The platform economy: historical impact and future trends

Since their genesis, digital platforms have been nothing short of revolutionary – and not just in sociological terms. As the pace of change accelerates and we look ahead to emerging future trends, there is plenty of opportunity for platforms to continue to reshape our economies and our world. To begin to understand the massive economic impact of digital platforms and the platform economy, however, we first need to step back in time…

Understanding the past

Looking at the average economic value created per capita we find that it has remained incredibly stable over time, for hundreds of years at around 500 USD per capita… until around the year 1800 with the Industrial Revolution. 

Then the economic value created per capita on average jumps to approximately $6,500 by 2000.

At the heart of this transformation we find the business model of the modern firm: “It’s the value chain; and it’s linear processes,” says Benoit Reillier, Co-founder and CEO of Launchworks & Co. This business model has remained entrenched in our economies and is responsible for powering the economic growth that has defined our modern era. Yet, as Benoit points out: “Over the past 20 years, that growth has not only continued but accelerated.” 

By 2020, the average GDP per person grew to around $18,000. But this more recent spurt of growth “has been powered by a  different type of firm,” says Benoit. He explains: “It’s not that long ago, but if you look back to 2000, the largest companies in the world were very well-known, traditional companies with value chains. General Electric was the largest company in the world in terms of market capitalization in 2001. This [type of company] is what was at the top of the rankings and what powered the Industrial Revolution, pretty much until 2000. And then we see a new type of company emerging.” Although it does not happen overnight, the change is unquestionable. On the list of largest companies, Microsoft first appears in 2001; Apple follows in 2011.

Soon, a clear paradigm shift emerges. “For the first time, in 2016, you see that the five largest companies in the world are powered by something that is not just a value chain,” Benoit says. “It’s something else. It’s a platform business model.”

The rise of the platform economy

It may not yet be written into the history books, but the platform revolution is on track to prove as dramatic as its industrial predecessor. Whereas the model of a value chain established one way of generating economic growth, platforms upend this linearity and distribute value creation across an entire ecosystem.

“What [platforms] do that is really unique is that they attract participants into the ecosystem,” Benoit continues. “They match them, connect them, and enable them to transact. Effectively, they’re uniquely able to harness the energy of the participants within the ecosystem.” 

This opens doors for new and established firms alike, provided they can engage strategically with the unique characteristics of platforms. “These are very powerful business models, but they do not work like value chains,” says Benoit. “When you’re in a platform world, it’s outside of the boundaries of the firm. And to orchestrate that ecosystem, you need to do things that traditional firms don’t have to do.” In particular, he explains: “You don’t control the people who create the value.” Rather, the means of value creation is managed within the ecosystem. “People co-create the value with you and are part of your ecosystem, [but] are not necessarily your employees.” With this in mind, the necessity of taking a different strategic approach quickly becomes apparent.

There are major tasks facing digital platforms, and Benoit highlights two in particular. “You need to develop the right governance principles: who is allowed to join the platform, what they’re allowed to do on the platform, and how value is shared on the platform.” And, he adds: “You also need to create trust in the concept of the platform itself.” Trust needs to be established across different strata, including in the platform’s brand, in the other participants, and in the fundamental value proposition of the transactions that are possible within the platform’s ecosystem. Benoit illustrates this with a ride sharing platform as an example. For the platform to succeed, participants not only need to be confident in the company’s brand, but also that sharing a car is worthwhile and that the other people involved are reliable and trustworthy.

Future trends in digital platforms

Against the backdrop of this history and definition of how platforms work, we can look to the future with more clarity. The impact of digital platforms to date is undeniable, yet there is certainly more to come. Benoit identifies five major trends that he sees developing for 2024 and beyond:

1. Platform-powered ecosystems. More firms are choosing to centre their business strategy on building an ecosystem of interconnected platforms. For example, Benoit worked with a DIY retailer to expand their business and launch a product resale marketplace, a service platform and a content platform.
2. B2B platforms. While B2B platforms are often less visible because they are not consumer brands, they are nevertheless reshaping industries such as agriculture, the chemical industry and transportation. A B2B bus rental platform is just one recent example.
3. The circular economy. Traditional business models were predicated upon the infinite availability of fossil fuels and were not designed to be sustainable, Benoit points out. Sharing, reusing, refurbishing or recycling is very difficult to do with a value chain model, but platforms offer the ideal alternative – one that is more important than ever in the climate change era.
4. Emerging platform-specific regulations. After years of operating in a relatively unregulated environment, platforms are finally becoming the focus of tailored and targeted legislation. This is sure to affect the balance between innovation and consumer protection that platforms and regulators are continually trying to strike.
5. New technologies. Artificial intelligence is just the tip of the iceberg. The question now is how technologies such as generative AI, blockchain or smart contracts can be combined. These technologies and many more are powering development in two major areas: productivity gains and new business models. See, for example, the emerging conversation about decentralized platforms, based on the same concepts that underpin DAOs.

To go further

It is with this context that Benoit set the stage for the most recent Platform Leaders conference, which dove into these topics, trends and much more. Attended in person and online by hundreds of experts from all over the world, Platform Leaders provides an opportunity for entrepreneurs, academics, practitioners and policymakers to understand the issues and shape the debate. Stay tuned for more valuable insights from the latest conference, check out the full list of speakers and agenda, as well as videos and articles, and join the community to learn about upcoming events and more.

For more in-depth analysis on emerging 2024 platform trends: read the platform economy’s 2024 trends article.