Don’t Confuse Platforms with Ecosystems

What’s even worse than ubiquitous business buzzwords? When those buzzwords are also used interchangeably. Case in point: the terms “platform” and “ecosystem”. Although often conflated, these words mean different things. Treating them as synonymous denotes either a lack of knowledge or imprecise thinking. But there is more at stake here than appearing smart. The distinction between platform and ecosystem has broad strategic implications that can make the difference between success and failure in today’s digital world.

The Merriam-Webster dictionary defines a platform as “a vehicle used for a particular purpose”. A platform is an asset or business that removes friction from a market. The oldest examples of platforms are village markets that facilitate transactions between buyers and sellers. They do so by reducing the costs of transacting at scale by attracting a large number of buyers and sellers.

Transactions that take place in a platform share an attribute of similar nature, e.g. a purchase, and the platform facilitates this via the provision of scale. For example, is a platform aggregating groups of similar offers, e.g. credit cards and loans, attracting consumers to credit card companies or lenders through the promise of convenience and the ability to better compare products. A platform generates value by facilitating the third parties’ transactions and not by taking part in the transactions themselves. Read More >>

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