5 Indicators a Market is Ripe for a Platform

What is a Platform?

The word “platform” even though it is used quite often, is a chameleon word – meaning different things in different contexts and to different people. A good starting point for a common definition is to understand that all platforms have a common basic structure. Platform owners control access, provide governance and infrastructure, own the IP of the platform. Providers are a platform’s interface with users, sometimes one entity is both the owner and provider. Producers create offerings and adopt the platform to enhance go-to-market, but a platform may not be the only route to market. Consumers adopt a platform because it makes it easy for them to find, gain access and solve problems they have. You can read more about platforms here.

An economic view of platforms is they enable two sided markets of direct interactions between producers and consumers. A successful platform, is a “golden goose” creating self-feeding network effect (e.g. ebay, Facebook, iOS).

Technologists view platforms a bit differently. For them, any technology that provides external programmable access (e.g. APIs) is a platform. Actually, APIs are platform enablers, but do not turn a solution into a platform.

Sometimes technology companies call their technology a “platform” even though they don’t really intend them as two sided markets. They do this because most folks intuitively understand the economic value in owning a platform and the customer value of using APIs to open a solution to tailoring. Everybody wants to be a platform – so every startup worth their salt provides an API and claims to be a platform. What many don’t understand is that creating a platform is not just providing technology enablers to your own solution but actually figuring out how to enable some sort of two sided market of consumers and producers.

What Platform to Build?

Once in a “steady state” platforms are regarded “golden geese”, but the $1,000,000,000 question is how do you find the right market early on – either as an entrepreneur that would like to build a platform or as an early stage investor that would like to fund one?

Here are 5 indicators for a market ready for a platform:

1. There is a large under-served market of consumers.

2. There are a multitude of producers that can provide partial solutions to serve those consumers, but have difficulty getting their solution to a broad market

3. There is a large number of “local” producers that end up building or integrating the same pieces in order to get to market.

4. The intended market for the platform is global. i.e. consumers worldwide have the same problems, and solutions don’t need to be tailored per market.

5. There is a growing number of providers in the market are building their own technical platforms or services, for their own use but not as a two sided market.