Linear and Platform Business Models In A Nutshell

Business Models

For much of the 20th century, businesses relied heavily on linear models to run their operations.

Without the internet, platform business models would not have emerged.

You can determine if your existing business has the most potential to grow by familiarizing yourself with various types of business models.

A platform is a business model that provides value by allowing multiple entities, typically customers and suppliers, to interact and exchange information.

Instead of owning the means of production, platform businesses provide channels of connectivity.

Businesses that use a linear business model generate value as they move goods and services along the supply chain.

A linear company model that expands will also seek to hold more assets, necessitating more capital management.

A platform business model creates value for its end-users and customers by allowing them to communicate and transact with the other side of the transaction, whether that is another consumer or a provider.

As a result, a platform company model will not hold assets but instead enable its users to interchange items.

As a result, the platform business model expands so much more successfully than a linear business model since it can cut expenses even on a large-scale basis.

Platform business models, on the other hand, may not only be able to grow with the size of the market, but they may also be able to grow these markets in a new way.

By and large, linear companies produce value through the creation of goods or services and afterward sell them.

The platform’s main purpose is to create and facilitate a network. Platforms don’t own the tools of production; instead, they invent new ways to connect people.

Linear companies often expand by adding human capital, physical assets, or a combination of the two.

Because these strategies provide value by limiting production, linear companies must devote large efforts to increasing capabilities in order to sell more goods.

Standard Oil, General Electric, Walmart, Toyota, and ExxonMobil, to name a few, were all linear companies in the early twentieth century.

Google, Facebook, YouTube, Airbnb, Uber, eBay, Alibaba, and PayPal are examples of companies that leverage platform business models.

Apple and Amazon, for example, take a hybrid model, combining linear and platform business models.

It can be very profitable and very effective to combine these two business models. This way, a business can use both the strengths and weaknesses of each business model.

Hybrid companies will outperform traditional companies that remain completely linear.

Today, platform business models are the most common type of business because they can grow rapidly and get a bigger share of the market much faster than linear business models.

It’s vital to understand that a platform is more than simply a chunk of technology; it’s also a business model.

Platforms that are successful encourage interactions by lowering the cost of production and allowing for continuous innovation.

Platforms can now grow in different manners that traditional businesses can’t. This is thanks to the new technologies that connect people and things together.

There are still some good reasons why a linear business model is good for small businesses and start-ups. Platform business models, on the other hand, allow companies to grow more quickly so they can get more of the market.


Read more on Crenov8:

Identifying Business Growth Opportunities through Innovation

The new big change in business models and how your organization can adapt in the future

Understanding the similarities and differences between Agile and Lean methodologies

Leave a Reply

Don’t worry! Your email address will not be published.