Platform

A business model that creates value by facilitating exchange between two or more interdependent groups—producers and consumers—rather than by producing goods or services directly. Platforms (Apple's App Store, YouTube, Airbnb) are fundamentally different from pipelines (traditional businesses that create and sell): they orchestrate ecosystems rather than manage supply chains. Platform economics are characterized by network effects (value increases with users), winner-take-most dynamics, and the chicken-and-egg problem of needing both sides to create value for either side.

When to use it

When evaluating whether to build a platform versus a traditional business; when competing against platform businesses; when analyzing market dynamics in platform-dominated industries; when designing business models around connecting supply and demand.

How it can help

Determine whether platform economics apply to your business or market. The test: does connecting two groups create more value than serving either group directly? If yes, platform strategy may be viable. The key decisions: which side to subsidize (usually the harder-to-attract side), how to manage quality (platform reputation depends on participants' behavior), and how to capture value without killing the ecosystem (the take rate question). Be wary of 'platform envy'—not every business benefits from being a platform.