Making sense of platform economy

There is a lot of hype and discussion around platform economy, platform ecosystems and platform thinking, and for good reason. Platform thinking is challenging the current operational environment of companies by providing a new logic of value creation and necessitating new business models. However, since the discussion around platforms is fairly recent and the impacts of platform thinking are still uncertain, there are multiple views of what platforms are and what they mean for society.

In the Platform Value Now project, we have been trying to make sense of the various viewpoints in the discussion around platform economy. I will present some early ideas on Monday at the ISPIM conference. We have tried to structure the discussion by applying metaphors originally created for organisations. However, I feel these might be useful also in understanding emerging phenomena such as the platform economy. The metaphors also cover four different paradigms of social science, namely the functionalist, interpretative, emancipatory and postmodern, and therefore they offer diverse viewpoints to the issue.

Nine metaphors for platforms

The first four metaphors we consider are based on the functionalist paradigm, which offers a mechanical, rather unproblematic view of platform economy. In the machine metaphor, platforms are depicted through the algorithmic functions they offer. Airbnb turns people’s homes into hotels. Upwork connects employees and employers. In general a platform is a machine that transforms input to output. Of course this type of linear transformation process in not very suitable for a phenomenon based on distribution and networks.

The metaphor of an organism, on the other hand, is perhaps the dominant perception of platforms. A platform is a living ecosystem, i.e. a network of users, producers, etc. working together to achieve a common goal. The actors in the network have different roles and share information. The collection, analysing and sharing of information among multiple actors globally as the result of rapidly progressing digitalization is the main driver of platform economy.

The brain metaphor, on the other hand, shifts the focus to the platform itself: to a central node, algorithm or protocol of intelligence, through which the activities are organised. This is typical in the discussion around internet of things (IoT) and industrial internet. The flux and transformation metaphor focuses on the underlying mechanisms of platforms: how are platforms formed, and what makes them succeed or fail.

In the functionalist paradigm the purpose of the platforms is not questioned. The interpretive paradigm, on the other hand, focuses on the intentions and interpretations that people give to platforms. In the culture metaphor, a platform represents the shared code of conduct, the joint agreement between actors. Sharing economy is a good example of this: platforms are seen as both the tools to share unused resources and the rules for sharing. In the political system metaphor the emphasis is on the institutional structures that the platforms create, such as in e-government platforms and electronic voting systems.

The emancipatory paradigm puts emphasis on the power aspects. The instrument of domination metaphor aims to unmask the power relations inherent in a platform. In this view, platforms may operate under a winner-takes-all dynamic and aim to become monopolies. Platform cooperatives oppose this trend. On the other hand, platforms may be in conflict  with incumbent actors and governments, causing power struggle and resistance through regulatory and other measures. For example, platforms such as Uber or Airbnb are seen by some as an unwelcome disruption to the current system, be it housing, transport or something else.

The psychic prison metaphor takes a more unintentional take on power imbalances, and concentrates on platforms shaping the behaviour of their users and utilising the network effect in order to create a strong incentive not to leave the platform. The question of data ownership and privacy are crucial in this view.

The postmodern paradigm critiques the attempt to form grand narratives and assume rationality and direction. The operational environment is a carnival of platforms and the emphasis is on creative destruction. In this view platforms are questioning the conventional ways of doing things, deconstructing the current system and exposing existing assumptions. The key question raised is where will the next disruption be?

Metaphor Description of a platform Example: Uber
Machine Mechanism for transforming input to output The app and server that enables the service
Organism Network of actors serving a common purpose Network of drivers, connected though the app and server
Brain Central node or protocol for coordinating action A way of collecting data and optimising rides
Flux and transform System of information flows The logic behind the software; the principles through which the service operates
Culture Common way of working The set of practices and behaviour of drivers and customers, that constitute what Uber is
Political system Creator of de-facto institutional structure An actor trying to change existing legislation and institutions to more favourable for its operations
Instrument of domination Tool for oppression A tool for oppressing drivers through e.g. pricing mechanism, but also on the more general level through framing them as users instead of employees.
Psychic prison Mechanism for shaping behaviour An opportunity for self-employment and freedom, which ends up being difficult to leave
Carnival Disruptor deconstructing existing structures A disruption that highlights the flaws in the current mobility system and experiments with new ways of operating

Next steps: moving from structuring to operationalisation

While the research is still very much in progress, I feel that metaphors help structure and clarify the discussions around platforms by illustrating different perceptions. By analysing these perceptions it is possible to anticipate further developments. Since platform thinking is becoming increasingly popular, it is important to structure the discussion and broaden the viewpoints in order to capture a more wide range of possible and preferable futures.