Question

What is the difference between the Pipe Business model and The Platform Business model? Can you name a example

Answer 1

Pipeline firms optimize their entire chain of activities of product from material sourcing to sales and service.They create value by organizing their internal labour and resources whereas Platform business model create value by facilitating interactions between the consumers and producers.In pipeline business model the flow of value is linear from producer to consumer whereas in platform business model value is created through exchange of services or content between group of producers and consumers.Pipe business model is a liner model and where value is not build at every stage of its operations where in case of platform business model value is build at every stage.

Example : 5 major mobile phone manufacturers Nokia,Samsung,Motorola,Sony Ericsson and LG they collectively hold 90% of the global industry profit in 2007.In 2015 I phone singlehandedly generated 92% of global profit.The main reason behind this was apples iPhone was successful in building a platform business where it can learned lessons from the companies in the industries.Firms that fails to create platform don't learn the new rules of the strategy.Hence there is switch from pipeline model to platform model by understanding customers need and thus creating more value.