March 2021 agricultural “platforms” in a digital era

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4. EVOLVING MARKETPLACE SERVICE 
DELIVERY MODELS AND CHALLENGES
Unique business model characteristics 
As discussed in Section 2, Digital Platforms are 
fundamentally different from traditional pipeline 
businesses in terms of how they create and 
extract value. Pipeline business models typically 
create value by taking a series of inputs and then 
producing products or services that they sell for a 
given price. In contrast, Platform business models 
create value by facilitating interactions between 
multiple types of users. In practice, this means 
that Digital Platform models differ from pipeline 
businesses in that they: 
1. Do not own inventory nor the means
of production;
2. Do not manufacture the product or provide 
the services available in the Platform themselves 
(with the exception of Platform-specific services 
that facilitate the exchange, e.g., logistics and 
delivery services);
3. Do not price the products or services directly 
(this is done by sellers using the Platform) 
but instead charge for enabling access to the 
Platform or facilitating transactions; and
4. Create limited value for users until a critical 
mass is reached.
These unique characteristics have two 
fundamental implications for how to build a 
viable Platform business model. First, the path 
to critical scale should, in theory, be faster and 
easier than in a traditional pipeline business. 
That is because growth is not constrained by high 
capital investment needs and, once the Platform 
infrastructure is established, the marginal cost 
of serving an additional customer becomes close 
to zero. Second, reaching monetization and 
profitability may be trickier in a Platform business 
model since Platforms must generate additional 
value for buyers and sellers—and must be able to 
capture part of that value without discouraging 
users from transacting through the Platform. 
With these reflections in mind, in this section 
we focus on product and service marketplace 
Platform models. We begin by taking a look at 
the current diversity in the market and laying out 
the most important strategic and management 
choices agricultural marketplaces can make in 
defining their business model. We then focus 
on the challenge faced by most models in first 
reaching, and then sustaining a critical level of scale.