We are all in business to make money, right? I have never met a business person who is opposed to making money. But we shudder at the thought of being branded as “greedy” - thinking only of getting our nervous hands on other people’s money — even if that is what we want at the end of the day. So we use a more socially acceptable way to describe the profit motive. - we strive to “add value” to “clients”.
But you might want to think for a second, what is value? Where does it come from? How do we add to it? As it turns out, there is more than a little ambiguity to the concept. Value has a cost element - can we reduce the cost of something that we want to acquire. Matt Ridley talks about cost reduction as a great benefit humans get from exchange. But reducing costs is not the only element to value. We also add value by adding to the pleasure of things we experience - regardless of cost. So adding value has at least two dimensions - cost reduction and return enhancement.
I will not say much about cost reduction here, except that industrialization and mass marketing provided mankind with enormous value added of this sort. The internet has pushed this to a new level, reducing the transaction costs in markets that it “disrupts”. And we may see even more with new technology like 3d printing. I won’t talk about these things because they are primarily technical. I would like to address the other dimension — return enhancement — because it is primarily social.
My main thesis, again - Getting more out of stuff is primarily a social activity. That is why we pay huge amounts to go to concerts where we listen to “great” music. We need the social setting in order for us to get something out of the experience. Offer exactly the same music at a subway entrance and no one will notice. Don’t believe me? Then watch this video.
If getting more out of stuff is primarily a social activity, services that put us in a social setting and help us get more out of stuff have high value added. BTW, this is nothing new. Socrates et al were into this in Athens. The Parisian salon accomplished it with whit and charm. And the more hunble founders of Amway built a very successful real world business model on this idea - bringing housewives together to celebrate tupperware.
But there is something new at hand. The web is the ultimate platform building forum. If this is so, we should have in hand the tools to get more out of everything that we do. Sadly, we don’t have these tools — yet. The problem is, as HBR points out, we just don’t have a lot of experience in how to build platforms that offer the right kinds of social experiences. Put another way, there is no real world analog that gives us the right framework to understand what can and should be done on the web to enhance value in a systematic way. We don’t even have the vocabulary to set standards for what to look for. Though we do have a word for the opposite - it is “noise”.
Uggh! But I don’t want to waste your time with complaints. Enter stage left, some tools. Mark Bonchek and Sangeet Paul Choudary at HBR offer a few useful words.
In our view, the success of a platform strategy is determined by three factors:
- Connection: how easily others can plug into the platform to share and transact (how well it acts as a toolbox for plugging in - like YouTube for posting and viewing video. Or like Apple’s platform for app designers to plug into the IPhone and IPad. Key question - does your platform have a “plug in” capacity?)
- Gravity: how well the platform attracts participants, both producers and consumers (this is a “pull” concept - and a bit mysterious. Though Mark Bonchek helps us get the idea with his three stepes (building a shared purpose, engagement, and partnering relations) Gaming incentives help build this magnetism. Key question - does your platform pull people in to use it?)
- Flow: how well the platform fosters the exchange and co-creation of value (well, this is about facilitating something to be exchanged, bought or shared. Like Etsy or EBay. Key question - does your platform match makers and clients?)
Toolboxes, magnets and matchmakers. These are elements that we all can build into our platforming strategies to “add value” by helping folks get more out of what they encounter. What!… did you say that you don’t have a platform building strategy! Dear me! Well, get to work man!