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Platform Economics by Mind Map: Platform Economics
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Platform Economics

Three Key Principles of Platform Design:

Start with defining the value that is created or consumed, the Core Value Unit.

The Core Value Unit should lead to the actions that enable the creation and consumption of that value.

Only in the last step should one go about designing the system and interfaces that enable those actions.

Rule of thumb: If you are a new platform and you’re designing for more than one core interaction, you’re toast!

Frank Schultheiss - based on Platform Thinking Labs Articles by Sangeet Paul Choudary

The Core Interaction

set of actions that producers and consumers engage in repeatedly to derive value.

All actions in the core interaction fall into one of the buckets: Creation, Consumption, Curation

Creation: producer who creates value

Consumption: consumer, who consumes value

Curation: To encourage good quality and quantity of value creation, as well as to ensure the right consumers consume it, you need some form of curation.

You need all three actions: Creation, Curation and Consumption to repeatedly occur for the platform to work properly.

The Three Design Elements for Designing Platforms

The Core Value Unit

e.g. a listing for a marketplace or a video for youtube

The Interaction

a set of actions involved in the creation and consumption of value

The Platform

a network and an infrastructure that enables this interaction

The Core Metrics for Platforms

measure and optimize the Core Interaction.

The goal of a platform is to repeat and optimize the Core Interaction that creates value

content which gets a minimum engagement

Measuring number of Creation and Consumption is often not enough. The percentage of content which gets a minimum engagement is an important indicator of quality

From Transactions to Stickiness: Marketplace 3.0

The Problem: Buyers rarely use the marketplace except when they actively need something. If buyers don’t return often, sellers do not see much action on the marketplace. This, in turn, may discourage sellers form participating on the platform

Six key mechanisms to an engaged and ‘sticky’ platform

Reputation Systems: Marketplaces like Airbnb and TaskRabbit create stickiness by helping a user build reputation across transactions.

Collection: User collections and collection management tools can make buyers sticky. A wishlist or wardrobe feature allows buyers to collect listings and items of interest.

Personalized Feed: Marketplaces can also improve buyer retention by personalizing. Most buyers will only spend a limited time on the marketplace. The limited time spent on the marketplace caps the amount of transactions a user may engage in.

Influence: Seller-centered marketplaces are different from listing-centered marketplaces. Seller-centered marketplaces allow sellers to brand themselves, build a following and create influence. Sellers regularly push out content on their wares.

Workflow management: In order to create stickiness for both parties on a services marketplace, these platforms are moving from a transaction-only model to a workflow management model. Traditional service based marketplaces often fail to own the transaction.

Substituting transactions with subscription Marketplaces that can offer a fairly guaranteed form of service, often move from an a-la-carte transaction model to an all-you-can-eat subscription model.

Focus not just on transactions but on strengthening of network effects

Three Elements of a Successful Platform Strategy

The success of a platform strategy is determined by three factors:

Connection: how easily others can plug into the platform to share and transact

Gravity: how well the platform attracts participants, both producers and consumers

Flow: how well the platform fosters the exchange and co-creation of value

The Toolbox

The Toolbox creates connection by making it easy for others to plug into the platform. This infrastructure enables interactions between participants. For example, Apple provides developers with the OS and underlying code libraries

The Magnet

The Magnet creates pull that attracts participants to the platform with a kind of social gravity. For transaction platforms, both producers and consumers must be present to achieve critical mass.

The Matchmaker

The Matchmaker fosters the flow of value by making connections between producers and consumers. Data is at the heart of successful matchmaking, and distinguishes platforms from other business models.

What is it?

An approach to enable external value creation to scale existing or build new business

Platforms power co-creation by users and extension by developers.

The phrase "Platform Thinking" was coined by Sangeet Paul Choudary

“A platform is a plug-and-play business model that allows multiple participants (producers and consumers) to connect to it, interact with each other and create value.”

Scaling an Online-Plattform

Scaling Quantity: Creation

Understand the motivations of the creators

Create enabling technology that caters to those motivations

Lower (or completely remove) the barrier to getting something done

Clear strategy to maximize the number of creators

Scaling consumption is a critical step to scaling interactions

Scaling Quantity: Consumption

capture data about the consumer

start acquiring data about users the moment they sign up

use data to make relevant recommendations

Encourage users to follow topics or listings

create opportunities for transactions in the future without the user explicitly initiating one

Scaling Quality: Curation

Scaling editorial / social curation, Editorial actions scale only when they are gradually moved out to the community over time, Educating the community on how to curate and ensuring that the tools of curation (e.g. rating, review, reporting etc.) are being used correctly and often enough, Reputaion: Differentiate highly reputed users from less reputed ones

Scaling algorithmic curation, improving the algorithms themselves, improving the inputs to the algorithms

Scaling Quality – Overall Governance

creating centralized trust mechanisms becomes critical to ensuring widespread adoption among mainstream users

Growth Hacking Strategy

It describes tactics and processes to help you increase your numbers.