The Key Concepts in Platform Design
Discover essential platform design concepts with this comprehensive guide, exploring crucial principles, network properties, growth strategies, and other key elements you have to master to unlock the full potential of your platform design journey.
Simone Cicero
Introduction
As we mark the tenth year of our exploration into the realm of platform design, it is an opportune moment to consolidate and share a library of the key concepts of platform design that have emerged from this journey. As a side effect, this also contains a comprehensive guide, a sort of “canon“, of reads that encapsulates the most fundamental concepts in platform design.
While the field of platform design encompasses a broad spectrum of elements, this post will primarily focus on the platform as a product side (designing a platform). The organizational aspects, though equally important, will be less emphasized in this discussion. The objective is to provide a clear and concise guide for those involved in designing, managing, or studying platforms.
Despite our blog often covering techniques, approaches, and examples, the aim of this specific article is to make a shortlist of key concepts and make them accessible at a first level of understanding for readers, almost irrespective of their background or experience level.
The post is structured into the following sections:
- Key Concepts on the Nature of Platformization
- Key Concepts on Understanding Platform-Ecosystem Thinking from a Value Chain, and Value proposition perspective
- Key Concepts on the Nature of Networks and on the Impacts of Network Effects on Platforms
- Key Concepts on Liquidity, Getting To Market, and pursuing Growth
Each section will quickly recall the core concepts. In addition, links to further reading materials will be provided for those who wish to delve deeper into any specific area.
The journey of understanding and mastering platform design is a continuous process of exploration, learning, and growth. This post is intended to serve as a valuable guide on this journey, facilitating access to open resources for readers’ self-actualization.
Let us now delve into the key concepts in platform design.
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Key Concepts on the Nature of Platformization
In the realm of platform design, principles, and patterns can serve as guiding lights, helping to shape and direct the actions and decisions of those involved.
They are not rigid rules, but somewhat flexible heuristics that provide a framework for understanding and navigating the complex landscape of platform design. In essence, principles and patterns are tools that can guide your actions and unveil underlying threads in platform design. They are not prescriptive but rather serve as a compass. Both Patterns and Principles can be used as provocations to help teams think out of the box in initial exploration phases or – later on in the process – as a ruler to see how true the team has stayed to the platform vision.
Principles of platform design, as outlined in the first article that is part of this canon, are the fundamental truths or propositions that serve as the foundation for a system of belief, behavior, or chain of reasoning when approaching platform design. For instance, one of the key principles highlighted in the article is “Design for Disobedience“. This principle underscores the importance of designing platforms that are flexible and adaptable to the diverse and unpredictable behaviors of ecosystem participants. Rather than enforcing rigid rules or processes, this principle encourages platform designers to capture emergent behaviors and integrate them within time.
Understand more: The 7 Key Principles of Platform Design – To design Strategies that mobilize, in the XXIst Century
Patterns of Platformization, on the other hand, are recurring dynamics that mirror the way that designers and entrepreneurs have used to address ecosystemic problems and opportunities. They are like templates that can be adapted and applied in different contexts. For example, one of the patterns presented is “Climb the Value Chain”, which challenges platform designers to understand and consider what users are doing with their existing products or services and use this information to design new channels to support their target ecosystem players with higher value proposition such as lead generation and enabling services.
Key Concepts of Understanding Platform-Ecosystem Thinking from a Value Chain, and Value proposition perspective
Ecosystems and Arenas
In the realm of platform design, understanding the broader ecosystem is paramount. The enormous importance comes from the fact that the ecosystem is, for platforms, what the customer is for simple products; in a few words who you’re designing for.
However, ecosystems can be vast and complex, making them challenging to comprehend in their entirety. This is where the concept of ‘Arenas’ comes into play.
An Arena is essentially a sub-segment of the ecosystem, a smaller, more manageable piece that allows one to better grasp the dynamics and interactions within the ecosystem. By breaking down the ecosystem into these Arenas, we can take a snapshot of the ecosystem, understand the systemic steps that occur within each Arena, and map across the various layers of the ecosystem. These layers include entities in the long tail (producers and consumers), brokers and mediators, and leveraged resources.
Understanding Arenas is a crucial first step in platform design. It allows us to see the opportunities to rethink processes and experiences in a new way, which can be mediated and empowered by a product or platform that we build for the task. This understanding of the ecosystem and its Arenas is fundamental to creating the right value propositions.
Understand more:
- A New release of the Platform Opportunity Exploration Guide: Arena Scanning for Ecosystem breakdown – Boundaryless
- Understanding Ecosystems to create the right Value Propositions: Part 1 of a Series on the Macro-Problems and Techniques of Platform Design – Boundaryless
The Cicero Triangle, the 3 Value propositions in Platform Ecosystems-Thinking, and the 6 Platform Strategic Plays
In this section, we present the key concepts that could help a platform designer assess the roles that can be played in a certain ecosystem and how products can be built accordingly.
The Cicero Triangle, in particular, is a way to represent the three key layers of a platformized market: infrastructures, aggregators, and long tails.
Infrastructures are the basic modularized and ubiquitous systems and services that are necessary for a platform to be built and connect with the lower layers of the market. Aggregators (which are the players most often called “platforms”) are entities that bring together and bundle diverse content or services, providing a system of record, enabling services, and – most importantly – facilitating the connection between independent parties in the ecosystem. Long tails refer to the large number of independent parties, powered and connected by the aggregators’ services, that produce products or services on their own. These players and their services may not be hugely popular or profitable if taken singularly but collectively they can make up a huge market. The Cicero triangle can be used to explain the three key roles that one can play in the digitally enabled market: you can either be an infrastructure provider (eg: AWS), an aggregator (eg: Airbnb), or a niche player in the long tail (an Airbnb host).
Understand more: Unified Theory of Digital Markets – Stories of Platform Design (platformdesigntoolkit.com)
These three elements are mirrored in the three core value propositions that a platform can provide: a product side, one or more marketplaces built on top of it, and an “extension platform” that extends the product with third-party plug-ins. The product side refers to the core offering of the platform (eg: Shopify’s e-commerce SaaS), the marketplace is where users of the core product interact with other types of stakeholders to exchange value (eg: Shopify’s expert marketplace), and the extension platform allows third parties to enhance the core product (eg: Shopify’s Apps).
Understand more:
- Value Propositions in Business Ecosystems – Products, Marketplaces, Extensions – Boundaryless
- Designing Extendable Platforms – protocols, no-code, AI, and modularity – Boundaryless
The Six Platform Plays are recurring transformations of the value chain that can help identify the right platform strategy model to develop in accordance with a certain Value Chain. For example, one of the typical platform plays is that of transforming low-value suppliers into users that can build and leverage their reputation. These plays can be seen as recurring value chain transformation strategies that platforms use to disrupt traditional value chains and create new forms of value.
Understand more:
- Apply Value Chain Analysis with Wardley Maps to identify a Platform Opportunity – Boundaryless
- Identifying a Platform Strategy Model and its potential go-to-market strategy: a streamlined process – Boundaryless
- Understanding Ecosystems to create the right Value Propositions: Part 1 of a Series on the Macro-Problems and Techniques of Platform Design – Boundaryless
The 2 core engines of Platform Design and the Platform Experience
Platform strategies should always be seen as a mix of two core elements of value creation: we call them Learning Engine and Transactions Engine. Elements of the two engines are normally consolidated in simple, scalable, and straightforward experiences that characterize platforms. For example, Airbnb got to grow enormously as a simple system where the initial experiences were characterized by a less than 10 steps process.
The Learning Engine is about helping all the players in the ecosystem to become their “best” version. It is based on the idea that platforms should not just be about facilitating transactions, but also about enabling learning and continuous improvement given the competitive and ever-changing landscape they operate within. This is because platforms are essentially networks, and networks are powerful learning systems. Developing a Learning Engine is about creating a system of acupunctural services that allows all participants to face the challenges they encounter as they progress inside an ecosystem: crucial moments in a learning journey are that of onboarding, getting better at what you do and catching new opportunities. This can be achieved through various means, such as providing feedback, facilitating collaboration, and offering resources for learning and development. The goal is to help each participant become more valuable to the network, which in turn makes the network more useful as a whole.
Understand more:
- Why Platforms need to be Engines of Learning | by Simone Cicero | Stories of Platform Design (platformdesigntoolkit.com)
- The Platform Design Toolkit User Guide (page 20)
The Transactions Engine is something more traditionally connected to platforms and it’s about reducing transaction costs in the interaction between parties in the ecosystem. In the context of platforms, transaction costs are the costs associated with making a transaction happen. This includes not just the direct costs of the transaction itself, but also the costs of finding a suitable transaction partner, negotiating the terms of the transaction, and enforcing the transaction agreement. The goal of the Transactions Engine is to reduce these costs as much as possible, making transactions more efficient and scalable. This can be achieved through various means, such as improving search and matching algorithms, streamlining the transaction process, formalizing previously informal aspects of the transactions, building trust among participants, and more.
Understand more:
- Why Platform Strategies are all about reducing Transaction Cost | by Simone Cicero | Stories of Platform Design (platformdesigntoolkit.com)
- The Platform Design Toolkit User Guide (page 20)
The Platform experience is about combining the two engines just mentioned into a simple, scalable set of steps that can be scaled and replicated. Designing a platform experience involves carefully designing the interactive user journey, favoring journeys centered around relational steps. In a few words, to be successful, a platform experience should reduce transaction costs, create engines of learning, and provide a scalable and repeatable process that can be used by a wide set of different entities to power their interactions and relationships in the ecosystem, leaving space for the interacting parties to adapt a core, stable process to their peculiar needs.
Understand more:
- Defining the Platform Experience, and Flywheels for Defensibility: Part 2 of a series on The Macro-Problems and Techniques of Platform Design – Boundaryless
- The Platform Design Toolkit User Guide (page 39)
The 3 Key Gains an Ecosystem-Platform player is looking for (Entity Portrait)
In the context of platform design, the user or the entity participating in the platform is not just looking for a service or a product. They are looking for gains that go beyond the transactional. These gains can be categorized into three key areas: Value Gains, Convenience Gains, and Access & Reach Gains.
Value Gains refer to the tangible or intangible benefits that the entity seeks. This could be a monetary value such as revenues or savings, or it could be a non-monetary value such as recognition, experience, security, or knowledge. The platform should be designed in a way that enables the entity to achieve these value gains.
Convenience Gains are about making things easier for the entity. This could be in terms of reducing the effort required to perform a task, simplifying a complex process, or eliminating the need for the entity to manage certain aspects of the transaction. The platform should provide elements of convenience that the entity is looking for.
Access & Reach Gains are the most peculiar of marketplace-based platforms and are about enhancing the entity’s ability to access the ecosystem and reach its perfect target counterpart, in a specific niche: These gains could be about finding more niche demand or supply, new categories of peers, or getting to find a solution in a particular geography or time slot. As an example finding a provider of white goods repair services that can come to my house to fix a particular model, brand and in the time slot where I’m available at homeThe platform should provide the entity with enhanced access and reach.
These three key gains are what the entity is looking for when participating in a platform. Understanding these gains is crucial in designing a platform that meets the needs and expectations of the entities in the ecosystem.
Understand more: Evolving User Research in the Age of Platforms & Ecosystems | by Simone Cicero | Stories of Platform Design (platformdesigntoolkit.com)
Key Concepts on the Nature of Networks and on the Impacts of Network Effects on Platforms
The 7 Strategic Flywheels
Flywheels are one of the key concepts in platform thinking: these are self-reinforcing loops that drive platform growth and defensibility. The types of flywheels that can be created vary, but they all share a common characteristic: they make the product defensible and self-reinforcing.
In Boundaryless framing, they are classified into three types: Core Network Effects Flywheels (CNEF), Core Defensibility Flywheels (CDF), and Technical Defensibility Flywheels (TDF). Core Network Effects Flywheels represent the basic mechanism behind the attraction that marketplaces generate by coalescing all users into one shared place. These are intrinsic characteristics of “network-based” phenomena: the more entities participate in a shared space the more becomes valuable for a new participant. The Core Defensibility Flywheels (CDF) and the Technical Defensibility Flywheels (TDF) are additional elements of self-reinforcing value creation, sometimes intrinsic such as economies of scale, and sometimes more intentional such as building a data advantage based on the data you collected.
Overall, flywheels represent a series of mechanisms that feed on each other, creating a momentum that propels the platform forward: understanding how to leverage flywheels in design will make an enormous difference for any platform strategy.
Understand more:
- Boundaryless Platform Growth and Product Guide (page 48)
- Defining the Platform Experience, and Flywheels for Defensibility: Part 2 of a series on The Macro-Problems and Techniques of Platform Design
The 7 Key Properties of the Relationships Underlying the Network
In the context of platform design, understanding the underlying characteristics of the relationships that form the network is paramount. These relationships are characterized by several properties: for example, some relationships are symmetric and infrequent (think of selling and buying a house), while others are frequent and asymmetric (think of hiring a taxi). These properties characterize the behavior of the marketplace and can impact widely things such as the difficulties that will be encountered to bring the marketplace to a certain “critical mass” or the long-term behavior of the network effects: for example, certain marketplaces reach a “plateau” of added value after a certain density of provider is reached (adding more drivers to a city neighborhood for a ridesharing service doesn’t really add any value once the availability is dense enough), while others continue to benefit for more supply to be added.
Overall, understanding the seven key properties of the relationship underlying the network is essential for platform designers to set expectations and strategize around the go-to-market strategy and tactics to use and to assess how defensible will the endeavour be in the long term.
Understand more:
- Boundaryless Platform Growth and Product Guide (page 57)
- Defining the Go-To-Market and Liquidity Approach: Part 3 of a series on The Macro-Problems and Techniques of Platform Design
Key Concepts on Liquidity, Getting To Market and Growth
The Canonical Unit
For designers and founders dealing with platform strategies featuring a marketplace element, understanding the concept of the canonical can make a whole lot of difference. The canonical unit can be seen as the smallest convergence of the different “categories” in a marketplace. If you think about a well-known marketplace such as Thumbtack, customers normally search for a certain type of professional (eg. a plumber) in a certain City (New York): in this case, we can consider the canonical unit as the sum of a city and a type of professional. Often, the canonical unit has a geographical element – especially for services that depend on two players meeting physically – and multiple categorization layers.
A customer looking for a certain category of supply wouldn’t be interested in another category: this is why understanding the canonical unit is of utmost importance to define your go-to-market strategy and dynamics.
The 10 Growth Tactics for Initial Liquidity
In the journey of platform design, one of the most challenging aspects is overcoming the initial chicken-and-egg problem. This is where the concept of growth tactics comes into play. Growth tactics are actions designed to stimulate the initial activity on the platform, to attract the first users thereby helping put the flywheels in motion. These tactics are closely tied to the properties of the network we discussed in the previous section, as certain properties make certain tactics more apt to get the initial flywheels spinning.
Understand More:
- Boundaryless Platform Growth and Product Guide (page 57)
- Defining the Go-To-Market and Liquidity Approach: Part 3 of a series on The Macro-Problems and Techniques of Platform Design
The 4 Growth Loops and the Growth Model
This showcase of key concepts of platform design ends with the concept of a growth loop. Differently from the flywheel, which describes the mechanism that makes the perceived value increase as the network size grows, the growth loop is the mechanism through which a platform owner can acquire new customers. The traditionally used key growth loops are four: virality, sales, content, and paid acquisition. Connecting the growth loops with experiments and measuring and analyzing how these experiments increase the conversion rates of the growth loops (for example into “paid” customers) across different cohorts of users is what is normally called developing a growth model.
Understand More:
- Boundaryless Platform Growth and Product Guide (page 87 – for growth loops and page 100 for Growth Model)
- Key Concepts and Practical Steps to your first Growth Model (for a Platform or Product) – Boundaryless
Conclusions
In this article, we’ve provided a list of key concepts that every platform thinking expert should know deeply and fully. Furthermore, we’ve presented references to a set of key articles and direct references to pages in our guides: a sort of “canon” that can be used to onboard new teammates to the topic and to generally identify the must-reads, and starting points in the vast content library that Boundaryless have released during the last decade contributing to the shape and formalize world-class and free knowledge around platforms and ecosystems.
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