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Build connections, not new factories. That is American management guru Seth Godin’s advice to people – and companies – looking to prosper in “the connection economy” which, he says, will mark the greatest economic shift since the Industrial Revolution 200 years ago. Technology is connecting and agglomerating companies, transcending market boundaries and redesigning the global economy.

For decades, the dominant capitalist business model has been for companies to create stuff, push it out and sell it to customers. Platform businesses don’t need to make stuff (although some do) and just push it out. Users are free to add value through such options as reviews. Such tools as Application Programming Interfaces (APIs) also encourage third parties to invent functions that make the platform more useful for consumers and developers.

If platforms optimize this network effect they can create a virtuous circle. With more users, the platform becomes more attractive to developers whose innovations attract more users which, in turn, attracts more developers. The network is often described as an eco-system because although it needs to be managed effectively, it also relies on the interdependence of the participants. - Peter Evans, Principal, Innovation & Enterprise Solutions, KPMG in the US.

Popular explanations for the startling rise of platform businesses – especially in the retail, healthcare, real estate, banking and travel sectors – vary considerably. The business media lauds the quality of their leadership. For some, the disruptive power of technology is key. Others attribute it to a distinct lack of brand loyalty among Millennial consumers.

There is some truth in all those explanations but for Evans, the rationale is much simpler.

Continue reading the full article here (PDF 2.4 MB).

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