Welcome to the Platform Revolution
In October 2007, a tiny item appeared in an online newsletter aimed at industrial designers—men and women who shape the appearance of everything from coffee makers to jumbo jets. It referred to an unusual housing option for professionals who planned to attend the upcoming joint convention of two industrial design organizations—the International Congress of Societies of Industrial Design (ICSID) and the Industrial Designers Society of America (IDSA):
If you’re heading out to the ICSID/IDSA World Congress/Connecting ’07 event in San Francisco next week and have yet to make accommodations, well, consider networking in your jam-jams. That’s right. For “an affordable alternative to hotels in the city,” imagine yourself in a fellow design industry person’s home, fresh awake from a snooze on the ol’ air mattress, chatting about the day’s upcoming events over Pop Tarts and OJ.
The hosts for this “networking in your jam-jams” opportunity were Brian Chesky and Joe Gebbia, budding designers who’d moved to San Francisco only to find they couldn’t afford the rent on the loft they shared. Strapped for cash, they impulsively decided to make air mattresses and their own services as part-time tour guides available to convention attendees who’d been unable to find a room at one of the city’s hotels. Chesky and Gebbia attracted three weekend guests and made a thousand bucks, which covered the next month’s rent.
Their casual space-sharing experience would launch a revolution in one of the world’s biggest industries.
Chesky and Gebbia recruited a third friend, Nathan Blecharczyk, to help them make affordable room rentals a long-term business. Of course, renting space in their San Francisco loft wouldn’t yield much revenue. So they designed a website that allowed anyone, anywhere to make a spare sofa or guest room available to travelers. In exchange, the company—now dubbed Air Bed & Breakfast (Airbnb), after the air mattresses in Chesky and Gebbia’s loft—took a slice of the rental fee.
The three partners started out focusing on events for which hotel space was often sold out, scoring their first big hit at the 2008 South by Southwest festival in Austin. But they soon discovered that demand for friendly, affordable accommodations provided by local residents existed year-round and nation-wide—and even internationally.
Today, Airbnb is a giant enterprise active in 119 countries, where it lists over 500,000 properties ranging from studio apartments to actual castles in the countryside and has served over ten million guests. In its last round of investment funding (April 2014), the company was valued at more than ten billion dollars—a level surpassed by only a handful of the world’s greatest hotel chains.
In less than a decade, Airbnb has siphoned off a growing segment of customers from the traditional hospitality industry—all without owning a single hotel room of its own.
It’s in the DNA
It’s a tale of dramatic, unexpected change. Yet it’s only one in a series of improbable industry upheavals that share a similar DNA:
- Smartphone-based car service Uber was launched in a single city (San Francisco) in June, 2010. Less than five years later, it was valued by investors at over $18 billion, and is poised to challenge or replace the traditional taxi business in many of the more than 200 global cities it operates in—all without owning a single car.
- China-based retailing giant Alibaba features nearly a billion different products on just one of its many business portals (Taobao, a consumer-to-consumer marketplace similar to eBay) and has been dubbed by The Economist “the world’s biggest bazaar”—all without owning a single item of inventory.
- With over 1.3 billion subscribers visiting regularly to read news, look at photos, listen to music, and watch videos, Facebook garners an estimated $14 billion in annual advertising revenue (2015) and is arguably the world’s biggest media company—all without producing a single piece of original content.
What is their secret?
How can a major business segment be invaded and conquered in a matter of months by an upstart with none of the resources traditionally deemed essential for survival—let along market dominance? And why is this happening today in one industry after another?
The answer is the power of the platform—a new business model that uses technology to connect people, organizations, and resources in an interactive ecosystem in which amazing amounts of value can be created and exchanged. Airbnb, Uber, Alibaba, and Facebook are just four examples from a list of disruptive platforms that includes Amazon, YouTube, eBay, Wikipedia, iPhone, UpWork, Twitter, Kayak, Instagram, Pinterest, and dozens more. Each is unique and focused on a distinctive industry and market. Yet each has harnessed the power of the platform to transform a swath of the global economy. And many more comparable transformations are on the horizon.