What do tech giants like Apple and Microsoft, global online retailers like Amazon and Ebay, leading payment and finance companies like Visa and Mastercard, and popular online game developers like Riot Games have in common? ) and TikTok?

While it may not be clear at first glance what might link companies with such diverse backgrounds, upon closer inspection, we notice that there is indeed a common denominator: all of the aforementioned companies – and many more – are leveraging the power of platforms to change global business. .

A platform is a business model that creates value by facilitating interaction (but) and transactions between different groups – usually consumers and producers or suppliers – through the creation of communities and niche markets.

Let’s take things from the beginning. When Apple launched the first iPhone in 2007, the five major mobile phone makers—Nokia, Samsung, Motorola, Sony Ericsson, and LG—cumulatively controlled 90% of the industry’s global profits. However, it only took Apple 8 years to completely change the picture: in 2015, the iPhone accounted for 92% of the industry’s global profits. To achieve this, the Steve Jobs company used a typical platform approach, which was enough to overcome the impressive set of classic strategic advantages that its competitors had at the time: huge size, economies of scale, high commercial awareness, logistics infrastructure, installed operating systems. as well as huge research and development budgets.

If we look at the big picture today, half of the ten most valuable companies in the world (based on market capitalization) use this platform business model. Companies like Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook) have pushed traditional global company names like General Electric, Shell or IBM from the top in a decade. The same is true in the field of financial services: global banking giants such as Citi or HSBC have been replaced by players such as Visa, Mastercard, PayPal or Ant Group in the list of leading global financial companies. What do these businesses have in common? You guessed it right, they are all platforms.

It can be argued that platforms (as a business model) have been around for decades. So why now? What was so significant that in just a few years they rose to prominence in every industry? Digitization and the transfer of most economic activity to the Internet are two components of the right answer. Technology has made building and scaling platforms much easier (and definitely cheaper) than in the past, and has enabled seamless (and fast) onboarding for customers who can and do enjoy extremely high-level personalized service based on an unparalleled ability to collect, analyze and share huge amounts of data, which in turn increases the (added) value of the platform for everyone. Consider, for example, the next time you buy something through Amazon or a similar service, all the dynamically adaptive product recommendations that appear on your screens based on your history or the preferences of other consumers with similar or similar options to yours.

Half of the ten most valuable companies in the world (by capitalization) use this platform as their business model.

In addition, a number of additional factors give this model even more momentum: (always available) online distribution channels, a pattern of repetitive and frequent transactions, cloud computing, and the increasing use of mobile phones as our main entry point to the Internet. .

At the same time, there is an oxymoron that applies to almost all known platforms around the world: Uber, the largest taxi company in the world, does not have its own vehicles; Meta (Facebook), the most popular social network in the world. world does not create its own content, Alibaba, the world’s largest e-commerce provider, does not have its own inventory, and Airbnb, the world’s largest accommodation provider, has no ownership rights to any of them.

So the question arises: in the absence of an irreplaceable competitive advantage, what is the key success factor for platforms? The correct answer, of course, does not include – oddly enough and contrary to a fairly common belief – the ownership of infrastructure (cars, buildings, content, etc.). However, in today’s rapidly changing environment, there is something much more important: customer relationships and the degree of trust that is built into them.

In other words, moving to a platform economy means shifting the focus of business from infrastructure ownership to customer relationship management, displacing and replacing old models. Today we use all these platform services because they have a high degree of recognition and reliability, competitive price-performance ratio (not always the best), personalized offers, easy access (due to technology), and a relatively high degree of confidence that that the services and products we receive will meet our (initial) expectations.

Whether it be banking, payments, e-commerce, gaming or social media, it is now clear that platforms will be the dominant means of value creation in the future, discarding old structures and inventing new ones. In such an environment, the ability to understand new rules and the flexibility to adapt will be a critical survival factor for new age service and product providers.

* Mr. Panagiotis Criaris is a Business Leader in Financial Services and FinTech.