Home Book Reviews Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You
Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You

Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You

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Most people have heard of Uber, Airbnb, Amazon and PayPal. The growth and success of these companies and others stem from a technology-based business model that connects people and resources in an interactive ecosystem that creates and exchanges value while disrupting traditional businesses. That model is a platform and successful companies that utilize its power are transforming business, the economy and society.

In Platform Revolution, authors Geoffrey Parker, Marshall Van Alstyne and Sangeet Paul Choudary assert that “practically any industry in which information is an important ingredient is a candidate for the platform revolution.” Those industries can be information-rich like education but can also include businesses where access to information about customer needs, supply and demand, and market trends has value. Most of the world’s largest companies either operate a platform or are adopting their business to a platform approach.

Platforms beat traditional businesses because they scale more efficiently by eliminating gatekeepers. Using higher education as an example, the authors note that most colleges and universities force students and their parents to purchase college as a bundle that includes administration, teaching, facilities, research, athletics and much more. In their roles as gatekeepers, colleges can require families to buy the entire package because they control who earns a degree. As other non-bundle options proliferate, such as alternative certifications or online-only institutions, colleges will be challenged to maintain their bundled pricing.

Platforms also beat traditional “pipeline” businesses because they unlock new sources of value creation and supply. Consider Airbnb’s business model versus the traditional hotel industry. Airbnb utilizes rooms, apartments or houses that are privately owned, requiring no investment in capital by Airbnb whereas traditional chains like Marriott and Hilton must acquire land, construct buildings, develop reservation systems, and continually maintain and upgrade their properties. Uber and Lyft use the power of the platform to offer transportation services without investing in vehicles and salaried drivers.

Using data-based tools, platforms create feedback loops from their user/customer community to modify their product to better meet customer needs. Companies embracing a platform strategy shift from a focus on internal to external activities. Instead of controlling unique internal resources and constructing competitive barriers, platforms orchestrate external resources and build and engage vibrant communities of users/customers.

The authors provide a comprehensive analysis of platform business models that offer guidance to anyone seeking to develop such a business or change an existing one to a platform model. Network effects, architecture, disruption, launch, monetization, openness, governance, metrics, strategy and policy are all critical issues that must be considered as a platform business is developed. Of these issues, the authors note that “platform managers should be thinking about potential monetization strategies from day one, and plan their design decisions so as to keep as many monetization options as possible open for as long as possible.”

In an era when rapid advances in technology are providing information to many more people at lower costs than ever before, businesses need to understand the ability of platforms to capture substantial market share and undermine traditional models of commerce. As such, I highly recommend the book to both leaders of established businesses and entrepreneurs.

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Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In July 2016, he retired as APUS president and continued as CEO of APEI. In September 2017, he was reappointed APUS president after the resignation of Dr. Karan Powell. In September 2019, Angela Selden was named CEO of APEI, succeeding Dr. Boston who will remain APUS president until his planned retirement in June 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. During his tenure, APUS grew to over 100,000 students, 200 degree and certificate programs, and approximately 90,000 alumni. In addition to his service as a board member of APUS and APEI, Dr. Boston is a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, a board member of the Presidents’ Forum, and a board member of Hondros College of Nursing and Fidelis, Inc. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. Dr. Boston lives in Owings Mills, MD with his wife Sharon and their two daughters.

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