This is second of my two-part look at the "power of the platform" and what you need to know in order to be positioned for maximum success. For Part I, click here, where you can find a definition of platforms (they aren't what you may think), an explanation of why they present a massive winner-take-all opportunity for some companies, and a description of some specific ways you can seize the moment. Once you've caught up, you'll understand why it's vital to:

1. Consider platforms that provide independent, consistent and highly relevant information

A very promising category of platform is one that creates a resource for buyers and sellers to access accurate, independent, and consistent documentation about the location, availability, and costs of various products (often used or refurbished), which is not often available from the sellers or manufacturers of new equipment. In theory, the best type of platform for this particular need would be an active marketplace, but because it is often difficult and time-consuming to assemble a critical mass of buyers and sellers at the outset, and sufficient transaction volume, it's not necessarily the only solution in the short term.

Better and more accurate information is always preferable, but in some cases any information that helps the parties make smart and more informed choices is better than nothing. When I started CCC Information Services in 1980, the goal was exactly this: to provide in digital formats better, more accurate, and more timely information about used car prices for insurance adjusters and ultimately for consumers to use in settling insurance loss claims. Thirty-five years later the same basic platform I built then is still in use, and CCC is still the industry leader in the insurance vehicle valuation space. 

What's great about working with innovative startups every day at 1871 is that I get to see new and exciting game-changing examples of businesses addressing some of the same issues I dealt with decades before, but applying them to new markets and opportunities.  One case in point is MarkITx (an early 1871 company), which is building a platform that enables Fortune 1000 companies to efficiently value and then buy or sell the billions of dollars of used IT equipment they have to update and dispose of every year.

A platform like this, which not only shows companies the actual residual value of equipment they often regard as "junk" but also enables them to sell it has been a long time coming.  The hope is that once the platform creator has clients using an automated system that produces “found money,” said clients wouldn't think about doing something else or going elsewhere.

2. Invest in infrastructure that individual market players can’t justify (or afford to create)

Another of the opportunity spaces for platforms are in markets not dominated by a few big guys, but consisting instead of a million little guys--none of whom are in a position to make the commitment or the capital investments (as well as absorbing the people costs) of launching, marketing, and operating a central organizing platform for their industry or marketplace. As I said above, platforms don't happen accidentally, and getting the word out about a centralized and ubiquitous utility platform is very tough and very expensive.

I'm somewhat surprised that even sophisticated observers often don't really get what's going on in these spaces. One writer whose opinions I generally respect said that he wasn't sure Uber is a technology company. He acknowledged that they use smartphones, but so, he argued, does every other business these days, including taxi companies. What he just didn't understand is that it isn’t about the phone, it's about the classic Ghostbusters question: "Who ya gonna call?" That's the name of the platform game. Sure, everyone in the city could just call some random cab company from wherever they happen to be and hope for the best, but that's not a solution that anyone with any smarts thinks is a winner.

To win in this particular game you’ve got to be top of mind with consumers, have immediately responsive city-wide coverage, have a critical mass of participating drivers 24/7, and build a system to instantly connect them all through a single distributed platform. Oh, and on top of that you need lots of cash, and staying power. Then you hope for the best. Anyone who thinks this isn't a technology business doesn't know a Tesla from a Model T.

At the end of the day, one thing is absolutely clear: The companies that drive and control the centralized and coordinated connections we all need through hubs, networks, and other emerging channels are the companies that will be able to extract market-driven premiums from everything (the communications, transactions, and commerce) that moves over those platforms. These gatekeepers, many of whom are in start-up mode right now, will keep a very fair share of the gold. Nothing primes a platform. 

Published on: Aug 13, 2014