Pipelines, platforms, and the new rules of strategy

For decades, the five-forces model of competition has dominated the thinking about strategy. But it describes competition among traditional “pipeline” businesses, which succeed by optimizing the activities in their value chains—most of which they own or control. “Platform” businesses that bring together consumers and producers, as Uber, Alibaba, and Airbnb do, require a different approach to strategy. The critical asset of a platform is external—the community of members. The focus shifts from controlling resources to orchestrating them, and firms win by facilitating more external interactions and creating “network effects” that increase the value provided to all participants. In this new world, competition can…