Digital business Platform economics is a booming market
Platform economics has changed the dynamics of how business is done in the ever evolving digital world. It plays a vital role especially in the B2C market wherein there is a huge demand of products.
What is platform economics? In simple words, platform economics is a digital market place where a customer can get multiple products / services from different vendors on a single platform and where the owner does not actually own any product / service. For instance, Amazon and Alibaba are some of the big league players in this space.
Amazon – platform economics
Amazon offers a wide range of products from numerous vendors but it not own any product on its own. It only offers a platform wherein vendors and customers come together for their own respective purposes. A platform comprises of three core segments: the platform owner, the producers (players that offer their goods or services to the platform) and the consumers (people who purchase or use the product or service offered on the platform). This is also called the ecosystem of a platform.
Data is also at work here as customers as well will be offered suggestions of ‘likely’ products which they will be willing to purchase. Similarly, the producers i.e. vendors are better informed about their customers’ preferences and other demographics with the assistance of data collected by these platforms.
Old concept of platform economics
It is interesting to note that the concept of ‘platform economics’ has been present since ages. An excellent example of this is the grocery store that one visits. In the past, the grocery shop owner used to keep vegetables from different vendors at his shop and consumers then used to visit the shop to buy their groceries. In today’s age, the scenario is the same but rather than the physical platform we now have a digitised platform and hence, the emergence of platforms.
Another important aspect about platforms is that the target audience i.e. communities are already present. For example, Facebook initially introduced its social media platform to college students (communities) that were already present. This is one of the core reasons for its growth. Similarly, for the B2C sector, platforms such as Amazon also had existing communities in the form of vendors and customers. It’s just a matter of getting them onboard.
Change in business strategy
Business has transformed and is moving towards the digital revolution. According to a survey by Accenture, it was observed that 40 % of the executives were of the opinion that adopting a platform-based business model and engaging in ecosystems of digital partners is very critical for their business success. In another Accenture report in which more than 560 chief strategy officers were surveyed, a significant majority of those claiming to be well-prepared for industry disruption (88 %) have already started investing heavily in platform-based business models.
This does not mean that the company will build its own platform but rather it will identify the competencies that must be developed and owned and those that can be accessed by plugging into other platforms.