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Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You: How Networked Markets Are Transforming the Economy―and How to Make Them Work for You Reprint Edition, Kindle Edition

by Geoffrey G. Parker (Author), Marshall W. Van Alstyne (Author), Sangeet Paul Choudary (Author) Format: Kindle Edition
4.6 4.6 out of 5 stars 1,770 ratings
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A practical guide to the new economy that is transforming the way we live, work, and play.


Uber. Airbnb. Amazon. Apple. PayPal. All of these companies disrupted their markets when they launched. Today they are industry leaders. What’s the secret to their success?


These cutting-edge businesses are built on platforms: two-sided markets that are revolutionizing the way we do business. Written by three of the most sought-after experts on platform businesses, Platform Revolution is the first authoritative, fact-based book on platform models. Whether platforms are connecting sellers and buyers, hosts and visitors, or drivers with people who need a ride, Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary reveal the what, how, and why of this revolution and provide the first “owner’s manual” for creating a successful platform business.


Platform Revolution teaches newcomers how to start and run a successful platform business, explaining ways to identify prime markets and monetize networks. Addressing current business leaders, the authors reveal strategies behind some of today’s up-and-coming platforms, such as Tinder and SkillShare, and explain how traditional companies can adapt in a changing marketplace. The authors also cover essential issues concerning security, regulation, and consumer trust, while examining markets that may be ripe for a platform revolution, including healthcare, education, and energy.


As digital networks increase in ubiquity, businesses that do a better job of harnessing the power of the platform will win. An indispensable guide, Platform Revolution charts out the brilliant future of platforms and reveals how they will irrevocably alter the lives and careers of millions.

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  1. ISBN-10
    9780393249125
  2. ISBN-13
    978-0393354355
  3. Edition
    Reprint
  4. Sticky notes
    On Kindle Scribe
  5. Publisher
    W. W. Norton & Company
  6. Publication date
    March 28, 2016
  7. Language
    English
  8. File size
    4334 KB
  9. See all details
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Editorial Reviews

Review

"In a very cohesive and comprehensive way, the authors provide deep conceptual insights and rich practical advice on platforms, the most important business organizations of our time."
― Ming Zeng, chief strategy officer, Alibaba

"Platforms have transformed the economy over the last two decades, but the biggest effects are yet to come. Platform Revolution provides the first comprehensive framework for platform strategy and for predicting the winners and losers of future disruptions."
― Susan C. Athey, Stanford University, former chief economist, Microsoft

"In the digital economy, platforms are transforming industries at high speed. Platform Revolution is an inspiring guide for business leaders to transform existing businesses to platform businesses."
― Jim Hagemann-Snabe, former CEO of SAP

"Platform Revolution is a manual for the disruption of your industry. You can either read it or try to keep it out of the hands of your competitors―present and future. I think it’s an easy call."
― Andrew McAfee, principal research scientist at MIT, coauthor of The Second Machine Age

"Thorough and often provocative."
― Jeremy G. Philips, The Wall Street Journal

"Platform Revolution provides an exceptional synthesis of cutting-edge research that makes it must-reading for my MBA students. A key insight is that platform strategies can benefit all participants when they understand the underlying economics. Read the book and share it with your business partners. You’ll be glad you did."
― Erik Brynjolfsson, MIT Sloan School, coauthor of The Second Machine Age

"An authoritative guide to the role of online platforms: what they are, how they work, and what they mean for business and economics. Platform Revolution demystifies the concept by providing clear prose, insightful examples, and practical lessons."
― Hal Varian, chief economist, Google, and author of Information Rules

About the Author

Sangeet Paul Choudary is a C-level advisor to executives globally on platform business models. He is an Entrepeneur-in-Residence at the INSEAD Business School and a Fellow at the Centre for Global Enterprise. He has been ranked among the top 30 emerging business thinkers globally by Thinkers 50. Sangeet writes the popular blog Platformed (platformed.info), and his work has been featured on leading journals and media, including the Harvard Business Review, MIT Technology Review, Sloan Management Review, the Wall Street Journal and The Economist. He is a frequent keynote speaker at leading conferences, including the G20 World Summit 2014 and the World Economic Forum events.

Marshall W. Van Alstyne is a professor at Boston University and a visiting scholar and research fellow at the MIT Initiative on the Digital Economy. Van Alstyne is a world expert on information economics and has made fundamental contributions to IT productivity and to theories of network effects. His coauthored work on two-sided networks is taught in business schools worldwide. In addition, he holds patents in information privacy protection and on spam prevention methods. Van Alstyne has been honored with six best paper awards and National Science Foundation IOC, SGER, iCORPS, SBIR and Career Awards. He is an adviser to leading executives, a frequent keynote speaker, a former entrepreneur, and a consultant to startups and to Global 100 companies. He received his BA from Yale and his MS and PhD from MIT.

Geoffrey Parker is a professor of engineering at Dartmouth College (effective July 2016) and has been a professor of management science at Tulane University since 1998. He is also a visiting scholar and research fellow at the MIT Initiative for the Digital Economy. Before joining academia, he held positions in engineering and finance at General Electric. He has made significant contributions to the economics of network effects as co-developer of the theory of two-sided networks. Parker's work has been supported by the Department of Energy, the National Science Foundation, and numerous corporations. Parker advises senior leaders in government and business and is a frequent speaker at conferences and industry events. He received his BS from Princeton and his MS and PhD from MIT.

Product details

  • ASIN ‏ : ‎ B00ZAT8VS4
  • Publisher ‏ : ‎ W. W. Norton & Company; Reprint edition (March 28, 2016)
  • Publication date ‏ : ‎ March 28, 2016
  • Language ‏ : ‎ English
  • File size ‏ : ‎ 4334 KB
  • Text-to-Speech ‏ : ‎ Enabled
  • Screen Reader ‏ : ‎ Supported
  • Enhanced typesetting ‏ : ‎ Enabled
  • X-Ray ‏ : ‎ Not Enabled
  • Word Wise ‏ : ‎ Enabled
  • Sticky notes ‏ : ‎ On Kindle Scribe
  • Print length ‏ : ‎ 438 pages
  • Customer Reviews:
    4.6 4.6 out of 5 stars 1,770 ratings

About the authors

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  1. Geoffrey Parker PhD

    Geoffrey Parker PhD

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    Geoffrey Parker is a professor of engineering at Dartmouth College where he also serves as the director of the Master of Engineering Management program. He received a BS from Princeton and MS and PhD from MIT. Parker has made significant contributions to the field of network economics and strategy as co-developer of the theory of "two-sided" markets. His current research includes studies of distributed innovation, business platform strategy, and the system integration of renewable energy. Papers are available at ssrn.com/author=252328. Additional information can be found at platformrevolution.com, platformstrategyinstitute.org, and ggparker.net.

    See more on the author's page
  2. Sangeet Paul Choudary

    Sangeet Paul Choudary

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    Full content visible, double tap to read brief content.

    Sangeet Paul Choudary is the best-selling author of multiple books, including Platform Revolution and Platform Scale. He has advised the leadership of more than 40 of the Fortune 500 firms and has been selected as a Young Global Leader by the World Economic Forum. Sangeet's work on platforms has been selected by Harvard Business Review as one of the top 10 ideas in strategy and has been featured on four occasions in the HBR Top 10 Must Reads compilations.

    Sangeet is appointed to advisory boards and committees at several Global 2000 firms and government bodies and he is a frequent keynote speaker at leading global forums including the G20 Summit, the World50 Summit, the United Nations, and the World Economic Forum.

    See more on the author's page
  3. Marshall W. Van Alstyne

    Marshall W. Van Alstyne

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    Full content visible, double tap to read brief content.

    Marshall Van Alstyne (@InfoEcon) is a world expert on IT economics and strategy. Thinkers 50 ranked his work among the 50 most important business ideas globally, given fundamental contributions to IT productivity and theories of network effects. His coauthored work on two-sided networks is a Harvard Business Review bestseller, taught in business schools worldwide. He holds patents on privacy protection and spam prevention methods. Van Alstyne is the Allen & Kelli Questrom Professor of IS at Boston University and a visiting scientist at the MIT Initiative on the Digital Economy. Research has been honored with multiple best paper awards, National Science Foundation grants, and been featured in Science, Nature, Wired, the New York Times, the Wall Street Journal and on NPR. He advises leading executives, is a frequent keynote speaker, a former entrepreneur, and a consultant to startups and global 100 companies. He received his B.A. from Yale and M.S. and Ph.D. from MIT. He is a husband and dad, who loves dogs, exercise, travel, and questions of good governance.

    Writings can be found on Google Scholar. For media related inquiries, contact him @InfoEcon.

    See more on the author's page
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Customer reviews

4.6 out of 5 stars
4.6 out of 5
1,770 global ratings
Good primer if your new to this topic
4 Stars
Good primer if your new to this topic
Good primer if your new to this topic. Overall I added to my base of knowledge of the power of networked markets and how companies have leverage this framework in the past. Recommended.
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Top reviews from the United States

Mike
5.0 out of 5 stars Essential Platform Reading
Reviewed in the United States on July 21, 2020
Verified Purchase
Having worked at Intel for nearly two decades (1999-2017), with equal time in architecture and business development, I found this book to be a fantastic primer for concepts around platformization. This will help you understand the genesis of platform based businesses and how you might use some of the concepts for your own good. I reference this book frequently for my current work in driving digital transformation at a tier 1 life sciences company.

There is no one-size-fits-all guide to platforms. But, this book does a fantastic job of explaining things in terms of value units (not apps), which is much more universal. As such it examines platforms more broadly than just software.

Platforms are complicated, especially if you've never been in a business or industry that is platform, or platforms, driven. I'd venture that a majority of modern successful tech based solutions are platform based, if not a platform of platforms. So, if you want to get your bearings, and begin to understand how these principals can be applied to your business, start here! But, there is no substitute for sitting down with someone who has worked within a platform before.

Happy reading!
4 people found this helpful
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hnyuksel
5.0 out of 5 stars Great book on platforms
Reviewed in the United States on August 22, 2023
Verified Purchase
Really insightful, step by step overview of how to build successful platform businesses.
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Tony Davis
4.0 out of 5 stars Great insight, hard to read
Reviewed in the United States on January 3, 2023
Verified Purchase
This book is an excellent resource to understand the Platform business model, although maybe a bit dated in 2023. It covers all the key points and puts forward to good models. It is not an easy-reading book and you'll need to concentrate and take it one bite at a time. Its probably worth it though if you are thinking of starting, pivoting to, or investing in a platform based business
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Steven Forth
5.0 out of 5 stars ' This book is the single best introduction I have read to Platform Businesses
Reviewed in the United States on July 4, 2016
Verified Purchase
Every so often I lead workshops on pricing strategy. For the past several years I have been telling people that if you are in a conventional business (what Parker, Van Alstyne and Choudary call a 'pipeline business') and you are competing against a platform business you have already lost. Pipeline businesses do not have winning strategies against multisided markets, or as this book calls them 'platform businesses.' This book is the single best introduction I have read to Platform Businesses. If you use (and if you are reading this you do use a Platform Business, Amazon), are working on or may compete against a Platform Business you need to read this book. I have been recommending it to my own team at TeamFit.co to my investees and to companies that come to me for pricing advice.

Platform Revolution has many strong points.It explains the feedback loops and network effects (positive and negative) that drive platform business dynamics, the chapter on monetization is excellent and the chapter on governance is a must read (I think I will send a copy to Vancouver's mayor). The book even has a short section on data ownership, which is likely to emerge as a major social issue over the next decade (ask yourself, why does the company I work for own my employee records, why don't I own them too!).

Platform Revolution is not perfect of course. My main complaint is the lack of useful diagrams. The book is sketch poor and I found that I had to keep a notebook and pencil beside me as I read to make sure I was following all of the interactions of forces and to give me some mnemonics to remember what I was reading. This is good in that it helped me to build up my own mental models, but I would prefer to have shared sketches that I could use in business planning with other people. I also found the characterization of the two sides of a market as 'producers' and 'consumers' limiting. This is not a useful model to describe many two-sided market interactions, as the authors themselves noticed when they talked about dating sites (dating sites are a good thing to study to learn a lot about very dynamic two-sided markets). I also found the discussion of Porter's Five Forces to be simplistic and dismissive. This seems to be an MIT thing as other people associated with MIT have the same blinkers. A more useful approach would be to look at how each aspect of the five forces gets drawn into platform markets.

There are some other good books to read on this theme. I would also recommend Platform Ecosystems by Amrit Tiwana, Matchmakers by David Evans and Modern Monopolies by Moazed and Johnson. But Platform Revolution is an excellent place to start.
71 people found this helpful
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AxZ
5.0 out of 5 stars Aligning business and product designers
Reviewed in the United States on April 24, 2016
Verified Purchase
A must-read for entrepreneurs, innovators, business developers and product managers. It gives them a conceptual framework that connects purely business considerations with hands-on growth hacks and technical insights. I was struggling constantly to align with my group and the clients on basic concepts, so that the expectations were in line with the still blurry product vision. This book brings clarity to what were hunches before.

What makes the book even more valuable is the simplicity of explanation of otherwise complex changes that the digital transformation brings to companies. The concepts are then followed by numerous examples from well-known companies. I'm reading the book for the thirt time already and every page continuousely sparks fresh ideas and solutions for everyday issues and strategic challenges at work.

I propose combining the teachings from Platform Revolution with great books on the lean startup principles (e.g. Scaling Lean from Ash Maurya or Disciplined Entrepreneurship from Bill Aulet). It will empower the entrepreneur to better focus on the right business model (the platform) and shorten the time of finding its successful implementation.
2 people found this helpful
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autofila
5.0 out of 5 stars Missing stepping stone in developing your Platform!
Reviewed in the United States on August 26, 2023
Verified Purchase
An excellent book!!! I regret of not knowing about this book earlier!!! Plus, the very authoritative authors have written this book!!! Excellent!!!
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Top reviews from other countries

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Timothée de Rancourt
5.0 out of 5 stars A must-read on platforms
Reviewed in France on August 3, 2023
Verified Purchase
'Platform revolution' is a must-read for anyone interested in digital platforms. It takes the reader through the greatest successes - and failures - of that industry with well-known companies such as Uber, AWS, BlackBerry, Facebook etc.
The book systematically reviews key aspects of the platform business: economics, governance, business model etc. As such it could almost be used as a checklist for a platform entrepreneur.
In my view, the most interesting part of the book is the one on 'network effects' enjoyed by platforms, where the authors explain what makes platform companies so peculiar when compared with traditional businesses.
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Victor Casillas
5.0 out of 5 stars Step by Step to Platform Success
Reviewed in Mexico on June 9, 2022
Verified Purchase
A must read if you are interested in building a Platform.

Detailed analysis and case studies of successful platforms. Deep diving on all the concepts that one must understand to create a successful platform.

Also an important view of the networked economy, network effects and not only how they work, "but how to make them work for you."
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Vaishnav Shelke
5.0 out of 5 stars Must Read, Good real life examples provided for every topic
Reviewed in India on October 19, 2022
Verified Purchase
Must Read, Good real life examples provided for every topic
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Jordi
5.0 out of 5 stars Buen estado y buen libro
Reviewed in Spain on December 10, 2020
Verified Purchase
Buen estado y buen libro
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Felipe
5.0 out of 5 stars Best book on the subject by far!
Reviewed in Brazil on February 18, 2019
Verified Purchase
Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You (Parker, Geoffrey G.;Van Alstyne, Marshall W.;Choudary, Sangeet Paul)
- Seu destaque na página 3 | posição 158-159 | Adicionado: sexta-feira, 9 de março de 2018 21:28:15

As we’ll explain, practically any industry in which information is an important ingredient is a candidate for the platform revolution.

A platform is a business based on enabling value-creating interactions between external producers and consumers. The platform provides an open, participative infrastructure for these interactions and sets governance conditions for them. The platform’s overarching purpose: to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants.

Platforms beat pipelines because platforms scale more efficiently by eliminating gatekeepers.

In their role as gatekeepers, universities can require families to buy the entire package because it is the only way they can get the valuable certification that a degree offers. However, given the choice, many students would likely be selective in the services they consume. Once there is an alternate certification that employers are willing to accept, universities will find it increasingly challenging to maintain the bundle.

Whereas the leanest traditional businesses ran on just-in-time inventory, new organizational platforms run on not-even-mine inventory.

This works for the new firms because there is spare capacity that can be brought to market through the assistance of the platform intermediary.

The effort necessary to individually verify credit- and trustworthiness is an example of the high transaction costs that used to prevent exchange. By providing default insurance contracts and reputation systems to encourage good behavior, platforms dramatically lower transaction costs and create new markets as new producers start producing for the first time.

Platforms beat pipelines by using data-based tools to create community feedback loops.

By contrast, traditional pipeline firms rely on mechanisms of control—editors, managers, supervisors—to ensure quality and shape market interactions. These control mechanisms are costly and inefficient to grow to scale.

Platforms invert the firm. Because the bulk of a platform’s value is created by its community of users, the platform business must shift its focus from internal activities to external activities. In the process, the firm inverts—it turns inside out, with functions from marketing to information technology to operations to strategy all increasingly centering on people, resources, and functions that exist outside the business, complementing or replacing those that exist inside a traditional business.

External resources don’t completely replace internal resources—more often they serve as a complement. But platform firms emphasize ecosystem governance more than product optimization, and persuasion of outside partners more than control of internal employees.

platform expertise has now become an essential attribute for business leadership.

Positive network effects refers to the ability of a large, well-managed platform community to produce significant value for each user of the platform.

Network effects refers to the impact that the number of users of a platform has on the value created for each user. Positive network effects refers to the ability of a large, well-managed platform community to produce significant value for each user of the platform.

Negative network effects refers to the possibility that the growth in numbers of a poorly-managed platform community can reduce the value produced for each user.

Demand economies of scale are the fundamental source of positive network effects, and thus the chief drivers of economic value in today’s world.

Two-sided network effects with positive feedback explain how Uber can afford to use millions of dollars of money from Bill Gurley and other investors to give away free rides worth $30 each. Uber’s coupons buy market share in a way that attracts a virtuous cycle of drivers and riders who will later pay full price to participate in the network.

Virality is about attracting people who are off the platform and enticing them to join it, while network effects are about increasing value among people on-platform.

A team of experts collaborating with the consulting and accounting firm of Deloitte published research that sorts companies into four broad categories based on their chief economic activity: asset builders, service providers, technology creators, and network orchestrators.

The focus on processes such as finance and accounting shifts from cash flows and assets you can own to communities and assets you can influence.

Platforms are designed one interaction at a time. Thus, the design of every platform should start with the design of the core interaction that it enables between producers and consumers. The core interaction is the single most important form of activity that takes place on a platform—the exchange of value that attracts most users to the platform in the first place. The core interaction involves three key components: the participants, the value unit, and the filter. All three must be clearly identified and carefully designed to make the core interaction as easy, attractive, and valuable to users as possible.

When designing a platform, your first and most important job is to decide what your core interaction will be, and then to define the participants, the value units, and the filters to make such core interactions possible.

in most cases, platforms don’t create value units; instead, they are created by the producers who participate in the platform. Thus, platforms are “information factories” that have no control over inventory.

As you can see, a focus on the value unit is extremely important if you’re running a platform. Deciding who can create value units, how they are created and integrated into the platform, and what differentiates a high-quality unit from a low-quality one are all critical issues,

Platforms must perform three key functions in order to encourage a high volume of valuable core interactions, which we summarize as pull, facilitate, and match. The platform must pull the producers and consumers to the platform, which enables interactions among them. It must facilitate their interactions by providing them with tools and rules that make it easy for them to connect and that encourage valuable exchanges (while discouraging others). And it must match producers and consumers effectively by using information about each to connect them in ways they will find mutually rewarding.

Unlike traditional pipeline businesses, platforms don’t control value creation. Instead, they create an infrastructure in which value can be created and exchanged, and lay out principles that govern these interactions. That’s what the process of facilitating is all about.

The derisive term bloatware has been coined to describe software systems that have become complicated, slow, and inefficient through thoughtless accretion of features.

a well-designed platform as consisting of a stable core layer that restricts variety, sitting underneath an evolving layer that enables variety.

The story of Internet-enabled disruption as we’ve witnessed it so far has occurred in two main stages. In stage one, efficient pipelines ate inefficient pipelines.

Business revolutions such as these embodied Andreessen’s vision of “software eating the world.” Today, having attained the status of a cliché, his vision needs an update: “Platforms are eating the world.” We’ve entered stage two of the disruption saga, in which platforms eat pipelines.

The interactions facilitated must generate a significant amount of excess value that can be captured by the platform without producing a negative impact on network effects. When that’s not the case, monetization may not be possible.

As we’ve discussed, a platform’s goal is not simply to pump up the numbers of participants and interactions. It must also take steps to encourage desirable interactions and discourage undesirable ones. Meetup’s monetization model helped it achieve exactly that. By discouraging organizers who weren’t serious about their objectives, the pricing mechanism created a culture of quality on the platform.

How can we generate revenues without reducing our positive network effects? Can we devise a pricing strategy that strengthens our positive network effects while reducing our negative network effects? Can we create a strategy that encourages desirable interactions and discourages undesirable ones?

As you can see, deciding whom to charge is a delicate balancing act. The need to monetize the platform must be carefully weighed against the friction invariably produced by imposing a cost. Deciding precisely where the system can afford to create some friction—and how much friction can be tolerated without crippling the growth of network effects—is no easy matter.

“You never take first money.” In other words, only after a value unit has been created and exchanged with results that are satisfactory to both the producer and the consumer should the platform business itself seek to capture a share of that value.

It might seem impossible for a platform to be both too closed and too open simultaneously, but Myspace managed the feat.

Curation usually takes the form of screening and feedback at critical points of access to the platform. Screening decides who to let in, while feedback encourages desirable behavior on the part of those who have been granted entry.

The king of coffee had violated three fundamental rules of good governance: • Always create value for the consumers you serve; • Don’t use your power to change the rules in your favor; and • Don’t take more than a fair share of the wealth.

Governance is the set of rules concerning who gets to participate in an ecosystem, how to divide the value, and how to resolve conflicts. To understand good community governance is to understand the set of rules for orchestrating an ecosystem.

The goal of good governance is to create wealth, fairly distributed among all those who add value.

In general, there are four main causes of market failures: information asymmetry, externalities, monopoly power, and risk.

In Lessig’s formulation, systems of control involve four main sets of tools: laws, norms, architecture, and markets.

The underlying principle: Give fast, open feedback when applying laws that define good behavior, but give slow, opaque feedback when applying laws that punish bad behavior.

As the story of iStockphoto suggests, norms do not arise in a vacuum. They reflect behaviors, which means that they can be constructed through the intelligent application of the discipline of behavior design. Nir Eyal, who has worked in both advertising and game development, describes behavior design as a recurring sequence of trigger, action, reward, and investment.

Markets can govern behavior through the use of mechanism design and various incentives—not money alone, but the trifecta of human motivations that may be summarized as fun, fame, and fortune.

Having a person’s name and email address on a membership list doesn’t promise success for a platform. What matters is activity—the number of satisfying interactions that platform users experience.

The BranchOut story illustrates a vital truth about the world of platforms. Just as platforms transform traditional value chains, competitive strategy, and management techniques, they also demand new forms of internal measurement.

Note the difference between this core metric and the core metric of the pipeline. Whereas a pipeline manager is concerned with the flow of value from one end of the pipeline to the other, the platform manager is concerned with the creation, sharing, and delivery of value throughout the ecosystem—some occurring on the platform, some elsewhere.
When one or a few platforms can dominate a particular market because of the power of network effects, they may choose to resist beneficial innovations in order to protect themselves from the costs of change and other disruptive effects.

In a world where data is widely described as “the new oil,” it’s clear that the issue of data ownership will need to be resolved through some combination of regulatory action, court rulings, and industry self-regulation.

At its core, the platform revolution is about using technology to connect people and provide them with tools they can use to create value together.
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