Networked platforms are changing the game in a way that has never been imagined before.

In a simple sense, a networked platform, brings the consumers and suppliers of services or content together to transact business or exchange ideas.

Platforms – as compared to traditional e-commerce sites – go a step further. They build a complete ecosystem around the service being offered and the consumers of the platform often become the contributors.

Wikipedia is a good example of that. Airbnb has now the taken the hotel industry by storm.

As the author mentions, all the platforms in their nascent stage have a common problem. They struggle to maintain quality as they do not actually own the inventory.

But successful platforms build a strong curative mechanisms through social signals to enforce quality. A simple rating system for an author on Wikipedia or an apartment on Airbnb is one such mechanism.

Over a period of time, successful platforms move up the value chain and disrupt the traditional incumbents in the industry. They reach reliability and scale around the same time through increased adoption as the quality of the platform improves.

The irony is, it happens even when those incumbents are innovating themselves. It is just that the incumbent players never regard the new platform entrants as serious competition.