Platform Economy: Putting Customer Value First

Pedro Pereira

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 who allow questions like “what if?” and “what is?” 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 to 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, but end up providing only basic services rather than utilizing the full potential of digitization to exceed customer expectations, enhance the customer experience, and deliver convenience and personalization. For example, a grocery store could build an app that enables customers to order goods and have them 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. Consumers are looking for choices, comparisons, and help with decision-making. The idea that consumers make decisions at the store is no longer the norm—now they are looking to have an experience in the store. Stores need to focus on not only enabling experiences, but also helping people make decisions.

Digital platforms are driving people to change the way they consume. This means companies need to radically change how they offer products and services, how they capture information to deliver meaningful customer service, how they create value in this economy, and finally, how they compete for profits. 

Traditional commerce versus digital platforms

In traditional commerce, companies must 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 discuss bringing the digital platform to traditional retailers, we need to evaluate the way people consume products now. Today’s consumers buy products and services to pursue a lifestyle. That means we need to focus on adding value first, and then move on to the transaction.

That 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 economies—versus products or transactions at the core of traditional commerce—the platform economy provides an edge by enabling companies to offer meaningful and relevant content, products, and services.

In the end, it is all about:

  • Convergence
  • Understanding what is meaningful to the customer
  • A brands’ ability to communicate with and understand its 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. Let’s look at the two sides of the market: 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 see 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?

The 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, a CEO who embraces digital transformation and has a structured agenda in their strategy to make this happen.

Most core companies are typically hinged on two key components: time and performance. After a point, they need a new S curve, which requires investment. Ideally, this should be done in the growth phase rather than when during a downturn. And the answer lies in digital platform ecosystems. Today’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 “I,” “my,” and “mine.” It is imperative to give power to the ecosystem by enabling its components to shine.

The platform economy is about taking risks, experimenting, trying, and learning. We need leaders who believe in, and are willing to invest in, these ecosystems and ask “What if?” and “What is?”

  • 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 don’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 changes 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. Platforms can be 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.


Pedro Pereira

About Pedro Pereira

Pedro S. Pereira is Head of Digital Innovation for Middle East and North Africa at SAP.