Book SummaryPlatform Revolution, by Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary

1-Page Summary1-Page Book Summary of Platform Revolution

Have you ever wondered what makes platform businesses like X (formerly known as Twitter), Spotify, and Amazon so successful? In Platform Revolution (2016), economists Geoffrey G. Parker and Marshall W. Van Alstyne and businessman Sangeet Paul Choudary provide the answer: Platform businesses leverage their novel characteristics to become uniquely competitive and transformative, with far-reaching effects on the economy, society, and politics. The authors also explain that running a platform business requires a distinct skill set—so in case you want to start your own platform business, they provide design and management tips to help you achieve success.

Parker and Van Alstyne are prolific and widely-celebrated researchers who received...

Platform Revolution Summary The Platform: A Novel Business Model

According to the authors, platforms emerged at the turn of the 21st century as a novel business model that connects producers with consumers. In this section, we’ll describe pipelines—the business model that dominated before platforms came about—and explain how platforms differ from pipelines, focusing on three unique characteristics: their leverage of network effects, their outsourcing of operations, and their ability to optimize connections.

Pipelines Preceded Platforms

Before we dive into the platform business model, let’s discuss the traditional business model that came before it, which Parker, Van Alstyne, and Choudary refer to as a “pipeline.” In a pipeline business model, a series of producers connect with each other to create a product that ends up in the hands of the consumer. To illustrate, think about how a wool sweater is made and sold—a shearer harvests wool from sheep, a processor turns that wool into yarn, a manufacturer turns that yarn into a knit sweater, and a retailer sells it to a consumer. The authors explain that for hundreds of years, most businesses relied on pipelines to create and sell their products, so pipelines became the default business...

Platform Revolution Summary Why Platforms Are Transforming the World

Platforms aren’t just an alternative to pipelines—Parker, Van Alstyne, and Choudary say platforms are outperforming pipelines and, in the process, transforming the world. In this section, we’ll explain why platforms are taking over the market and explore the economic, social, and political effects of this trend.

Why Platforms Are Taking Over the Market

The authors explain that platforms perform better than their pipeline competitors and represent a growing share of the market. There are two reasons for this: First, platforms’ unique traits give them a competitive advantage. By leveraging network effects, outsourcing operations, and optimizing connections, platforms offer greater value to producers and consumers at less cost than pipelines are typically capable of, which contributes to faster and more unencumbered growth. Second, having noticed platforms’ competitive edge, many businesses that have historically relied on the pipeline business model are transitioning to (or integrating aspects of) the platform model by using the data they already collect to connect producers and consumers.

(Shortform note: Experts note that despite platforms’ market takeover, the business...

Platform Revolution Summary Platform Design Fundamentals

Now that you understand why platforms are such game-changers, you might be inspired to start your own platform business. In this section, we’ll cover three design fundamentals to consider as you get started: crafting your platform’s purpose, choosing your participants, and deciding how to turn a profit.

Craft Your Platform’s Purpose

If you want to design your own platform, the authors recommend you start by defining its central purpose: the connection that users come to the platform for. Every connection can be broken down into three steps: First, the platform applies a software tool to create appropriate connections between producer and consumer (for example, a search tool that ensures someone looking for a dog sitter isn’t connected with a cat sitter.) Once the connection is made, the consumer can see what the producer has to offer. Finally, based on that information, the producer and consumer can choose whether to proceed further with a transaction. Usually, but not always, the transaction involves the consumer paying money for the producer’s offerings.

(Shortform note: In _The $100 Startup,...

Platform Revolution Summary Platform Management Principles

Once you launch your platform, you need to manage it carefully to ensure its success. To help you accomplish this, we’ll cover three key management principles in this section: strategic platform administration, tailored performance measurements, and clever competitive tactics.

Strategic Platform Administration

A strategic platform administration system can help you maintain control of your platform’s quality as it grows. This is important for two reasons: First, platform experiences are an increasingly significant part of life for countless people, and they have real-world implications. For example, banning a user from a social media platform could impact their ability to contact their loved ones. To keep users happy, Parker, Van Alstyne, and Choudary state that your administration must be straightforward, clear, judicious, and fair.

(Shortform note: Controversy about an administrative practice called “shadowbanning,” where social media platforms restrict the visibility of a user’s content without informing them, illustrates the importance of a strong platform administration system. Research suggests...

Shortform Exercise: Design an Ideal Platform Experience

Apply what you’ve learned about platform success to your own prior—and potential—platform experiences.

Think about the platforms you use most often. Which guide principles best explain why you use them? For example, maybe you use Instagram because a lot of your friends use it, which demonstrates the importance of network effects.