can attest that this arrangement is less than ideal. By building a platform, Uber has cut out the middleman and blown up the traditional limitations on richness and reach for transportation providers. As a result, Uber enables much greater scale while also creating a much more pleasant experience for consumers.
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This means that the core value that Uber delivers is a reduction of search and transaction costs for both drivers and customers (the unpleasantness of dealing with traditional transportation companies being a form of transaction cost).
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