Your Company Has A Technology Platform…But Do You Have A Platform Business Model and Strategy?
Vince Kuraitis
In most other industries platforms are also understood as a business model and strategy. Outside of healthcare, there are 45+ books focusing on this topic.
This post is written for:
- 9,000+ early-stage digital health companies, most of which have a software and/or hardware technology platform as a centerpiece of their offering
- Healthcare incumbents — health systems, health plans, pharma, medical devices, etc. — that provide a digital platform as part of their external offering. For example, health systems that have an EHR platform, a patient portal, and/or a population health platform.
What Do Platforms Do?
A platform business model connects producers and consumers — creating an ecosystem that facilitates value exchange and interaction between them. Unlike traditional linear business models, where companies primarily produce and sell products or services directly to customers, platform models serve as intermediaries, making connections and facilitating interactions between two (or more) parties. Some examples in healthcare:
- Communications between patients and clinicians and among clinicians themselves
- Sharing health data among producers of data and users of data
- Matching buyers and sellers
- Integrating workflow of disparate care providers
Platforms are powerful. Four of the top five companies in the world by market cap are platforms.
The North Star of a Platform Business Model — Network Effects
The North Star of a platform business model is achieving network effects—where users experience more value as the size of the network increases. Network effects are the single greatest differentiator in platform success.
Some strategic questions to address include:
- How to solve the chicken/egg (aka cold start) problem – achieving critical mass on both the supply and demand sides of the platform
- What types of network effects are possible?
- What’s the relative strength of different types of network effects?
- Is there potential for winner(s)-take-all (WTA) dynamics?
Other Elements of a Platform Business Model
Some other major factors to consider in designing a platform business model:
- What’s the optimal monetization and pricing approach? For example, should one side be subsidized? When should users be charged?
- How open should the platform be? There are tradeoffs — greater openness can lead to faster adoption, but can result in loss of control.
- What’s the optimal governance model? What are the rights and responsibilities of different stakeholders?
- What are key metrics to measure progress and success?
- How can data best be gathered, analyzed, and used to innovate and develop the platform?
- As the platform evolves, how can APIs and integration be optimized?
You don’t need to discard your existing business model and strategies to capture the business advantages of a platform business model. But…but platform thinking does require you to look at your business differently.
Platform business models can be adopted incrementally. Particularly in healthcare, many organizations will choose to adopt a hybrid business model.
Challenges
To be sure, success is not guaranteed. Platforms encounter common challenges, e.g., achieving user adoption, complying with regulations, maintaining security and trust, and balancing relationships among stakeholders.
Conclusion
Many healthcare companies have been missing a mammoth opportunity. They primarily recognize platforms that they build or use as technology. It’s time to understand the power of platforms as business model and strategy!
