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How to Design a Billion Dollar Company

BY LUKLESIN · APRIL 9, 2015

Question: What do Airbnb, Snapchat and Uber all have in common (besides multibillion-dollar valuations)?

Answer: None of these startups directly create the value that end users consume. These companies facilitate the exchange of value between users.

Uber does not own or operate any of the cabs its riders use, but it has avaluation of $17B. Pinterest does not post any of the ‘Pins’ that refer 23% of all traffic to e-commerce sites. Vine does not create any videos, yet is thefastest growing app in the world.

This is a colossal shift from traditional business models, where a company creates a product or service and then sells it to its customers.

Some call this the sharing economy or the collaborative economy. Others refer to these businesses as marketplaces or networks. But the overarching term for all of these multisided business models is a “platform.”

Platform startups have been disrupting entire industries (like Facebook and WhatsApp with communication, Youtube with entertainment and Uber with transportation), or are innovating with the goal to disrupt and take over outdated industries (healthcare, insurance, manufacturing, finance and many more).

How Does Design Fit Into a Multisided Business Model?

Let’s start with a quick history of ‘Design Thinking’.

Design Thinking was created to be a step-by-step method to creative thinking and innovation by using a user-centered approach. Unlike analytical thinking, which is often associated with “breaking down” ideas, Design Thinking is a creative process based on the “building up” of ideas.

Design Thinking has evolved throughout the years, from Human-Centered Design focusing on customer experience, to Service Design focusing on customer journeys and touch points between a business and its customer.

This process has worked very well for traditional products and services. However, designing a business that will succeed in this new economy requires us to take Design Thinking one step further. We call this Platform Design.

Platform Design isn’t about making it look pretty. It’s about nailing the experience of user-to-user interactions and making the exchange of value really, really efficient.

Is this similar to Design Thinking? Yes, but a successful multisided business needs to build for both consumers and producers. If you fail to attract either group, your platform won’t succeed. Your platform creates value to one group of users only if the other group of users is also present. The good news is that thanks to the network effects between your different user groups, you can enjoy exponential growth if you succeed in getting both sides on board.

But for Platform Design, this interdependency between user groups makes the task exponentially more complex than traditional product and service startup wiki design. That’s why I say that:

Platform Design = (Design Thinking)^2

What do I mean by this? To explain, let’s go through each of the steps associated with Design Thinking and see how Platform Design is different.