The new platform economy - opportunities for SMEs on platforms in a digital ecosystem
The platform economy is a major driver of digitalisation and whose market power now impacts many sectors. In the following section, we set out to clarify what we understand by the term platform economy and the opportunities that can arise for traditionally organised companies.
Characteristics of platforms
Platforms are characterised by the fact that there is a platform operator (web/app/combined) that makes this service available for at least two parties. The large platforms include: Google, Amazon, Facebook and Alibaba (GAFA). In Germany, there are now also many platforms in different sectors, for example, ImmobilienScout24, Check24 or young start-ups, such as Holidu, Mycabin or Comii; moreover, in this ongoing process, many smaller ones appear almost daily.
These platforms assume the role of an intermediary between supply and demand and become sort of gatekeepers for specific sectors and companies. The ease of use and, frequently, the huge choice make these platforms the most important distribution channels for the services that are provided.
Alternative applications in practice
Companies can use platforms that already exist. Then again, they should think about whether and to what extent a (future) platform could have short-term and long-term effects on their business model.
Example
AirBnB does not own any hotels and therefore has no tied-up capital. The range of its offering is nevertheless larger than that of the biggest hotel chains in the world put together. Despite the lack of own capacities, AirBnB’s enterprise value is extremely high when compared with the traditional market participants.
In practice, it will often be difficult to assess whether and to what extent a platform could constitute an advantage. It is therefore advisable to change the view on the market as regards your own service operations, service or the products. Consequently, within the scope of a platform strategy, you would no longer act as a producer, logistics services provider, service provider or sales partner. Instead, you step into the role of a ‘market shaper’ by defining future rules that are based on the optimal conditions and the needs of market players.
The key benefits of acting as a platform operator
By ‘organising’ a market in the traditional business model to-date it would be possible to shape the overall market itself. This requires, apart from the market participants and the aspects that are newly enabled on the platform, the integration of the previous product (or service and the service operations). The primary objective is for your own customers and suppliers to join the platform. A further objective has to be to compensate or increase the previous margin via the platform strategy and its offering.
Thus, a sole proprietorship can, for example, sell its own products on marketplaces, such as eBay or Amazon. However, these suppliers will be frequently overlooked in the ‘big wide world’, particularly, of Amazon. Therefore, besides your Amazon presence, it is essential to create your own online store, too, in order not to lose your direct customer relationships. Such an own online store is however not yet a platform but merely a preliminary step. A lucrative opportunity could be to develop a ‘regional platform’ on which small suppliers that operate locally could meet your customers in the surrounding area.
On the one hand, you can obtain much more market intelligence via a platform, e.g., about the cross-linking paths and prices. Here, data likewise form the basis for further deeper analysis using AI including shopping cart analysis as well as an evaluation of order placement times and delivery situations, etc. On the other hand, with a platform you would be able to play a part in determining the rules in a specific (niche) market. Furthermore, the information edge will allow you to optimise the previous business model and you will also be able to adapt it to new circumstances faster and better than the competition.
Benefits for market players
Nearly every market player is searching for new distribution channels, customers, suppliers and products. Here, a platform provides easy access to new relationships. Training on the technology is not necessary, or only to a small extent, as the platform should be ‘easy’ to use and the costs will be amortised via new customers, suppliers and products/services as well as the transaction costs that are charged and invoiced by the platform operator.
Expansion of platforms into a digital ecosystem
The development of platforms is continuing. Many businesses - especially young successful start-ups - have thus realised that existing platforms are able to and have to open up. Opening is the term used for interfaces (technically API) to platforms for service operations. These days, many platforms thus allow complementary products and services to connect to the respective platforms. These service operations enhance the added value and benefits of the platform for other participants; these operations are frequently automation solutions for updating and enabling the integration of the products of the market participants on the platform. In turn, the platform is able to develop further in this way.
Example
In this regard, a solution for a property portal can be mentioned here as an example, since it makes it possible for a commercial landlord to upload individual properties to the portal more quickly via an add-on product. This is achieved through the use of AI to generate texts for the advertisements.
In the meanwhile, there are platforms on which hundreds of such ‘add-ons’ are made available via partner companies of the respective platforms; in this way, they thus set up an even bigger barrier to market entry for those rivals who are not part of the platform.
