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oday most business offerings consist of a product or service that a company creates and then delivers to customers. This is the traditional way – produce and deliver. The platform model is fundamentally different, serving as the technological base upon which customers, developers, businesses and their partners can build added value through increased participation.

Wherever a platform emerges as a business-critical infrastructure for a wide range of other businesses, it not only reduces transaction costs for various business and peer-to-peer functions to nearly zero but becomes an economic force with a logic of its own. Alex Taub from the payments network Dwolla put it like this in our Digital Disruptors report: “We already have companies building on top of us. Alliance Data Systems did it just yesterday [with the launch of Dwolla Credit]. They launched a credit card on top of our network. They’re a billion dollar company. The more people that depend on us, the more people are in the network and the stronger the network effect gets. That makes it a fundamental market.”

The logic of a platform business is to create technology that can serve as a basis for other services and products. The more businesses that are built on the platform, the more people use the platform and the more the platform becomes a complete market ecosystem. Check out the rest of the post at the Networked Society blog >>