Demystifying platforms

14 Dec, 2022
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Back during my business school days, my professors used to say that this school is a good platform to jumpstart your management experience.  

I would often wonder what exactly they meant by a platform. 

Later someone explained to me that students from all walks of life, be they freshers or experienced folks looking to take a break from their jobs to go back to school or executives from companies wanting to learn the management part of the business, would come to the school to learn. 

These were all on the supply side of the school (platform). The companies that recruited from the school presented the demand side of the platform, each company with its own recruitment requirements from the candidates for the different profiles they had. 

This is what is a platform. It provides a space to different producers (students here), that have different capabilities to offer, to interact with different consumers (companies here), who have different requirements. 

Let’s come back to the software industry and look at the world’s biggest companies today: Apple, Google, Microsoft, Amazon. All platforms. They all have different producers (developers) that offer different products or applications to consumers. 

Of course, building platforms is easier said than done. Many companies have tried to build their platform but failed. There are three important requirements that need to be fulfilled before any platform business can take off: 

  • Software Development Kit (SDK): Software Development Kits are an important aspect to attract developers. They provide tools to help developers build applications in a standard manner and help leverage the platform by building functionalities that are not available out of the box. Easily pluggable kits enable lesser efforts from developers as there is no need to develop from scratch. The more the convenience for developers, the more they would prefer to participate on this platform. 
  • Marketplace: markets have existed for as long as there has been trade. It is simply a place for the producers and consumers to meet and interact with each other.  
  • Communities: building cohesive communities is important for any platform. Such communities create network effects. Think of any consumer going to a market and not finding enough sellers. They would stop going to that market. The same for the producers, if they don’t find enough consumers in a market, they would simply move to another market. Simply said, the more the no. of developers/applications, the more the no. of consumers. Compare with the analogy mentioned above, the lesser the quality of students at school, the lesser the no. of recruiters. 

This brings us to the benefits that can be gained from any platform: 

  1. Building communities helps create network effects. The higher the no. of consumers, the more the no. of producers, and as the no. of producers increases, more consumers start visiting the platform. This creates a virtuous cycle. 
  2. Revenue from the subscription charges from producers or consumers, as per the business model increases as the numbers increase. The better the foundations of the platform to support scale, the better the revenue that can be generated from producers/consumers on your platform. 
  3. Economies of scale help reduce the costs incurred and increase the bottom line of the business. Or you can transfer the cost benefits to the producers/consumers to create a network effect again for lower costs, and more consumers. 
  4. Access to a large amount of data for interactions conducted on the platform. Data can be utilized to change business strategies or for monetization. 
  5. On the business end, platform owners provide small and medium enterprises with complete freedom from capital investment and scaling issues. 

Of course, a big part of the platform requires collaboration and cooperation across the platform esp. with the producers so that they keep building good applications for consumers to use. I will call the producers here third-party developers who build products/applications on top of the platform. 

coMakeIT has worked with several customers to build their platform. While our engagement with a few started by building a product that evolved into a platform through continuous innovation, for other customers, we have built a platform from scratch. Our collaboration is not limited to building the platform but also to building communities and applications for the platform.

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