Designing business ecosystems via platformization

One big misconception about ecosystems, at least the term which is used for businesses, is that it is not possible to actually create an ecosystem. They have been in place for already several decades as long as companies and institutional relationships exist.

Therefore, old processes, habits and conditions are still in place in most of these ecosystems, which lead to high transaction costs, inefficiency and little knowledge transfer. Restructuring these systems with latest technology by using digitalization can increase the overall wealth of the system.

One way transforming and enhancing current business ecosystems is a platform strategy. It offers the possibility to evolve current product and service offerings, reaching new markets and opportunities.

Thinking of designing a concept should therefore be for the ecosystem and not for a team, company or institution. Existing markets should be analyzed in order to find opportunities for improvement.

Although a lot of platforms already exist, there is still huge potential in areas where producers and consumers self-organize value creation. Moreover, some companies already offer different products and services in the market but there is no clear structure and organization which would facilitate value interaction.

Platform Structure

There are three different entities involved participating on a platform: The impact entities, demand & supply entities.

The impact entity is the platform shaper which enables the participants to exchange value. Providing the platform does not necessarily mean that the entity is continuously involved in the interaction, but they surely can. Amazon for example offers its own products on their marketplace where most value exchanges are between 3rd party retailers and end consumers.

Demand entities have the interest to “consume” the offering of the platform. Those peer consumers have specific interests and identifiable objectives that the platform should offer. “Consumers” can easily leave a platform, simply because they do not receive the services or products they are looking for. In other words, the platform does not fulfil their need or generates no additional value.

Supply entities place products and services at the disposal in continuous exchange with demand players. Once they see the opportunity to increase their turnover potential on a certain platform, they try to apply best practices for further reach. Investing a lot of time and energy and the concern of an ongoing platform development (reach or features) develops a strong relation with the impact entity.

Platform type

Once a company identified the entities of the platform, there are two essential strategies for designing, building and evolving a platform.

The transaction platform strategy facilitates the interaction and the exchange between entities. Providing a solution where the interaction with consumers is easier and the coordination costs are lower enables the producer to have more time to work on supplement solutions or services. Static workflows get disrupted shifting the focus to new opportunities.

The learning platform strategy offers a huge possibility of accelerated learning, the chances of new business opportunities and creative problem solutions. The platform promise essentially is that self-improvement will happen faster “inside” than “outside” of the platform.

The combination of both approaches can be seen as best practice since the customer has additional value and the possibility of leaving the platform is less.

LinkedIN for example offers companies to find new employees easier with lower transaction costs [transaction platform]. On the other hand, LinkedIN users gather new business information, best practices and creative thoughts which they can utilize to increase their job performance [learning platform].

Creating & designing platforms is an iterative process with several feedback loops. I personally look forward what will happen next. Once platforms are created in every industry, some players might merge into bigger platforms with a broad cluster of offerings.

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M