Digital platforms

Digital platforms as a business model are becoming stronger. An article from the World Economic Forum highlights the impact of the digital platforms on our economy. It is predicted, among other things, that by 2030, 30% of all economic activities will take place via digital platforms.

Already today, 7 out of 10 of the world's most valued companies are so-called platform companies. This also applies to startup companies, where platform companies account for 7 out of 10 companies that are valued over one billion dollars.

The foundation of a platform is very simple. It is about creating a space where producers and consumers can integrate and create value. This phenomenon is really nothing new, but has been manifested in different ways. One example is shopping centres that bring together stores and customers, another is traditional newspapers that bring together advertisers and readers. The big difference is that digital technology and the internet make it possible to increase the scope and efficiency of platforms. Today we can see platforms in a number of different sectors and industries, such as mobile (Apple and Android), E-commerce (Amazon and Ebay), transport (Uber and Lyft), but also within the industry (Mindsphere and Predix) and agriculture ( MyJohnDeere).

Previously, most companies have been based on products that have been created and refined through a classic horizontal value chain. This view is challenged by platforms that bring together and facilitate value creation between two or more players. In the case of Apple, the Appstore enables the value creation process between Iphone users and application developers. A platform's strongest asset is the network and ecosystem of producers and customers that the platform possesses. This network can create self-reinforcing and value-adding effects through so-called network effect. A network effect is described as an effect where the usefulness of a product or service increases as more users join the network. In Apple's case, more application developers mean more benefit to Iphone users and more users are more beneficial for application developers.

In order to handle the platform revolution that is expected to happen, and which is already under way, companies should ask themselves.

1. Do we know enough about platforms to be able to make strategic decisions about this today?

2. What is our role in a future platform economy? For example, should we own a platform or be contributing to someone else's platform?

Read more here.

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This article is categorised as Intermediate  |  Published 2019-05-15  |  Authored by Karin Wilson