We bundle up the activities of organizations selling their time or wares for profits and label them as enterprises. In doing so, we project that they have a lot in common, which is true, but some businesses are much more than businesses. Some businesses are just different.

Like the difference of impact. Take for instance the B-Corp or social enterprise. These organizations are highly motivated by their mission and profit isn’t the goal in as much as it’s a means to an end - that end being the impact they want to have. Then there’s the difference of advancement. Some companies exist to push boundaries. For these companies, profits might just be seen as a way to fund even more research and development.

Platforms might at times be both impactful and enabling of advancement or capacity, but neither of those differences capture what is truly unique about them. Platforms, especially those that enable third parties to offer and monetize apps, are radical in what sets them apart, because if successful, they’re far bigger than just a business. They become economies, and this is an entirely different game.

Economies (over)simplified.

Economies are social systems concerned with scarcity. We understand them as the sum of production and exchanges in defined regions where suppliers and consumers interact. There are a few types of economy, mostly differentiated by how private property rights and social relations are governed.

Market economies are biased toward private property. Centrally planned economies are done under the banner of the economies social fabric. Most of the world is currently comprised of mixed economies with various levels of private property rights attempting to be balanced against various levels of central planning like publicly owned industries and regulation

As the presence of central planning suggests, economies typically have government bodies that assert control over where they operate. We normally talk about economies along the lines of these government bodies, such as national, state, or even local. In addition to creating the rules around scarce natural resources, the regulators also govern the range of actions among economic agents: businesses and individuals.

This marries two important factors among economies: the boundaries of one economy from another, and the rules that the economies are subject to based on the government that is in control within those bounds. Two nations sharing an invisible border can be home to entirely different economic realities because of rules alone.

Market economies rely on uncoordinated signals to regulate things like prices. Too much supply or demand will test the price if it’s elastic, and if not, the product may just disappear from the market. This is because people have choices, and when people have choices, they’re really powerful.

Most mixed economies favour democratic governance and are responsive to market forces. Instead of expropriating industries to support and trying to own the economy, they tax the activities within it and hope they can get the right rules in place for it to flourish. If the rules discourage enterprise, the economy and regulator will suffer. People won’t want to go there to do business, capital will dry up, and if there’s a better option or if people become desperate they’ll leave. If the rules are favourable, capital should flow, businesses should grow, and it will remain homebase for many people and even attract new ones.

People conduct business, but participate in economies. When economic agents can choose their economy, the regulating body is incentivized to create and maintain favourable economic conditions.

People conduct business, but participate in economies. When economic agents can choose their economy, the regulating body is incentivized to create and maintain favourable economic conditions.

This is core to why an economy is radically different than a business. Building a business means caring for the direct relationships and conditions you need to grow. Building an economy bears the responsibility of being a steward of the conditions that encourage relationships among agents within the domain you govern, which sounds a lot more like building a platform.

Platforms as Economies

Platforms and economies have so much in common.

They’re defined and bound spaces governed by a body that wants the relationships within the ecosystem to grow. There’s an acknowledgement of property rights and autonomy within limits. Emergent and renegade behavior can result in discipline, the creation of new rules and even the relaxation of others. Tax is collected on the sale of goods and services. Residents and businesses operating within the ecosystem have choice, and that choice includes mobility - their ability to stay or leave the ecosystem they chose. In the case of businesses rendering services to consumers in an ecosystem, they’re even able to operate in multiple ecosystems.

Adopting this framework can be helpful if you are looking to create a platform ecosystem or are planning to operate within one. In the case of the former, adopting the perspective of governing an economy can prevent you from over indexing on the lessons in business textbooks when maybe economics or political science hold more relevance. In the case of the later it may help you choose the platform yielding the economic conditions you need to flourish.

Products Companies and Platform

The rules that make a product company successful are different than those that make a platform company successful. It very easy for product and platform ambitions to be at odds with each other, which is a challenge because platforms offering an app marketplace are seldom, if ever exclusively platform companies. They’re at best somewhere on a spectrum between the product and platform, or even more likely, a product company with a platform.

Product companies rely on control and predictability while platforms are decentralized, capturing the benefits of the market of ideas and diversity. A product company, being more of a typical business in nature doesn’t require sensitivity when making decisions.

Product teams will release competitive products, want to regulate ecosystem behavior, and tend to get worked up at the idea of a 3rd party service competing with core product. Solutions can often be brash - terminate relationships, revoke API keys, or leverage company superpowers to direct customer attention to the native solution.

This sort of behavior from product teams is fine - their job is to reinforce the value of core product - but it requires vigilance on the part of the teams responsible for ensuring that a platform ecosystem remains healthy and growing. More often than not, deliberate attention on alignment between product teams and platform teams can minimize the risk. It’s totally possible that as you advance product goals, we’re also continuously strengthening the platform.

Economy thinking can make these conversations easier by drawing attention the the nuanced ways a platform, unlike a purely product business, is vulnerable. This is predominantly anchored around trust and mobility.

Economy thinking can make these conversations easier by drawing attention the the nuanced ways a platform, unlike a purely product business, is vulnerable. This is predominantly anchored around trust and mobility. The companies that are building services on a platform are doing so in good faith that their business is well served by serving your ecosystem. Risk, be it through rule changes or product release motivates them to consider their mobility as a defense mechanism.

Of course, as with anything there’s a flip side to this. They’re really hard to kill. Just think of the most awful places in the world: there’s still an economy in spite of the abhorrent mismanagement of it. This should reduce the pressure of getting it perfect, both on the first try or over time. As long as there is an opportunity, the rules of supply and demand will do their thing.

Voting with Mobility

If you find yourself more likely to be a participant in a platform economy, choosing the economy you operate in can be a big decision. Ecosystem stability, leadership, and saturation are forces that can make or break your chances of succeeding before you step foot in the ring. After all, you wouldn’t move to a country susceptible to boom and bust cycles or governed by volatile politics and expect a smooth time. Why expect something different in the context of platforms?

Choosing a platform to work with is as much a values decision as it is one of opportunity. You may be motivated by the potential a platform economy offers, but applying your interpretation of what governance should be is where you’ll source your confidence. Without steering too close to politics, the caveat is that finding the perfect fit is no easier with platforms than it is finding your ideal real-world economy to live in, and it only gets harder the more sophisticated your opinions of economy governance becomes.

Your decision to invest or hedge is akin to voting with your energy and optimism. Don’t be afraid to use it.

There’s also the possibility that you’ve built a business on a platform, but you notice a shift in direction or governance. There’s no harm in taking pause to consider if other platforms offer the conditions you need, and any that demand exclusivity - well, that’s a big red flag. Your decision to invest or hedge is akin to voting with your energy and optimism. Don’t be afraid to use it.

Platform Economics

It won’t be a surprise if someday platforms are studied with an economic lens. Their semblance to economies invite the same analyses used to understand the impacts of political stability, taxation, regulation, and competition. It will be exciting to see the Laffer Curve used to find the ideal revenue share rate or the Austrian and Keynesian schools duking it out head to head or the effects of mobility and digital corporate nomadism on platform GDP.

Until then they’ll remain a business, just different.