For decades, the five-forces model of competition has dominated the
thinking about strategy. But it describes competition among traditional
“pipeline” businesses, which succeed by optimizing the activities in
their value chains—most of which they own or control. “Platform”
businesses that bring together consumers and producers, as Uber,
Alibaba, and Airbnb do, require a different approach to strategy. The
critical asset of a platform is external—the community of members. The
focus shifts from controlling resources to orchestrating them, and firms
win by facilitating more external interactions and creating “network
effects” that increase the value provided to all participants. In this
new world, competition can emerge from seemingly unrelated industries
and even from within the platform itself. The authors, three platform
strategists, walk executives through the choices they must make when
building platforms, outlining the different metrics needed to manage
them. Businesses that fail to learn the new rules will struggle, they
argue. When a platform enters the marketplace of a pure pipeline
business, the platform nearly always wins. That’s exactly what happened
when the iPhone came on the scene in 2007. By 2015, it accounted for 92%
of global profits in mobile phones, while most of the giants that once
ruled the industry made no profit at all.
[ABSTRACT FROM AUTHOR]