“Platform” and “ecosystem” are two commonly used business buzzwords describing business models that investors and board members around the world seek to emulate. These types of businesses benefit from higher price-to-earnings on account of their superior performance compared to so-called “linear” business models.
While the two terms are often used interchangeably, they are not synonymous. Platforms create value by eliminating friction from transactions and exchanges – for example in the case of a marketplace – whereas (platform-based) ecosystems do so by orchestrating the contributions of multiple companies, which collaborate to create a unique value proposition within a thematic customer journey. There are many propositions of this type in the B2C and B2B space, for example those that facilitate the day-to-day operational activities of a business or encourage consumers to live healthier lives and make it easier for them to do so.
Ecosystems, platform-based or otherwise, are more complex to develop, operate and manage than mere platform business models because they have more constituent parts. To understand the two models’ business focus and critical success factors, it is necessary to appreciate the differences: while platforms need scale to dominate their intended market, platform-based ecosystems (PBEs) require a combination of scale and scope. Platforms and PBE are, in most cases, business models that continue developing and evolving over time. Once one platform or PBE proposition is launched, it is common to see it expand by exploring adjacent areas for friction, white spaces and potentially complementary thematic journeys.
The successful development of both business models requires the ability to sustain large scale investment, often over a period of time. Ultimately, it is should also be noted that these are not new business models. There are a number of very successful B2C and B2B cases that can serve as inspiration or be adapted to one’s needs. Some models, e.g. Vitality, have been replicated into other geographies, proving the universal applicability of these ideas with the benefit of being able to take inspiration from success cases in other markets.
Thank you for clarifying these important differences!