The Platform Canvas for designing new businesses that rely on multi-sided platforms.
Airbnb’s IPO will shatter records. Uber, despite its recent losses, is maturing into a dominant player in almost every country in the world. Amazon, Apple, Facebook, Google, and Microsoft constitute half of the world’s ten most valuable companies. What do they have in common? They are multi-sided platforms, connecting buyers and sellers. These business models seem simple but in fact are difficult to design.
In 2010, the practice and research into entrepreneurship took a great leap forward with the introduction of the Business Model Canvas by Alexander Osterwalder and Yves Pigneur. This diagram changed how entrepreneurs think about designing a new venture in two different ways. First, the Canvas declared nine elements of a business model. Even if there remains some disagreement around the edges, this declaration gives all entrepreneurship educators a shared vocabulary and a common set of categories by which organize hypothesesfor testing and refining a business model. Second, the Canvas put all of these elements into a single diagram that fits on one page, so entrepreneurs can visually see how the pieces of their business model fit together. This may sound like a small step to people outside of entrepreneurship education. For those of us inside, it is perhaps the most significant aid in teaching entrepreneurship in the last decade.
However, the Business Model Canvas was designed for a linear business model, where a company makes and sells a product or service. As we enter the Age of Platforms, entrepreneurs and those who teach them need a canvas that is optimized for designing multi-sided platforms. Enter Marcel Allweins and Markus Proesch, two masters students at the Hult International Business School. After taking a class with me on the design of multi-sided platforms, they envisioned and created a Platform Canvas, complete with a video to explain the idea. Their work built upon existing tools and theories within entrepreneurship, culminating in a rigorous academic paper that will be presented at the U.S. Association for Small Business and Entrepreneurship in New Orleans in January 2020. This paper describes how different elements within the Platform Canvas interact with each other to create and capture value for buyers and sellers. (I will update this article with a link to the full paper once it has been presented.)
The Platform Canvas is not just a tool for entrepreneurs. It can also be useful to managers in companies with linear business models (i.e. not a platform) as a way to envision if and how a platform could jeopardize their competitive advantage. The Age of Platforms will not only see a proliferation of new platform ventures, but also the commensurate proposal and failure of hundreds of ventures that did not optimize the design of the platform business model at inception. This tool contributes to improving the success of these platform businesses.
As an important postscript, I want to be transparent about my biases. The Platform Canvas is an improvement upon several other attempts to visually depict the complexities of a platform business model. I’m sure that some of my fondness for the Platform Canvas emanates from my early involvement in the project and my high regard for the two authors who created it. Our next task as entrepreneurs and academics is to test the efficacy of the Platform Canvas in order to make incremental improvements. Stay tuned!
