What is a digital platform business model?
A digital platform business model is how an organization enables a business ecosystem to create value and generate revenue. Moving from fixed and linear value chains to multi-sided interactions between the members in the ecosystem cultivates innovation and drives new ideas and offerings.
In a world where few innovations are created solely in-house, the co-innovation model helps you better serve customers, increasing satisfaction and stickiness, and leads to revenue growth, network effect and economics that are far harder to copy.
Digital platform network effects*
- Companies that add more partners, diversify and increase the attractiveness of their offerings attract more customers. More customers attract more partners to join the platform.
- Network effect can be multiplied and help increase reach if platform partners make these offerings available to their customers.
- This leads to a more efficient business as cost of operating the platforms drops, which can then be leveraged to offer more attractive pricing to customers.
*Diagram based on Amazon's Flywheel