The driving force behind our internet economy is demand-side economies of scale, also known as network effects. These arise when users create value for other users and are enhanced by technologies that create efficiencies in social networking. While resource control and supply side efficiency used to be key success factors in the past, building platforms, orchestrating networks and managing relationships determine success in an increasingly digital world.
Successful platforms seek to maximize the overall value of the whole system in a circular, revolving and feedback-driven process. By attracting more platform participants they are able to offer a higher value. The larger the network, the better the matches between supply and demand and the richer the data that can be used to find matches.
Successful platforms put companies that use traditional business models at risk. Many companies are still highly competitive, but when platforms enter the same marketplace, the platforms usually win. Companies that fail to create platforms on their own or to integrate their business into existing platforms will be unable to compete for long.