After the dotcom boom of previous decades, a new trend seems to alter the ways we conduct business for the next years. This trend, which is called the platform-based business model, is a digital type of business model tailored for the needs of people today and in the near future. In contrast to traditional business models, this digital business model derives its value from the network effects it raises through the interactions among different sides it serves; namely the demand side and the supply side. Examples of this type of business model include some of the most popular corporations today: Uber, Airbnb, and even Facebook.
Traditional and incumbent players in various industries are somehow affected by the success of platform companies just like the struggle of traditional taxi drivers against Uber. The concept of shared usage prevails upon the concept of ownership for costly items and services in every industry; which raises concerns in industries which have not been affected significantly yet.
One of those industries is the education industry which has students as the demand side on one hand and teachers/information providers as the supply side on the other hand. However, until recent years, this industry mostly failed to recognize this shift from traditional business models to digital platform base business models even though they claim to be a source of innovation. Even though there are some pioneers in the industry such as Courseara and Udemy, most of the incumbents are yet to realize the platform potential of their industry. Especially in the US, where there are several thousand Universities serving general purpose instead of specialized aspects, converting into a platform-based education provider by bringing specialized academicians together with interested students would boost the value provided to both sides of the platform.
Probably the most important thing to consider in this case is the network effects just like in any other platform business. When a university thinks of itself as a platform rather than a service provider with full time academicians working for it, they would maximize the value they provide to both sides by closely watching how increasing the population of one side effects both sides. For example, increasing the number of students admitted to a programme would prevent future admissions; because, students would doubt the quality of education with too many peers next to them. In contrast, increasing the number of teaching staff would encourage more students to prefer your platform as their primary source of education. By thinking this way, educational institutions may also shift their pricing strategy from a side of the platform to the other when necessary, challenging the traditional way of education services. Decreasing the cost of having full time teaching staff and all facility related costs are also among the values this shift will bring to institutions.
As a result, the general shift to digital business models with a platform base in every industry also rings the bells for education institutions. Recognizing the values this shift would bring into your institution and industry is a first step towards success in the future. Concerning that in industries where businesses adopted the platform model, the first movers become the dominant players, educational institutions would not want to miss the chance to become a monopoly. Still, even if they recognize the values of opportunities of this new business model, there are some challenges and decisions they have to face; such as the positive and negative network effects and which side of their platform they are going to subsidize/ price.
More insights on the topic with different examples can be found from the link below. Looking forward to read your opinions on the topic!
