Platform thinking is disrupting and redefining industries.
In this chapter, you’ll see how network effects can drive exponential growth in any industry across both analog and digital environments.
The companies driving the greatest disruption in their industries have all embraced platforms as a technology, business model and mindset. Examples include Uber in transportation, YouTube in media, Airbnb in hospitality and Amazon in retail.
You can see the exponential power of these companies’ business models in the growth rates of key metrics like number of drivers, volume of content, number of rooms, number of payments.
These value graphs aren’t driven by acquisition of assets or investment in infrastructure. What’s driving growth for these companies is the powerful network effects generated as members join and use their platforms.
Each of these platforms relies on a cloud-based digital marketplace to connect participants. But while digital technology increases the ability to create network effects, it’s not a requirement.
Network effects can be generated in any industry across various analog and digital environments.
Consider this diagram drawn by Walt Disney in 1957.
It shows how all of the different activities and experiences of the Disney brand interconnect to strengthen the value of each component in the system.
Essentially, Disney saw his entire empire as a platform for storytelling. Imagine how different this vision would have looked if it had been created with a pipes mindset.
It would probably show Disney at the center, with spokes giving licensure and content to the other parts of the network. There would be no direct connections between them, and only revenue coming back to the core. The focus would be on optimizing and monetizing each of the pipes.
In Disney’s pre-digital platform vision, each channel is part of an interconnected system whose function is creating network effects across characters, stories and environments.
Consider digital or other kinds of platforms that are currently disrupting your industry.
Answer the following:
Different types of interlocking network effects cause exponential growth.
Platforms don’t have to be digital. Any vehicle that enables network effects can be a platform.