People create things and others consume them – this exchange is almost as old as society itself. We make and we use; we sell and we buy; we want to connect with others and we want to offer our connection to others. This is all usually pretty straightforward if it’s between just two people. But what if this sort of interaction is between hundreds – or even millions – of people, each taking various positions on the supply or demand side of this equation? How are interactions coordinated? What forum can they use to signal what they have and what they want? What guarantees do they have once a transaction completes? Our ancestors invented a model to prevent all of this from becoming a giant mess.

About 5,000 years ago, society created the concept of a “market.” A marketplace, as defined in its namesake Wikipedia article, enables people to “…regularly gather for the purchase and sale of provisions, livestock and other goods.” These markets facilitated a “hub” where people with little to no trust in each other can gather and advertise their offerings and their needs. This hub provides a protocol for advertisement and request, a vehicle for transaction, and generally, a regulated commerce guarantee (either by social convention or an authoritative body).

Now we’re 5,000 years into the future where everything and nothing has changed. People have all the same fundamental needs and desires to fulfill those needs. People want to create things and others want to consume those things. But we’re no longer browsing goods under a cotton tarp, raised to protect us from the scorching sun.

We’re requesting car rides or accepting those requests from our phones, we’re publishing music we created minutes ago via a medium where unknown fans are buying our tracks just minutes later, and we’re approving people’s requests through our browsers who want to rent homes, all without having to be a hotel or real estate expert. In the most open-ended of these interactions, we’re companies that are inviting partners and competitors to build brand-new apps to extend the data and capabilities we’ve created. Our customers can become their customers, and those customers can get more value than they bargained for. This is the digital age, and a digital platform is the technology that enables these unknown (and untrusted) parties to interact seamlessly and safely.

Digital platforms are, in their simplest sense, software “hubs” that equip producers and consumers of goods and services to interact and transact.

These hubs provide:

  1. The protocol for interaction between parties

  2. Mechanisms to transact and exchange value

  3. Guarantees & remediations for transaction failure between parties

  4. Means to create new value atop the base value of the system (hence the metaphorical use of the ‘platform – a raised level surface on which people or things can stand’)

Digital platforms act as a modern version of the marketplace – business stand, cotton tarp, and all. The world’s biggest brands are finding new and novel ways to act as the point of interaction and arbitration for networks of 3rd parties, and they’re doing so with digital platforms. These organizations are extending their businesses into the digital age with commerce not just flowing from/to them, but with multi-party interactions flowing through them.

The most mature version of this trend is when an organization builds a platform and then invites 3rd parties to build apps on that platform.

The result? Customers seeing an explosion in value from these bold companies, without the companies having to bear the cost of creating that value. The power of this digital platform model is scale and leverage in a way that the world has never seen. But it’s not as trivial as putting up a table, some stick, and a tarp.

Building a digital platform is different from building an app. Apps are vehicles for one party to deliver value to many. Platforms equip many to many interactions between parties. Much like going from 2-dimensional geometry to 3-dimensional geometry, this move from 1-to-many to many-to-many is much more complicated than just adding an axis. It requires a new technical model that can scale seamlessly, allowing for the untrusted to be trusted, and facilitating multi-party interactions. These platform architectures aren’t straightforward.

In future posts and whitepapers, we’ll be dissecting the challenges and approaches to building digital platform architectures and business models.

We’d love to hear about your experiences or your thoughts. Have you found that the term ‘digital platform’ is often incorrectly used or overused? What qualifiers would you look for when considering whether something is or isn’t a platform? If you’ve been part of a team building a digital platform, what challenges did you face in its buildout? Leave comments and help shape the content of those future posts!