We have heard this story many, many times : The 20th century brought us unimaginable value added by taking advantage of economies of scale. Just think of Henry Ford’s assembly line, vastly decreasing the cost of buying a car and apply that to just about everything we pay for.
And of course, that is what happened. In the 20th century it paid to get big, because getting big gave you economies of scale to exploit big markets. the bigger, the better! And it was too expensive for rivals to catch up. You could buy competitive advantage.
Will that also be the story of the 21st century? We can never know for sure when we start talking about the future. At the same time, we can say something about what 20th century thinking misses out on. And that is interesting.
The 20th century way of scaling is essentially “one size fits all”. As Henry Ford supposedly said “You can have any color you want, as long as it is black.” That is important if the producer has to pay to add capacity to change colors. That adds to costs.
But what if you could add that capacity without incurring the cost? This is the promise of platforming. Other folks may already have that capacity, and if they can just “plug it in” via a platform, you get both scaling and differentiation.
Dronebase has succeed using this idea. Dronebase offers drone flights to commercial users. Originally, it used its own drones. But the idea was to scale by allowing drone owners from around the world to offer drone flights using their drones to buyers via a platform. Fred Wilson tells the story. Nice!
To make platforming work, the platform builder has to understand the “plug in” concept. Boiling it all down, platforms are a vehicle for folks to plug in capacity. One can create plug in opportunities in a variety of ways, and one should choose the method based on what the providers of excess capacity can offer.
Bottom line – this way of exploiting market opportunities is not new. The technology that is now available to make it easier is new and developing rapidly. We can expect a lot more from “plug in” platforming.