Can platform economies replace traditional commerce? The platform economy is about taking risks, learning, and trying. Digital platforms are driving a change in mindset by democratizing the way people look at what they want. Leaders whoÂ allow questions like â€śwhat if?â€ť and â€śwhat is?â€ť to guide the creative process can help organizations leverage platforms to deliver meaningful customer value.
The platform economy is no longer emerging; it has arrived. Linear business models that are resource-heavy and producer-driven are shifting toÂ multi-sided platform models that are demand-driven. Major companies like Google, Etsy, and Uber have already created online structures or are diversifying existing ones, like Amazon as a web platform entering the B2B provider space.
Some companies are trying to build a digital platform,Â but end up providing only basic services rather thanÂ utilizing the full potential of digitization to exceed customer expectations, enhance the customer experience, and deliver convenience and personalization. For example,Â a grocery store could build an app that enables customers to order goods and have themÂ delivered. An extension of the app could operate as a digital twin, adding convenience by guiding users on what to buy.
But what, exactly, does a digital platform economy do?
Platforms push change in mindset
Platforms democratize the way people look at what they want. ConsumersÂ are looking for choices, comparisons, and help with decision-making.Â The ideaÂ that consumers make decisions at the store is no longer the normâ€”now they are looking to haveÂ an experience in the store. Stores need to focus on not only enabling experiences, but alsoÂ helping people make decisions.
Digital platforms are driving peopleÂ to change the way they consume. This means companies need to radically change how they offer products and services, how they capture information toÂ deliver meaningfulÂ customer service, how they create value in this economy, and finally, how they compete for profits.Â
Traditional commerce versus digital platforms
InÂ traditional commerce, companies mustÂ compete at many different levels. Digital platforms disrupt this process because they consume the value and deliver the service. Why, then, do we need brick-and-mortar organizations regulating the environment?
Before we discussÂ bringing the digital platform to traditional retailers, we need to evaluate the way people consume products now. Todayâ€™s consumersÂ buy products and services to pursue a lifestyle. That means we need to focus on adding value first, and then moveÂ on to the transaction.
ThatÂ is why traditional e-commerce is at a loss in the game. Where traditional e-commerce ecosystems push, the new platforms pull. As data lies at the core of platform economiesâ€”versus products or transactions at the core of traditional commerceâ€”the platform economy provides an edge by enabling companies toÂ offerÂ meaningful and relevant content, products, andÂ services.
In the end, it is all about:
- Understanding what is meaningful to the customer
- AÂ brandsâ€™ ability to communicate withÂ and understand itsÂ customers and make recommendations based what is meaningful to them
Dematerializing traditional ecosystems
My role at SAP has involved looking at the concept of the platform, bringing it to customers, and enabling companies to become the platform. Letâ€™s look at the two sides of the market:Â the creators of the service are on one side, and consumers are on the other. To facilitate more trade through the platform so that it becomes an active marketplace, we need to break the concept of suppliers and start looking at them as value creators. Once we aggregate functions on a platform and dematerialize a traditional ecosystem, we seeÂ that many of the activities, and much of the exchange of information that does not happen in a traditional model, is centralized in the platform.
Who makes the decision to move to the platform economy?
TheÂ decision to transition to the platform economy comes either from a strong leader who is trying to grow a company through innovative disruption or, ideally, aÂ CEO who embraces digital transformation and has a structured agenda in theirÂ strategy to make this happen.
Most core companies are typically hinged on two key components:Â time and performance. After a point, they need a new S curve, which requires investment.Â Ideally, this shouldÂ be done in the growth phase rather than when during aÂ downturn. And the answer lies in digital platform ecosystems. Todayâ€™s smart leaders will pursue a strategy that experiments with and invests heavily in disruptive platform economies.
What are the key learnings of building/leveraging a platform?
Shifting your mindset to a platform business model means moving away from the concept of â€śI,â€ť â€śmy,â€ť and â€śmine.â€ť It is imperative to give power to the ecosystem by enabling itsÂ components to shine.
The platform economy is about taking risks, experimenting, trying, and learning. We need leaders whoÂ believe in, and are willing to invest in, these ecosystems and ask â€śWhat if?â€ť and â€śWhat is?â€ť
- What if I started solving problems that are more meaningful to customers instead of pushing products?
- What if I relied on assets that are not mine? Can I let go control with enough governance to facilitate the exchange of value between people I donâ€™t control?
- What if I stopped making money and focused on adding value to my customers? What would happen to by business? Where would I go?
- What if I made these changesÂ and came to a level of balance?
- What is in it for me?
- What is the story you want to tell? Tell the story and honor the MVP.
- What is the upside potential? What do you have as a result of this platform?
- What is the downside and the risk?
The rise of platforms is being driven by three transformative technologies: cloud, social, and mobile.Â Platforms can beÂ an important competitive advantage if allowed to evolve and managed effectively on both the supply and demand side.
Time to get thinking.
For more insight on how platform is transforming business strategy, see Disrupt Or Be Disrupted: Why Platform, Not Pipeline, Will Save Your Business.Comments