Cultivating post-COVID resiliency, Adpatation 1: Accelerating the move to platform

In this first in a four-part series, we explore how businesses can adopt a platform-based business model in order to adapt to the new future of work.
Nov 19, 2021 • 8 minute read
Jayne Lysyj @JayneyL
Technical Co-pilot
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The first key adaptation that companies and start-ups need to consider is moving away from a linear style towards a platform-based business model. 

Industry behemoths such as Facebook, Amazon, eBay, Google and even Freelancer.com have achieved enormous scale in a short amount of time. 

While many attribute their successes to the use of pioneering technology and a compliant culture; it’s not the primary reason that these companies are the forerunners in the market.

These tech monopolies and industry giants are dominating the market because they follow a platform-based business model.

What is a platform-based business model?

A traditional, linear business model takes raw materials or components, creates products, or services, and then sells them to their customers. 

Conversely, a platform business facilitates exchanges between two or more interdependent groups (usually consumers and providers); think Spotify or Airbnb! 

Platform businesses can be both physical and virtual and are valid in B2B, B2c, public and private sectors. 

InnovationTactics mind-map infographic showing examples of platform based businessesSource: InnovationTactics, The Complete Guide to the Revolutionary Platform Business Model

You could think of a platform-based business as a series of ecosystems housed within one company or venture.

These separate and distinct biomes of technology, services and products bring consumers and producers together, encouraging third-party collaborations, scaling quickly and therefore extending their reach.

Not all sectors are unreservedly suited to a platform-based model of business. However, in the wake of COVID-19, those industries or companies that haven’t begun to evolve towards the platform model will need to start implementing these critical changes soon. 

If you own a business or are looking to launch a venture in the immediate future, then you need to consider either partnering with a current platform business or adopting the following strategies into your existing concept. 

The four essential qualities of a platform-based business model

A vast number of traditional or linear businesses are struggling to evolve with the ongoing digital transformation. 

Platform-based business models have four qualities in common: they are: 

  • Open

  • Scalable

  • Connected

  • Intelligent

These are all integral traits that companies need to embrace if they want to flourish. 

PlatformInnovation infographic showing the 5 steps to a platform-based business modelSource: PlatformInnovation, 5 Steps to a New Platform Business Model

Openness

Successful platform-based business models have an Open Business Model (OBM); this means making sure the right things are done at the right time by the right people. This involves getting a handle on your processes and having the definitive staff in place. 

Scalable

A scalable business model is agile and responsive; focusing on improving profitability and efficiency of services despite an increased workload.

Connected 

An effective platform-based business model embraces connectivity, facilitating interactions among a wide range of participants. This can involve short-term transactions (such as connecting buyers to sellers – think Amazon or eBay) or longer-term interactions such as collaborating on a project or venture to achieve a shared objective.

Intelligent 

Having an intelligent business model involves having the correct architecture in place which supports operations and decision-making processes. This can involve integrated applications, databases, data collection, and analytic tools. 

Why is a platform-based model imperative in the post-COVID world?

Linear companies procure profits from creating goods or services before selling them within their supply chain. They own their own inventory such as Walmart, Macy’s or Target - or they create or directly license their subscription content like HBO or Netflix. 

Applico infographic explaining the differences between platform vs. linear business modelsSource: Applico: Platform vs Linear Business Models 101 

One thing we have learned from COVID-19 is that the majority of linear business models are neither agile nor resilient enough to withstand major disruptions like a pandemic. For example, linear model Macy’s reported a financial loss of nearly $4 billion due to the epidemic and resultant lockdowns.

A key reason for such substantial upheaval and financial loss for a number of linear businesses during the pandemic was the lack of scalability.

Linear businesses grow by adding human capital, physical assets, or both. 

For example, if Marriott Hotels (linear model) wants to add more rooms then they need to build more hotels at great cost to the business. If Airbnb (platform model) wants to add more rooms, then they just need someone to create more listings on their site. 

This costs the Airbnb platform next to nothing and their needs can be scaled-up or easily scaled-back due to demand or need. 

Physical assets, employees, and tangible resources don’t scale well. Networks do.

Real-life examples of thriving platform business models 

To give you an understanding of how existing ventures have evolved into a platform business, we will look at some real-life examples. 

Kloeckner Metals 

Kloeckner Metals is a medium-sized metals distributor based in Germany. The company realized that the steel industry was outdated. The use of faxes and phones had become redundant and slowed the supply and service chain. 

Also, with over-capacity, intense competition, and wide fluctuations in steel prices, the steel trade was under intense pressure. 

Consequently, Kloeckner digitalized all their processes and created a platform whereby they communicate with their competitors and customers, using the information to decrease costs, improve service and satisfaction across the industry. 

The knowledge and data derived from the platform have enabled Kloeckner to drastically reduce its inventory of unnecessary products, streamline processes to improve customer satisfaction, and added nearly a billion in new sales to its portfolio in 3 years.

John Deere / Deere & Co

John Deere has improved farm productivity by enhancing their alliances. By using an innovative cloud-based platform they have created an ecosystem of collaborations. Simply put, their set-up enables farmers to share their data with other farmers, imparting their knowledge and capabilities with others to increase yield. 

The more farmers who contribute their data and share within the platform of knowledge, the more it translates into a greater yield of produce for all, and a higher income for those within the network.

This simple communication platform and transition towards a platform-based business model aided John Deere to evolve into the world’s largest farm machinery manufacturer in 2020 and also become a Fortune Global 500 Company in the same year. 

So, how does this translate into smaller businesses or start-up ventures? 

It’s important to remember, with platforms, it's not about improving linear activities but enhancing your networks, collaborations, managing interactions with customers, partners, experts, suppliers and even competitors.

If you’re starting a venture or have a small enterprise, then now is the ideal time to think about implementing those changes to help you scale into a thriving platform-based business. 

In this instance, we will use a printed t-shirt company as an example of how to make that evolution. 

The graphic t-shirt industry is a highly competitive market at present and the competition is fierce. According to statistics, this industry is expected to be worth more than $10 billion by 2025.

In this example the t-shirt enterprise would need to evolve away from the standardized linear model:

  1. The customer orders a t-shirt

  2. The company prints the product

  3. The company delivers the product to the customer 

To adopt the future of platform-based business style the t-shirt company needs to consider:

  • Launching a site whereby purchasers can create their own t-shirts from a catalogue of available designs, colors, fabric, etc.

  • This would involve having an ecosystem of designers and shirt manufacturers offering their services for a fee.

  • The platform model would be heavily network-based, especially as a start-up, whereby you would need to consider interacting with the community (for example, competitions, connecting with local teams or charities to donate products or offer discounted services, promotions, etc.)

  • You would also need to appeal to both the ecosystem of designers and vendors as well as customers. You could do this by creating bespoke mailing lists, having appealing designer competitions or blogs, etc. You would also need to think about extending network reach through leveraging social media and embracing influencer marketing.   

How to transform your business into a thriving platform-based success

Preparing your business for a platform-based transformation requires a deep-seated shift in business, culture, and mindset. The best practices for platform-based digital transformation are:

  1. Environmental evaluation

  2. Digital maturity and readiness assessment

  3. Ideation and imagination

  4. Identifying value propositions

  5. Evaluating operational costs

  6. Strategizing

  7. Digitizing your core

Environmental evaluation

The first step is to understand the context of your market, including weak spots and risks. Therefore, you need to research and understand key trends, market forces, industry forces and macro economic forces impacting (or likely to impact) your business. 

It is important not to scrimp on this step. An environmental evaluation forms the foundation of your business model overhaul. 

If environmental market analysis is not your forte, you’ll find a plethora of experts available at your fingertips on Freelancer.com. By using expert freelancers to assist you with these key transitional steps, you can dip into a worldwide pool of talent without the need for committing to a full-time employee. 

Digital maturity and readiness assessment  

Before you can evolve and progress you need to look at your current position. This starts with a digital maturity and readiness assessment encompassing your current customer-centricity, existing business models, leadership structure, technology attributes and talent acquisition.  

Ideation and imagination

Take time to reimagine your business, products and services focusing on new sources of value creation, meaningful customer engagement and innovative system constructs

The easiest way to do this is through a brainstorming session or hiring an outside expert to cast a fresh eye over your current business strategy and to formulate a blueprint of how your future venture could look. 

By using an independent expert from Freelancer.com you can benefit from their wisdom, experience to navigate you through these critical adaptations but without the added long-term salary, overhead or additional employee benefit costs.

Identifying value propositions

This is an integral step. Getting it right ensures that consumers and users will buy into your platform. Think about your business ecosystem by:

  • Identifying who your customers are.

  • Pinpointing who your producers, partners and third parties are

  • Identifying the potential pains and gains for your clientele

  • Identifying your business model and how are you going to earn money 

Evaluating operational costs

In this step you will need to delve deeper into the platform business model, evaluating what you need to do to operate the platform as well as assessing the costs of running it. 

This can include the activities, resources, and technologies you’ll need to implement to make your transformation a success.

Strategizing

Now you have a crucial and thorough understanding of how your digitally transformed platform business will look, you need to establish how to consolidate your vision and roll out your plan. To succeed here you must define your market position, mission and Unique Selling Point (USP).

Digitizing your core

Start your transformation by digitizing your core. By doing this you can subsequently help expedite newer growth and formulate adapted business models, implement industry-approved digital business processes; thus achieving quick wins as well as developing a long-term successful strategic platform initiative. 

The hybrid approach

Not every platform business commits exclusively to a platform model, and not all aspects of products or services are best served through a platform approach. 

Some companies such as Apple and Amazon use a hybrid approach, combining both linear and platform models. Doing so can be immensely effective and lucrative – allowing a business to capitalize on the strengths of each business model.

So, if you don’t feel that a pure platform model is for you, then why not consider a fusion? Pick and choose what works best for you or seek advice from an expert in the know.

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