Platforms invert the firm. Because the bulk of a platform's value is created by its community of users, the platform business must shift its focus from internal activities to external activities. In the process, the firm invertsit turns inside out, with functions from marketing to information technology to operations to strategy all increasingly centering on people, resources, and functions that exist outside the business, complementing or replacing those that exist inside a traditional business.

The language used to describe this process of inversion differs from one business function to another. In marketing, for example, Rob Cain, the CIO of Coca-Cola, notes that the key terms used to define systems of message delivery have shifted from broadcast to segmentation, and then to virality and social influence; from push to pull; and from outbound to inbound. All these terminological changes reflect the fact that marketing messages once disseminated by company employees and agents now spread via consumers themselvesa reflection of the inverted nature of communication in a world dominated by platforms.2

Similarly, information technology systems have evolved from back-office enterprise resource planning (ERP) systems to front-office consumer relationship management (CRM) systems and, most recently, to out-of-the-office experiments using social media and big dataanother shift from inward focus to outward focus. Finance is shifting its focus from shareholder value and discounted cash flows of assets owned by the firm to stakeholder value and the role of interactions that take place outside the firm.

Operations management has likewise shifted from optimizing the firm's inventory and supply chain systems to managing external assets the firm doesn't directly control. Tom Goodwin, senior vice president of strategy for Havas Media, describes this change succinctly: "Uber, the world's largest taxi company, owns no vehicles. Facebook, the world's most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world's largest accommodation provider, owns no real estate."3 The community provides these resources.

Strategy has moved from controlling unique internal resources and erecting competitive barriers to orchestrating external resources and engaging vibrant communities. And innovation is no longer the province of in-house experts and research and development labs, but is produced through crowdsourcing and the contribution of ideas by independent participants in the platform.

External resources don't completely replace internal resourcesmore often they serve as a complement. But platform firms emphasize ecosystem governance more than product optimization, and persuasion of outside partners more than control of internal employees.

Can you explain, what the platform (paypal) did to beat traditional banking in term of Platforms invert the firm. with references please