Platforms: Growing with partners

The second day of the symposium, on the other hand, started off in a scientifically serious manner. The keynote speech dealt with platforms that have established themselves as superior business models in many digital markets. The ability to use the data gained to open up further competitive advantages and constantly penetrate new markets makes them powerful players. “In contrast to classical linear business models, platform models are based on interactions between demand and supply. And although classical producers are still needed, a not to be underestimated part of the added value shifts from production to interaction,” explained Dr. Holger Schmidt, network economist at the TU Darmstadt. “Platforms draw their strength from interaction data”.

Platform models changed the markets by establishing alliances in dynamic ecosystems and focus on transaction, innovation and interaction, according to Dr. Schmidt. It is often precisely these alliances that create the decisive competitive advantages of platforms over traditional providers, since they not only make life easier for customers, but also generate new value streams and network effects between providers. As a result, all partners in the ecosystem do more business than before and can leverage traditional providers.

Dr. Holger Schmidt, Digital Economist; Source: #OPS2019

Using Amazon as an example, Dr. Schmidt explained why platforms are so successful. “Opening up to other online merchants who sell their products on the Amazon website has accelerated growth,” he explained. Those who have the vision of a comprehensive selection can only do so with the help of other retailers.

The platform business model generates more revenue through more partners. More partners bring more customers, more choices lead to more interactions and more network effects, which in turn leads to a tendency towards exponential growth. According to Dr. Schmidt, there are four basic platform business models.

  • Platforms with a focus on sharing resources, capacities and capabilities: Complementary partners from a previously analyzed ecosystem form an alliance to bundle and share complementary capacities or resources.
  • Platforms with a focus on changing market mechanisms: The platform operator brings together partners with market power and good customer access. Bringing these alliance partners together expands market access and the number of indirect customers, triggering network effects and growth.
  • Platforms focusing on product and service alliances: Ecosystem partners’ products complement each other. The platform operator enables the partners to combine their products specifically via the platforms and offer them to their customers.
  • Platforms with a focus on data, AI, technology, software and the Internet of Things: The platform operator brings together different partners with a technology focus who use their complementary technologies/data to develop data-driven products from findings across the partners.

Those who understand and use the mechanisms of the platform economy will not only be able to stand up to the big platforms but will also be equally successful in building their own models. The size of the company is not even a prerequisite for success, according to Dr. Holger Schmidt – it is more important to develop your own market sectors with ideas and agile business models.