The traditional flow of a business’s lifecycle, which includes everything from the design and manufacturing process to the sale and consumption of products and services, is changing in our digital world (Kvitka, n.d.). Digital and physical means of business are consolidating to introduce new ways of allowing interactions between people and businesses (Kvitka, n.d.). The transformation introduced by the merging of these two worlds has developed platform business models (Kvitka, n.d.).
Platform business models facilitate interactions between consumers and producers and employ “elaborate algorithms and data management solutions” in order to enable an elevated user experience (Kvitka, n.d.).
The development of platform businesses started with digital technologies and retail businesses, such as Amazon and Alphabet, and these companies are now leading the digital economy, explains Kvitka (n.d.). These digital-native companies have been the most successful at employing platform business models by offering “multi-sided platforms”. These “multi-sided platforms” are provided by organisations with a specific goal in mind; to give their customers a seamless experience, explains Davenport (2022).
Some well-known organisations have managed to use these “multi-sided platforms” (Davenport, 2022) to not only create seamless experiences for their customers but to also become a valuable tool in their customers’ lives. Some of these organisations are; Uber, Google, and Airbnb.
The development of these industry leaders heading towards platform businesses and the evolution of their product and service offerings follow a similar pattern, according to Deloitte (2022):
- Seizing an opportunity
A company will identify a need in the market that they operate in and create a unique service to satisfy these needs (Deloitte, 2021). Deloitte (2021) explains that if needs are satisfied correctly, the organisation who met these needs could potentially become the leaders in their market. Examples include; “Google’s search engine” and “Apple’s different approach to computing” (Deloitte, 2021).
2. Embracing digital technologies
The company embraces new, digital technologies in order to improve their current service offerings and / or improve their customers’ experience (Deloitte, 2021). These newly adopted digital technologies can potentially boost an organisations success as they are not only focusing on improving their service offering, but taking their customers’ experience into account as well explains (Deloitte, 2021). An example of an organisation who has embraced new, digital technologies is Amazon. Amazon, who initially only sold books, extended their service offering to include a large variety of products (Deloitte, 2021).
3. Offering more with less infrastructure
The company recognises that it can use its infrastructure to allow third-party companies to create value via their platform (Deloitte, 2021). Not only is there an opportunity for organizations to increase their success through providing platforms to their customers, but there is also an opportunity to give other organizations access to these platforms for a fee, explains Deloitte (2021). An organization that makes use of both methods is Amazon.
4. Going beyond your core offering
When an organization reaches a certain level of success with their current service offering, they look for new ways to grow their organisation. One of the methods that can be used to achieve this is through the development of complimentary services, explains Deloitte (2022). An organisation that makes use of this method is Amazon who originally sold Kindle’s but later developed services that complement this product.
References:
Davenport, T.H., 2022. How legacy companies can pivot to a platform model. Harvard Business Review. Available at: https://hbr.org/2022/03/how-legacy-companies-can-pivot-to-a-platform-model
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>
Kvitka, A., n.d. Platforms: A Business Model for Strategic Growth. Global Logic. Available at: https://www.globallogic.com/insights/blogs/platforms-a-business-model-for-strategic-growth/
