A platform business is defined as a business model with a core focus on generating value by facilitating seamless interactions between many users (Deloitte, 2021). One of the main roles of a platform is to expedite network effects, which can be defined as a phenomenon that occurs when the value derived from a good or service increases as usage of this good or service increases (Currier, 2021).
HOW DOES A PLATFORM CREATE VALUE?
According to Accenture (2018), platforms create value in 3 ways:
- Platforms are developed with a standard set of functions which allows for them to be deployed in an expedited fashion.
- Platforms allow “devices, software and service providers” to be connected via an ecosystem. This improves customer outcomes by driving more applicable and captivating offerings.
- Platforms encourage innovation amongst contributors within the ecosystem.
3 PLATFORM BUSINESS MODELS:
Accenture (2018) states that platforms have become an economic driving force for most industries. As a result, many businesses have adopted platforms as a vital part of their business strategies (Accenture, 2018). The 3 main platform business models are the omni-channel model, the ecosystem driver model, and the modular producer model (Deloitte, 2021).
The Omni-channel Model
This business model is a client-focused platform with the aim of enhancing customer experience as well as using data to not only improve the organizations services but to also improve the way that they are presented to customers. Companies that employ this business model offer access to their products and services both physically and digitally in order to cater for all their customers’ preferences (Sviokla, 2018). Examples of businesses that often utilise this model include banks, insurance companies, and retailers (Sviokla, 2018).
The Ecosystem Driver Model
This business model is focused on connecting consumers and manufacturers (Deloitte, 2021). Organisations that utilise this model offer a “one-stop shopping” experience where they not only make their own products available, but also offer “complimentary products” as well as products from their competitors, explains MIT CISR (2017). Examples of organizations that employ an ecosystem platform are Google, Apple and Amazon (MIT CISR, 2017).
The Modular Producer Model
This business model is focused on scaling product and service offerings (Deloitte, 2021). The products and services provided by organizations following this business model are focused on “plug-and-play”. (MIT CISR, 2017). Organizations that provide these types of products and services, who want to stay relevant, must continuously search for their next innovation (MIT CISR, 2017). PayPal is an example of an organization that makes use of the modular producer model (Deloitte, 2021).
References:
Accenture, 2018. Digital Platforms will define the winners and losers in the new economy. [ebook] Accenture, p.3. Available at: <https://www.accenture.com/_acnmedia/pdf-85/accenture-digital-platforms-pov.pdf>
Currier, J., 2021. The Network Effects Manual: 16 Different Network Effects (and counting). [online] NFX. Available at: <https://www.nfx.com/post/network-effects-manual>
Deloitte, 2021. The Business of Platforms. [ebook] Deloitte, pp.5-6, 8. Available at: <https://www2.deloitte.com/content/dam/Deloitte/za/Documents/financial-services/za-Article-1-The-business-of-platforms.pdf>
MIT CISR, 2017. Digital ecosystem business models are consolidating. [ebook] KPMG, p.54. Available at: <https://assets.kpmg/content/dam/kpmg/xx/pdf/2017/05/cio-survey-2017mit-cisr-special-report-web.pdf>
Sviokla, J., 2018. Four Business Models for the Digital Age. [ebook] PwC, p.1. Available at: <https://www.pwc.com/ng/en/assets/pdf/four-business-models-digital-age.pdf>
