Every time you summon a rideshare, book a vacation home, or order groceries online to be delivered to your doorstep, you’re participating in a global movement that’s creating new business models: the platform effect. Although the term started showing up a few years ago, it’s become much more than a buzzword. The platform effect is rewriting the rules of how companies operate and scale. Some call it the platform economy, but no matter the moniker, it’s reshaping the core of how business gets done.
What’s the platform effect? Here’s an over-simplified definition: it’s when enterprises create innovative ways for buyers and sellers of products and services to match supply to demand. Technology and media companies are at the heart of the platform effect, but its effects spread across verticals. Whether an easy way to book a house for a weekend getaway or grab a shared ride to work, many of these opportunities didn’t exist a few years ago. It’s not just about consumers going to stores or checking into hotels anymore. It’s about entirely new ways to deliver products and services to the global market.
It’s also about new ways to connect workers to job opportunities and get those jobs done. It’s the bedrock that the gig economy is built on. Connection and openness are at its core, and technology is the engine that makes it move forward.
The platform effect is opening new doors for billions across the world. A new world of work is being built on it. The gig economy wouldn’t be as global and fast-growing without the platforms that have been created to facilitate it. Skilled employees looking to strike out on their own can easily find work through online platforms. Consumers benefit from more convenience and lower costs. The companies involved have the opportunity to make huge profits without—in theory at least—huge costs. (Though that isn’t always the case—more on that in “challenges.”) And there are tremendous opportunities to do good, like the positive effects of crowdfunding to help meet the needs of others. It’s also helped create new sub-industries and grow the economy in developing countries.
When revolutions like the platform effect come into being, they’re often organic and grow so quickly that challenges are inevitable. The “big profits with low costs” model may not always be sustainable. Regulation can be a challenge—how do you regulate a model that has no precedent? How do you make sure that rideshare drivers are providing safe rides? How do you verify that vacation home hosts treat their guests fairly and with respect? How do e-commerce platforms crack down on fraudulent sellers and products? The companies at the core of this revolution are working hard to answer these questions, but it can be difficult to keep up as the line between user responsibility and platform responsibility become blurrier.
The platform effect has brought about many entirely new ways to connect buyers and sellers, and companies are constantly searching for new ways to monetize. Payment systems that didn’t exist a few years ago, like mobile person-to-person, are being evolved to create as many ways as possible to generate revenue and remove friction from the opportunity-to-cash cycle. As often as possible, tech and media companies are looking to find what consumers are willing to pay for and make it seamless.
Distributed workforces and gig workers mean that the “all-hands” meeting isn’t going to cut it anymore to keep your employees informed. When a company’s employees are spread across countries and timezones, making sure all aspects of managing your workforce are rock solid is more important than ever. When employees can work from wherever makes them the most efficient, everyone wins. From providing visibility into performance goals to providing relevant learning opportunities, the platform economy offers up new challenges that companies must meet to keep employee engagement healthy.
A keen grasp of the skills a company needs to thrive is essential in the age of the platform. Traditional approaches to matching candidates to jobs are evolving fast. When the skills match the role, job titles may go out the window, and the conversation may go more like this: “This job requires these skills, and you have them. Let’s talk!”
Technology and media companies are at the heart of the platform effect, but its effects spread across verticals.
How organizations manage their people and their money must evolve to keep up with the platform effect. A workforce made up of gig or contingent workers has different needs and expectations around everything from recruiting to payroll. In a frictionless environment, organizations that make it easy for workers gain a distinct advantage. And finance teams and their practices must also change to reflect the needs of the platform economy.
The platform effect is here to stay, and along with its many opportunities, it brings many questions. And often those questions evolve even as they’re being solved. But they must be answered if we’re to create the most good from the platform economy and help create opportunity for all. So it’s not a matter of “if” but “how” more and more companies embrace the platform effect, work through its challenges, and take advantage of its opportunities.