Understanding the Platform Economy

Understanding the Platform Economy

Within the world of business and economics, there has been much discussion of an emerging "platform economy." In order to help our followers better understand this relatively new technology and how your business can be a part of “the future of work,” the KonsusBlog team decided to explore the topic in a four part series.

In this first post of the series, we will discuss what attributes are shared by all online platforms as well as variations within this umbrella term. MIT Professor Michael Cusumano defines a platform this way:

“A platform or complement strategy differs from a product strategy in that it requires an external ecosystem to generate complementary product or service innovations and build positive feedback between the complements and the platform. The effect is much greater potential for innovation and growth than a single product-oriented firm can generate alone.”

More simply put, a platform business serves as a medium through which others connect. For the purposes of this series, we will be defining the platform economy as, “economic activities involving an online intermediary that provides a platform by which independent workers or sellers can sell a discrete service or good to customers.”

This definition comes from a recent report titled, “Paychecks, Paydays, and the Online Platform Economy." Within the report, the writers state that all platforms share these four common traits:

1) Connects workers or sellers directly to customers
2) Allows people to work when they want
3) Sellers are paid for a single task or good at a time
4) Payment passes through the platform

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According to this report, Konsus (and other service platforms such as Uber and TaskRabbit), would be categorized as Labor Platforms that “connect customers with freelance or contingent workers who perform discrete projects or assignments.” Platforms such as AirBnB and eBay are “Capital” or “peer-to-peer” platforms.

The platform economy has grown significantly in recent years, and according to a report by the Center for Global Enterprise, platform companies “are increasingly at the cutting edge of rapid worldwide digital transformation.” The survey, focused on 176 businesses worldwide, is the first comprehensive study of online platforms.

Stay tuned to the KonsusBlog for future installments of our series on the platform economy. Next week we will be discussing how online labor platforms are leveling the playing field for global job seekers.

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