Pipeline business models involve selling a product or service to customers through a linear process, often referred to as a “pipeline.” This typically involves identifying a customer need, developing a product or service to meet that need, and then marketing and selling the product or service to the customer. The focus is on maximising the efficiency and profitability of the sales process. In contrast, platform business models involve creating a platform or ecosystem that enables different groups to interact and transact with each other. This can include customers, vendors, partners, and even competitors. The platform serves as a central hub for these interactions and often generates revenue by charging fees or taking a percentage of transactions.
Platform business models can offer several advantages over pipeline models. For example, platforms can leverage network effects, where the value of the platform increases as more people use it. This can create a virtuous cycle where more users attract more users, leading to increased value for all parties involved. Additionally, platforms can often generate multiple streams of revenue, such as through fees, advertising, and data sales.
However, transitioning from a pipeline to a platform business model can be challenging, as it requires a shift in mindset and business practices. It involves moving from a focus on selling a product or service to creating value for a community or ecosystem of users. Successful platform businesses often have a clear vision and strategy for creating and capturing value, as well as a robust and scalable technology infrastructure to support their platform.