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Platform Thinking demystified

12 November 2019
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Reading time: 6 minutes

Digital platforms such as Uber, Airbnb and Amazon have revolutionised the B2C market. Platform models and ecosystems have also gained a foothold in B2B markets – and of course can be seen in almost every business model in the digital industry. Companies that operate outside the consumer market are faced with the question of how to best apply a platform model in their business.

The benefits of digital platforms for customers and suppliers are clear: the platforms enable direct interaction, users can access information and offers anytime and anywhere, and companies increase their reach and efficiency. However, many B2B companies have difficulty determining how to make platforms work for them – usually because they have not defined a clear positioning with regards to their platform strategy.

Platform models and ecosystems

Parker et al. (2016) define a ‘platform’ in this context as a business model that uses technology to connect people, organisations and resources in an interactive ecosystem. The use of platforms as a technology often causes confusion, but also inspires and opens up opportunities – creating an ecosystem concept comprising different types of platforms with different user roles.

Digital ecosystems generally consist of at least five components: business, data, development, service and infrastructure platforms. Which of these five areas a company makes its main focus largely depends on its positioning and the platform strategy it decides to pursue.

Platform models and ecosystems

The five components of the digital ecosystem

Business platforms – sometimes also known as ‘transaction platforms’ – are platforms where the company acts as an intermediary to facilitate value-creating transactions between suppliers and customers, but no longer owns any resources. Well-known examples such as Uber and Airbnb, as well as YouTube and LinkedIn, use models that focus on optimising and orchestrating platform interactions using data to drive positive network effects:

1. Interactions create data
2. Integrated data platforms process this data so that the business platform, filter mechanisms and orchestration can be improved
3. Improved filters enhance the value of interactions for users
4. Higher quality interactions make the platform more interesting to new users
5. This increases the number of interactions
6. And, in turn, usually increases the value of the platform itself.

Data platforms can also be considered separately from a platform business model. A data platform facilitates the exchange of data between suppliers and users. Data is an asset with value – hence the term ‘data economy’ – that provides a clearly defined economic context for the parties involved. On a technical level, data platforms often use data lake architectures. This enables processed data to be made available to users in applications by utilising a combination of multiple data sources, data analytics and machine learning. However, decentralised approaches can equally be used, such as the IDS (International Data Spaces Association) reference architecture that does not require central data storage. Instead, it connects platform users for peer-to-peer exchange and decentralised data analysis.

Development and service platforms take us into the realm of actual production and the provision of products and services. Development platforms are dominated by linear value chains, generally using CI/CD pipelines for their technical implementation. The platforms often need to be used for development work, both internally and by external partners. Quality assurance and speed of delivery are directly interlinked in the integration of these platforms. Due to the maturity and target market of the product or product range, the entire chain between producer and consumer must be as seamless as possible. The interaction concepts and customer journeys developed in CX/UX play a key role in the interaction with end users.

Just like data platforms, development and service platforms do not necessarily need to be based on a platform business model. Product quality usually plays the crucial role, so that producers can achieve a strong position without their own platform business model with the right ecosystem and partnerships.

Finally, infrastructure platforms are an essential part of the ecosystem. They form the technical basis for the entire ecosystem and also provide the conceptual foundations and guiding principles.

Depending on the openness of the ecosystem, a shared approach to an integrated, coupled system can result, in which all the components exchange data to enable the platform to fulfil its specific function and continuously improve. Rapid learning from interactions, development and deployment creates a vital basis for future product and business innovation. If these main components are defined with clearly differentiated responsibilities, an explicit and tangible basis for a company’s positioning and core business is formed, as well as areas in which it makes more sense to look for a partner within the relevant ecosystem due to a lack of time or in-house expertise.

Positioning in an interdisciplinary context

Networked and integrated consideration of a company’s positioning is also worthwhile from a socio-economic point of view – after all, it isn’t developed in a vacuum but is influenced by a wide range of drivers and indicators.

From a business perspective, these factors could include trends in the global market – which is dominated by US and Chinese platform firms such as Amazon and Alibaba – or the call to use more innovative methods from open innovation or lean start-ups in the company’s innovation processes. In the social context, new ideas are being developed for the organisation of work (new work), climate discussions are leading to new carbon-neutral urban concepts and, at the same time, individual digital networks are constantly growing via a wide range of both new and established platforms. From a technological standpoint, we are developing more and more opportunities for interaction using AR/VR/MR and intelligent data processing. We are discussing distributed ledger technologies as a promising approach to organising interactions in a decentralised infrastructure, independently of intermediaries. Technology is also a key driver for companies when it comes to replacing outdated systems and using new technologies to create new opportunities.

The common factor in all these drivers is the focus on open, distributed and intelligently networked structures. In the business environment, this is a change in methodology from lean thinking to the platform and ecosystem models of platform thinking. In the social context, the change from statically organised structures to dynamic networks of participants. And in technology, replacing homogeneous, centralised system landscapes with distributed, heterogeneous systems that offer a range of opportunities for interaction and human-machine interfaces.

In summary, a paradigm shift can be seen, clearly showing that considering each area in isolation will no longer be sufficient in the future. Adaptability and flexibility are the most important overarching quality attributes. At the same time, greater transparency means that more attention needs to be paid to the common context in a company’s positioning. Innovation alone is no longer enough – the need for a networked view is, however, less a limitation and more of an opportunity to help shape the platforms and ecosystems of the future.

Germany

Principal Consultant

Stephan Janisch

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