Digitalisation

What is the difference between traditional companies and platforms?

| Author / Editor: Ahlam Rais / Ahlam Rais

Depending on the user’s interests, the platform (Facebook) learns and shows relevant posts and news to the user. In this way, the platform aims to increase the interactions.
Depending on the user’s interests, the platform (Facebook) learns and shows relevant posts and news to the user. In this way, the platform aims to increase the interactions. (Source: Deposit Photos)

Major traditional companies have been successfully established since a long time however, the market value of newer entrants i.e. platforms has witnessed a significant growth in a shorter period of time. How is this possible? MM International delves deeper into this scenario.

Platforms are making their presence felt strongly in the business world. It is interesting to note that platforms operate differently from
traditional companies who have been established since a long period of time. For instance, an automobile manufacturer such as Audi makes use of resources such as people, machines and components to create value for its end product i.e. an Audi automobile.

However, in the case of a platform such as Amazon, the value is created from external resources (producers and consumers). To make this platform a success, it requires an increased number of interactions which proves to be the core element of the platform. In other words, the platform needs to make as many interactions as possible and at the same time it also needs to increase the quantity and quality of the interactions.

Analysing the platform business model

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How does the platform work on this?

The platform can increase the efficiency and number of interactions in many different ways. One such way is by learning from every interaction that takes place on the platform. Google is the best example of this as the platform is able to show us results for our search and learning at the same time.

Increasing interaction on the platform

This means that when a person clicks on a particular link on the result page, the user is sending a feedback to Google informing the platform about what the right search result for the specific topic in concern is. Through this process, the platform learns about what the right search results are for that specific topic and this helps to increase the quality as well as the quantity of the interactions. In this manner, all the clicks on the platform enable to increase value of the whole platform.

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Facebook newsfeed

Another example of platforms learning is the ‘Newsfeed’ section on Facebook. Depending on the user’s interests, the platform learns and shows relevant posts and news. The platform determines a user’s interests by learning from the kind of posts the user shares on the platform, his clicks on a particular post and his reaction on a certain kind of post. Hence, all the users will have customised newsfeeds according to their interests and this will also encourage users to use Facebook more often.

There are many other ways through which platforms can increase their interactions and build the overall value of their respective businesses. However, one thing is certain – businesses will have to quickly adapt to these platforms in order to stay ahead of their competitors.

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