![]() ![]() In general, linear companies create value in the form of goods or services and then sell them to someone downstream in their supply chain. As such, they don’t have the cost structure and underlying economics that make platform business models successful. In the case of SaaS companies, they’re building products, not networks. We call these traditional, non-platform companies linear businesses, because their operations are well-described by the typical linear supply chain. What a company owns matters less than what it can connect. In the twenty-first century, the supply chain is no longer the central aggregator of business value. ![]() As with all of the preceding examples, these SaaS companies are still linear businesses. In such cases, the word “platform” really is just being used as a marketing term. This is especially common among SaaS companies, which love to claim they have a complete “platform” for X. The most common misuse of the term “platform” is when it’s used to describe an integrated suite of software products. ![]() ![]() It’s a holistic business model that creates value by bringing together consumers and producers. A lot of people make the mistake of conflating a platform with a mobile app or a website, but a platform isn’t just a piece of software. It’s important to remember that a platform is a business model, not just a piece of technology. With the advent of connected technology, these ecosystems enable platforms to scale in ways that traditional businesses cannot. Successful platforms facilitate exchanges by reducing transaction costs and/or by enabling externalized innovation. ![]()
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