Of the top ten, six are distinctly platform companies. Apple, Microsoft, Amazon, Alphabet, Facebook and Alibaba all have their roots in platform thinking. What is the reason for the success of the platform approach as a model and why is the emergence of platforms so strong in business? How can organizations with operations in many different locations use a platform approach to achieve both stability and agility?

"No one shall boldly buy or sell or conduct any trade elsewhere than in the market town", it says in 1284 in Jönköping's privileges given by Magnus Ladulås. It was the king himself who wrote the letter granting town rights. This means an official right to conduct trade and crafts. Historically, trade is linked to formal power and a way of governing the kingdom. The rules of trade and the marketplace form a structure that regulates the right to operate a marketplace, the right to collect site fees and the right to sell goods. It's a staggering thought that a 17th-century marketplace in Stockholm has similarities to the trading that takes place on the platform company Amazon. And the model is working for the US company. Amazon increased its turnover in the second quarter of 2020 to 88,9 billion dollars. Quarterly profits doubled to $5.2 billion compared to the same time period the year before. This is the same period that the coronavirus pandemic has brought an extreme challenge to society, the world economy and trade. 

An important aspect to keep in mind is that a platform is usually centrally controlled and owned, be it a square in Stockholm in the 17th century or a globally accessible digital platform. The idea of the internet is that there is a high degree of decentralization - that standards and protocols provide freedom. This is not the case for platform companies where the rules are set by the platform owner.

Platform strategy based on four eras

The concept of platform can be defined in many different ways. One way to describe platform strategy is in terms of four temporal eras: the square platform, the industrial platform, the software platform and the web platform. 

The automotive industry often serves as an example of a sector where industrial platforms play a major role. Here, platform strategies have been used for over a hundred years. The platform constitutes both a technical standard and a set of working methods as well as part of the production culture. This approach results in lower administrative, development and production costs, as well as faster product development.

The basis for this platform approach is a two-part system. One part forms a core where there is little variation. It moves slowly and provides stability, a platform. This stable part allows for easy variation - there is a part that is fast moving - agile.  

Gates, Grove and Jobs

In software development and digital technology, the term software platform is used. Bill Gates (Microsoft), Andy Grove (Intel) and Steve Jobs (Apple) are three people who have succeeded in the strategy of focusing not only on products but equally on developing industry standards to put their company at the heart of a business ecosystem. The concept of an ecosystem or business ecosystem highlights how your business interacts with other businesses and societal institutions. A business ecosystem describes how different actors, technologies and services are connected and interact to create customer value. It reduces friction for customers and makes it easier for them to switch between different relevant services. 

The success of online platforms is contemporary with the rise of the internet. Businesses such as Ebay and Craigslist started in the 1990s and contributed to major changes. Ebay can be seen as symbolizing the start of e-commerce, which has had a major impact and influence on commerce, and Craigslist, a web-based buying and selling marketplace that turned the US newspaper industry upside down as advertising revenue quickly moved from local newspapers to Craigslist. Intermediary, or two-sided, platforms of this kind have been a concept in the business and technology sectors for more than a decade and social platforms since the mid-1990s. Although the business model of social platforms is largely based on an attention model, they can also be seen as industry platforms: millions of applications have been built on the basic construct of Facebook , for example. And this particular company and platform has a relationship with a large amount of the most used websites in the world. They have a strong position in a business ecosystem.   

Stable and agile at the same time

A key reason for the success of the platform approach as a model and why the emergence of platforms is so strong in business is the combination of stability and agility at the same time. A solid foundation that allows you to be agile and to constantly innovate. For an organization with operations in many different locations, a platform approach can provide agility without risking or sacrificing the efficiency and reliability of more traditional governance.

We know that platform companies play a central role in economic, business and societal development. And such companies will not decrease in number. Quite the contrary. They will have a decisive impact on business in the future. Those companies that want to be in the game in the next ten or twenty years need to define a platform strategy for their business, whether that strategy involves building their own platform, positioning themselves in an existing ecosystem or leveraging the global platform companies. 

A key insight I have gained while working on my new book Stable and Agile Chain is that when the world seems to be increasingly fast-changing and difficult to assess, no one has the answers. The only possibility is to keep an open mind and be extremely curious. Perhaps just as important is to continually question how the world works and to reconsider the fundamental assumptions on which our own activities are based. I hope you want to discuss, reflect and create a better world. Preferably together with me. 

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Peder Söderlind

Peder Söderlind is an author, researcher and service designer. He is the founder and CEO of the Swedish SaaS company Glykol, which helps leading chains streamline quality management and risk assessment at scale. Stable and Agile Chain is his third book. 

You can follow Peder at linkedin.com/in/pedersoderlind and reach him at peder@glykol.com.