Platform thinking

In the shift from physical to virtual demand of products many retailers miss the train. Not because they don’t try to go virtual, but due to the way they enter the online world. The shift from reality to virtual gives rise to a new form of doing business, the creation of platforms. The key to success is largely determined by the usage of the three core elements in platform building.

As technology is becoming a bigger part of society new methods pop-up of doing business. One of the leading trends over the past two-three years is the creation of online platforms or so-called communities. They support an already existing interaction or create new forms of interaction. One of the most important aspects of the definition “platform” is this: it’s not just technology, but it is a totally new business model mainly focussed on sustaining interactions.

A platform is not just technology, but a totally new business model mainly focussed on sustaining interactions
Nowadays, more and more businesses are trying to go ‘virtual’ to beat the competition. The pressure for existing companies to join this platform mindset is rising due to market disruptors like Uber and Airbnb. Not only retailers should fear it, since the Internet of things makes every sector vulnerable to optimisation and potential disruptors.

To stay ahead of the herd the first step is to see where disruption can take place by looking at the three mechanisms of platform disruption: substitution of the middleman, creation of new types of value, and connection of fragmented and inefficient markets. After determination of the points of disruption, the structuring and building of the platform have to begin.

Three pillars of platforms
Looking at all the platforms that are present on the market a general set-up can be distinguished, which applies to all.

As the name states, this pillar draws and maintains the flow of visitors and registrations to the platform. It is also called the community pillar. Here value is exchanged in some form of interaction. This can be through interaction between users (Social networks), users exchanging items (Marketplaces) or even implicit like Nest, which shares data with the Nest-community to benchmark the electricity usage. However, to support these interactions well-organised tools and technology are needed.

The toolbox is the cornerstone on which value is created. This is the essential part in the realisation of the platform, but it has little value without the other two pillars. It offers the technological tools (infrastructure) for users, partners or even implicit communities to build and create value. These tools can be present in a very dominant way (PlayStore) or act on the background (Snappcar). Creating an effective platform gives rise to the problem of abundance. To counter the drop in relevance for users and partners of the platform it is important that matching is done correctly. This leads us to the final and most powerful pillar: matchmaker.

As the platform grows, the problem of relevance grows as well. It is, therefore, important to use data gathered from platform usage and users. With this data, the most relevant content, goods, services and users can be matched to the needs.

However, in some cases value is created exclusively in this pillar. These platforms are called “data-intensive platforms”. This shows that in building a platform it is not a choice between one or the other, but it is a combination of all three pillars that creates a successful platform. Depending on the goal of the platform the configuration of how these three pillars work together can change.

Picking the right configuration…
As stated above, all pillars are present on every platform, but the configuration in which they are used differs. However, three basic configurations can be distinguished: community, technology or data configurations on which one of the pillars is the main focus point.

The choice in configuration lies in the source from which value is created.

Key value = interaction
The main focus should be the community pillar. Supporting the interaction in the best possible way. This layer is shown mainly on primary social platforms like Facebook, Instagram, Snapchat.

Key value = development
If development is the main driver for value, the infrastructure or tools are the most important pillar to work with. By offering an easy method to support all types of development through a well-structured stack (back-end). With the upcoming of Augmented Reality and Virtual Reality new development stacks are formed, for example, the Microsoft Dev Center for the Hololens. Also, other concepts rely on this layer like PicNic, Uber etc.

Key value = data
Every platform uses data and creates value with it, but data is not the main driver of value. However, in some cases, the value of the platform is directly derived from its data streams. Those platforms are less easy to recognise, due to the fact that the users are mainly electronics. For example: the new trend of learning home devices like Google Home and NEST, which learn from and communicate with other devices in the world to optimise their performance.

So, now you have all the information to take the first steps in building a sustainable platform strategy. This article is part of a series of articles on platform strategy, on which the next articles will point out specific areas of attention.

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