What cities can teach us about building platforms

These days it seems like everyone wants their service to become the next big platform – every budding entrepreneur begins their pitch by stating their aspiration to become the next Uber, Airbnb or Facebook of their field.

But what do we know about building technological platforms? People know a platform when they see one, but in some important respects, we actually know very little about how they develop. They have not been around long enough to study in great detail and dissect their constituent parts in order to understand their anatomy. Instead, we need to find another specimen which shares some of the DNA of the species platformicus. We may have just such a genetic cousin in a “technology” that has been around for several thousand years and is continuing to evolve and grow – the city.

How the city relates to platforms

At first glance a city might seem very different from a technological platform. Cities are jungles of concrete and steel; they are towering, glittering examples of humanity’s imposition on the natural world. Cities allow us to defy nature, to live and grow in population sizes that would have been unsustainable in earlier periods of human history. It is not an exaggeration to say that they are one of the most important innovations in human history.

Cities are really transformative for the way they enable one thing: connections between people.

However, cities are not ultimately defined by the steel and the concrete, or the road networks or the infrastructure. They are not simply ways to stack human beings in increasingly compact spaces. Cities are really transformative for the way they enable one thing: connections between people. And that one thing is what binds cities and platforms together in their genetic similarity.

Maximize network connections

When a city’s infrastructure and environment facilitates increasing interactions between people, then there are more connections and, as a result, more ideas, more patents, more GDP per head, more jobs and more productivity. Theoretical physicist Geoffrey West, a leader in urban theory and the scientific modelling of cities, noted in his book Scale that “the job of a city is to facilitate and enhance [the continual exchange of information, goods and money between people] by providing the appropriate infrastructure . . . to encourage and increase social connectivity”.

Similarly, platforms create value by facilitating connections between consumers with producers, and indeed, in cases such as Airbnb and Uber, by allowing consumers to become producers. Everything about a platform is focused on making it easier to create value through increased connectivity. Dartmouth professor Geoffrey Parker and his fellow authors in their book Platform Revolution describe platforms as places where “rather than flowing in a straight line from producers to consumers, value may be created, changed, exchanged and consumed in a variety of ways and places, all made possible by the connections that the platform facilitates”.

The number of connections between a group increases much faster the total number of people in the group itself.

Why are connections so important? They are important because of the way they scale. Warning, here comes some math, but its pretty basic, I promise. If there are two people then there is 1 connections between them (2 x (2-1))/2. That is, if you are in the group you can only connect with the group size minus one (you can’t connect with yourself). And we divide by two since you can’t count the connection between you and person A twice. See, told you it was easy.

With this formula you can see that each time the number of people in the group doubles, the number of connections roughly increases fourfold. Thus, the number of connections between a group increases much faster the total number of people in the group itself. That is why cities and platforms are so similar, they are entities that create value in proportion to their ability to maximize connections. In other words, cities are a technology that maximize connections. From our perspective, urbanization offers plenty of lessons that are applicable to the growth of technological platforms.

Lesson One: Platforms, like cities, can’t be entirely planned

We noted that cities are more than just their roads and buildings. Instead, cities are complex adaptive systems that evolve and change over time like an organism. Like any complex entity that changes over time, it is difficult to fully predict its outcome or plan its evolution. We can see evidence of this in the recent attempts at creating massive planned cities to cope with the growing trend of urbanisation. West in his book Scale points out that “most urban development and renewal – and in particular almost all newly created planned cities such as Washington, D.C., Canberra, Brasilia and Islamabad – has not been very successful”.

Urban planning failed when it tried to plan for the highways and buildings and not the people that used them.

Trying to plan a city is difficult since you don’t know which small change might impede the city’s ability to maximize connectivity. The urban writer Jane Jacobs believed that urban planning failed when it tried to plan for the highways and buildings and not the people that used them, “project planners and urban designers assume they can create a promenade simply by mapping one in where they want it, then having it built. But a promenade needs its promenaders”.

Platforms are similar in this sense. You are trying to encourage, foster and grow connections. But it is difficult to fully understand the myriad ways in which people will want to connect and what will make that successful. Why do you use Facebook and not MySpace? Why was WhatsApp successful when there were other similar messaging platforms? Why did Slack conquer the workplace messaging field in the face of so many competitors?

The one thing many of these platforms have in common is that they adapted to their communities. They listened to their users and they tried to use their metrics to understand what worked and what didn’t. The key thing from cities is not that trying to create a city is impossible but that it will take time and you need to ensure you listen to the “promenaders”. This is why planned cities such as Washington D.C., to take just one example, have evolved into more “successful” cities over time. They took note and improved public transport and implemented bike schemes, for instance. Platforms, like cities, need to leave room to evolve and change to the needs of their “promenaders”.

Lesson Two: Platforms, like cities, develop their own gravity

We know that the world is urbanising at a faster rate than ever before. Well over half of the world’s populations currently live in cities and this percentage is expected to rise to over 66% by 2050. The number of cities continues to increase. But the interesting thing is that this does not seem to have occured in the classic bell curve that usually explains everything from exam scores to height distribution. Instead cities seem to be distributed by a “fat tail” distribution. This means that there are more outliers than under a normal distribution which have more in the middle and less at both ends of the spectrum.

These cities develop gravity fields similar to a large planet and pull all resources, people and companies into their orbit.

A UN development report in 2014 noted that there were 28 megacities with over 10 million people whereas in 1990 there were only 10. One reason for this increase is that cities have an inherent drive to get bigger. Like an organism with an innate desire to survive and expand, cities are driven by an urge to grow ever larger. One of the reasons is that the larger a city becomes, the more efficient it is. If a city doubles in size it needs only 85% more petrol stations, 85% more roads and 85% more general infrastructure. That’s a saving of 15% every doubling in size. And as it grows (remember our maths) the number of connections starts to increase exponentially.

As these cities grow larger they become globally connected entities that resemble nation state more than other cities. Think New York, London, Tokyo or San Francisco for example. These cities develop gravity fields similar to a large planet and pull all resources, people and companies into their orbit. The result is a growing inequality between these global megacities and their smaller domestic cousins. As a recent New York Times essay pointed out, smaller cities cannot compete with these behemoths and either stop growing or go into decline.

We can easily imagine a similar fate for platforms. It would be difficult to have multiple Facebooks, Airbnbs or Ubers. The whole point of these platforms is that they have one market or meeting place. If there were lots of Airbnb’s it would be more difficult for both consumers and producers to know how to create value. Similarly with social networks. In a particular area a certain platform will develop its own gravity that will start pulling in resources around it. This will make it more difficult to have multiple platforms within its orbit.

Lesson Three: Platforms, like cities, are about people

We often look for patterns in order to replicate the success we see elsewhere. Companies do the same, copying strategies and policies to engender the same growth or profit. And cities follow this same trend. Planners see cities growing and are blinded by the steel and the concrete and believe this to be the primary manifestation of a city. The more buildings, the more roads, the more infrastructure the more successful the city.

However, this is to miss the point. These physical entities are merely in the service of the people that inhabit that city and not the other ways around. As West notes, “the real essence of a city is its people…this may seem obvious, but the emphasis of those who think about cities, such as planners, architects, economists, politicians, and policy makers, is primarily focused on their physicality rather than on the people who inhabit them and how they interact with one another”.

Unfortunately, like city planners, internet businesses often believe that the goal is efficiency.

If we learn anything from urban theorists such as Jane Jacobs, it is that the goal of a city is to provide the infrastructure to facilitate social interaction, to enhance a feeling of community. In a sense, to make the city feel more personal.

This idea, of a city being about its people, is something that resonates with what we are trying to do at Intercom. The goal of Intercom is to make internet business personal, to make the experience of being on a website feel more like the interaction you would have in your local coffee shop. To realize that goal, we are actively encouraging and fostering connections with other technologies and companies.

Unfortunately, like city planners, internet businesses often believe that the goal is efficiency. It is much more efficient to get your customers to fill in a form rather than to chat to someone. In the same way it is much more efficient to dig up a park and build more offices and apartments.

Jacobs saw the folly of this when she opposed the creation of a four lane highway through Greenwich Village in New York. It was a more efficient design for moving people, certainly, but it destroyed the whole purpose of the city which is to encourage the personal experience of communal meeting places and parks and pedestrian streets. Sure, we need buildings and transportation but if we remove all the places where we can have human and personal interactions, then what is left but cold concrete and steel?

Build platforms like cities

The science of cities continues to show us the secret patterns behind one of our most important inventions. We can learn many lessons from cities, but the most important is that they are, like platforms, about enabling connectivity between people. Everything else – the ideas, the value, the business opportunities and the growth – is created as a result of that connectivity.

There are so many variables involved that you cannot always plan for the growth or the value. You need to focus on the people, your community, and ensure that there is a balance between the personal and physical which enhances connectivity. If you do that, your platform, like your city, will have the best chance of success.