What is a Network-Based Platform?

Every year there are new buzzwords about technology circulating the industry. You probably see terms like blockchain, internet of things (IoT) and big data regularly take over your inbox. The latest trend revolutionizing the software and technology space are Network-Based Platforms. Network-based platforms have been around for several years in the consumer space, but now, this methodology is being adopted in SaaS and other cloud-based solutions to add value for users.

Network-Based Platform: Definition

A network-based platform is a piece of technology or software that connects users with other members of a community to create mutually beneficial opportunities. Instead of simply being a tool to use within the four walls of an organization, network-based platforms help users find opportunities by connecting them with other users in the network while simultaneously fulfilling a function. The usefulness of the platform snowballs as more and more members join the network. This phenomenon is known as the Network Effect.

What is the Network Effect?

“The Network Effect” exists when the addition of another person or company makes all the existing members of the network better off.

“In a November 2014 video for UPS, MIT Professor Yossi Sheffi described the power and value of the network effect as follows:

“The network effect exists when the addition of another element [to the network] makes all the existing elements in the [network] better off,” explains Sheffi, citing cell phone networks and Facebook as examples. “It’s a positive feedback loop. As the network grows, the more value it provides. The more value [the network] provides, it grows even bigger. It’s the economics of having an extra point on the network, and the fact that you can build a lot more services on the existing network, that’s the power of the network.”^[1]

Therefore, to paraphrase Professor Sheffi, the network effect exists in transportation when the addition of another shipper, carrier, freight broker, or other participant to the network makes all the existing members of the network better off — by more quickly and efficiently matching demand with supply; by executing transactions in a more streamlined and automated way; and by providing everyone with network-based business intelligence and analytics about capacity, rates, on-time delivery, and other metrics.”

A network-based platform is a piece of technology that builds value by leveraging the network effect.

Examples of Network-Based Platforms

Social media – Network-based platforms have become incredibly popular, and very common, at a consumer level. Social media sites like LinkedIn, Twitter, Snapchat and Instagram rely on the network effect to retain users and scale their operations. The more people who join the platform, the more valuable the platform is for everyone else.

Ride-sharing – Ride-sharing technology has also taken off thanks to the network-effect. Companies like Uber and Lyft are based on a network of people looking for rides and people who can offer rides for a fee. This service isn’t merely a regular car rental, instead, these ride-sharing platforms connect thousands of individuals who otherwise would never have an opportunity to collaborate.

Fitness tech – The fitness industry has also incorporated the network effect into their technologies. Fitbit, for example, isn’t only a personal health monitoring device, it’s also a service to connect individuals with similar lifestyle goals. Getting people to collaborate isn’t only an added social benefit for users, it can literally make the technology more effective for achieving fitness goals.

What’s the Difference Between Network-Based Platforms and Traditional Software?

Network-based platforms let users connect and collaborate with other stakeholders outside of the four walls of their offices or homes. As more and more people become accustomed to network-based platforms like social media, companies are beginning to expect similar benefits from their business software. Instead of simply managing day-to-day processes with technology, companies are demanding opportunities to collaborate with other stakeholders in their industry directly through the platforms they use every day.

In the transportation and logistics industry, a network-based transportation management system (TMS) allows users to collaborate with a vast shipping community for greater efficiencies such as accessing truckload spot quotes in addition to contracted carrier rates. Unlike traditional platforms for managing logistics operations, a network-based TMS connects shippers with an entire ecosystem of other shippers, carriers, brokers, freight marketplaces and 3PLs.

The Network TMS

Kuebix TMS is the only true Network TMS. At Kuebix, we’re building the largest connected shipping community driven by our modular, cloud-based TMS that scales to meet the needs of small to enterprise companies. Kuebix customers can manage all their modes and contracted carriers in Kuebix as well as take advantage of savings on truckload spot quotes, opportunities to fill fleet backhaul, and other discounts and benefits because they are part of our network. That’s the Network Effect in transportation management at work!

^[1] http://talkinglogistics.com/wp-content/uploads/2014/11/1_The_Network_Effect_Part1.mp4