A digital platform is any network that facilitates connections and exchanges between people (exchanging goods, services, or simply just communications). Facebook, Uber, and Airbnb are all examples of digital platforms, giving you an idea of the magnitude of this trend. In fact, digital platforms are turning established business models on their head – just think of the impact Airbnb is having on the travel sector-leading many traditional, non-tech businesses to consider transitioning to or incorporating a platform-based model.
But why are digital platforms so significant right now, and what can your business do to prepare for this transformative trend? Read on to find out.
Why are platforms such a key trend now?
This notion of facilitating connections between one party and another is hardly new. If you think about it, a newspaper is a platform that connects advertisers to readers. Or a shopping mall is a platform that brings consumers and different brands together under one roof.
What’s new about today’s most powerful platform businesses is that the connections they facilitate take place online. In other words, digital platforms draw upon related technology trends, such as mobile devices, artificial intelligence, big data, cloud computing, and automation. All these tech trends have combined to create a perfect storm, giving rise to a new wave of highly successful digital platform businesses. That’s what makes this trend so significant right now.
5 questions to help your business leverage the digital platform model
If you think digital platforms are just for tech companies, think again. Across many different sectors, organizations are investing in digital platforms – be they platforms of their own making, or collaborations with existing digital platforms. This revolution is impacting all kinds of companies, from small businesses and nimble new startups to large corporations with a more traditional pipeline business model.
That’s why I believe every company should have a platform strategy. However, for many businesses, transitioning to or incorporating a platform strategy is far from an easy, overnight transition. Digital platforms often mean a fundamental change to business models and strategy, which means you’ll have to think carefully about how best to leverage the platform model to drive success.
The following five questions will help you do just that.
1. Where’s the value?
This concept of creating or capturing value is essential to the success of any platform. Therefore, a good starting point is to ask how your intended users would benefit, both from the platform itself and by connecting with others in the platform. At this stage, many businesses try to position themselves as “Uber for [insert product here],” but I believe it’s more important to focus on your unique value proposition as a business. To put it another way, what is it you do best, and how could a platform help you build on that success?
This doesn’t necessarily mean abandoning your existing business model. Rather, there might be opportunities to create a platform-powered additional revenue stream or service. As an example, rail transit company Siemens Mobility, part of Siemens AG, has created the Easy Spares Marketplace – a platform that brings together manufacturers, dealers, and customers, allowing users to order all the spare parts they need in one place.
2. Do you have the necessary platform skills?
Many traditional corporations simply don’t have the expertise – or even the culture – to seamlessly adopt a platform business model. This means you may need to look outside the company to the world of entrepreneurs and tech startups and potentially create a joint venture to access the skills you need.
A great example of this comes from Nissan, which has been in talks with Didi Chuxing (China’s version of Uber) to create a ride-sharing service centred on Nissan’s electric vehicles.
3. How will you attract people to your platform?
Without people, platforms fail. Facebook, for example, relies on its community of users to generate and post the content people want to read and see. Just as Airbnb relies on attracting people with homes and rooms to rent.
The community is critical to the success of your platform. You, therefore, need to work out how you’ll “seed” users to your platform – and this may involve offering free services, low prices, reduced commission, or a uniquely specialized offering. Think of how Amazon cornered the market by offering books cheaper than any other bookstore.
4. How will your platform encourage and support user interactions?
Ideally, your platform would become the core of the community it serves – it needs to be the place where consumers or users connect with people who can provide the information, goods, or services they need.
This means your platform needs to encourage and facilitate valuable interactions between participants. A key part of this value comes from developing appropriate governance policies on what is and isn’t acceptable behaviour on the site, in order to ensure users continue to have a great experience.
5. How will your platform integrate future technologies?
Digital platforms rely on other tech trends, but one tech trend, in particular, could prove a significant competitive challenge for platforms: blockchain technology. With blockchain, users can cut out the middleman and transact directly with others in a safe, secure way – potentially cutting out the need for middlemen platforms like Uber and Airbnb. As an example, the Arcade City ride-sharing app – which was created in response to one driver’s frustration with Uber’s way of working – is based on blockchain technology and has been described as an Uber killer.
The good news is, if you’re moving into platforms now, you have the opportunity to leapfrog existing platforms and harness new technologies like blockchain to your advantage at the outset. Ask yourself, is there an opportunity to use blockchain to create a new, more decentralized way of doing business in your industry?
Where to go from here
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