The platform economy has arrived



Major companies like Google, Etsy and Uber have already created online structures or are diversifying existing ones, like Amazon as a web platform entering the B2B provider space. Then there are those that are trying to build a digital platform, but end up providing only basic services to users, without optimally utilizing the full potential of digitization to exceed customer expectations, enhance the customer experience and deliver on the needs of convenience and personalization. For e.g. a grocery store could build an app that helps customers order and get goods delivered. However an extension of the app would be a personal assistant that would operate as a digital twin, guiding and helping users on what to buy, thus providing added convenience.

But what does a digital platform economy exactly do?

 

Platforms push everybody towards a change in mindset

Platforms democratize the way people look at what they want. People are looking for choices, comparisons, help with their decision-making etc. The idea that my decision will happen at the store is no longer the norm. Now people are after the experience in the store. Stores influence not only the enablement of experience but their focus also needs to be on helping people in the decision-making. Digital platforms are driving everybody to change the way they consume. This means companies need to radically change how they offer what is consumed, how they capture information that can help them deliver meaningfully, how they create value in this economy, and finally how they compete for profits.

 

Traditional commerce versus digital platforms

When we look at traditional commerce we realize the challenge is that companies have set themselves up to compete at so many different levels. However, digital platforms disrupt this process because they arrive, consume the value and deliver the service. So why then does one need brick and mortar organizations regulating the environment?

Before we talk about bringing the digital platform to traditional retailers, we need to evaluate the way people consume products now. Today people buy to pursue a lifestyle. So instead of giving people a brick and mortar, we need to give consumers a lifestyle. We need to focus on adding value first, and then move onto the transaction.

And this is why traditional ecommerce is at a loss in the game. Where traditional ecommerce ecosystems push, the new platforms pull.  As data lies at the core of platform economies versus product or transaction at the core of traditional commerce, the platform economy enables an edge by matching the supply and demand of meaningful and relevant content, products or services.

In the end, it is all about

  • Convergence
  • Understanding what is meaningful to the customer
  • And the brands’ ability to understand and talk to the customer and recommend based on the understanding of what is meaningful to the customer

 

Dematerializing traditional ecosystems

My role at SAP has involved looking at the concept of the platform and bringing it to the customers and enabling companies to become the platform. Lets look at the two sides of the market, with the creators of the service on one side and the consumers on the other side. To facilitate more trade through the platform so that it becomes an active market place we need to break the concept of suppliers and start looking at them as value creators. Once we aggregate functions on a platform and dematerialize a traditional ecosystem, we learn that many of the activities and much of the exchange of information that does not happen in a traditional model, is centralized in the platform.

 

So who makes the decision to move to the platform economy?

A decision for such a transition comes either from a strong leader in the company who is trying to grow through innovative disruption or, ideally, the CEO embraces digital transformation and has a structured agenda in his strategy to make this happen.

Most core companies are typically hinged on two key components – Time and Performance. After a point, they need a new S curve, which requires investment, but ideally this needs to be done at a time when you are in the growth phase rather than doing when things are on the downturn. And the answer lies in Digital Platform Ecosystems. Today’s leader, if he is smart enough, will pursue a strategy that starts experimenting and investing heavily in these disruptive platform economies.

 

What are the “key learnings” of building/leveraging a platforms?

  • Switching your mind to a platform business means moving away from the concept of “I” and “My” and “Mine”. It is imperative to give power to the ecosystem by enabling the components to shine.
  • The platform economy is about taking risks, experimenting, trying, learning
  • We need leaders that believe in and are willing to invest in these ecosystems
  • During the creative process, we need leaders who can ask the What if’s and the What is…
    • What If I started solving problems that are more meaningful to customers instead of pushing products?
    • What if I relied on assets that are not mine? Can I let go control with enough governance to facilitate the exchange of value between people that I don’t control?
    • What if I stopped making money and focus on adding value to my customers? What would happen to by business? Where would I go?
    • What if I was so friendly and come to a level of balance?
    • What is in it for me?
    • What is the story you want to tell? Tell the story and MVP
    • What is the upside potential? What do you have as a result of this platform
    • What is the downside risk?

On the technology side, the rise of platforms is being driven by three transformative technologies: cloud, social, and mobile. Platforms can be an important source of competitive advantage if allowed to evolve and managed effectively on both supply and demand side. Time to get thinking.

Pedro S. Pereira, Head of Digital Innovation, SAP MENA