December 12, 2018

Unlock an unfair advantage with platform economy

Teemu Malinen

CEO at Sofokus Group

There’s no competitive advantage like the unfair one. Companies have been trying to get ahead of the others as long as there have been companies. But, what if I were to tell you that there is a recipe available?

Most so-called unicorns are in fact platform companies. Over the past 23 years, network effects have accounted for approximately 70 per cent of value creation in the technology industry. Whatever the exact numbers are, it’s clear that if you want to grow fast and aggressively you must have a digital platform strategy that relies on platform economy and network effects.

Platform economy is not a scary monster. Like other digital business-jargon terms, platform economy might sound complex, but the basic principle is simple. Do you want to own the playfield of your business segment or use your competitors’ one? Think brick-and-mortar businesses: whoever owns the shelves, decides what’s put on them. The big difference from traditional business is that practically anyone can start their own digital platform. This is where things get interesting; the recipe for success emerges.

Let’s use an example and say that you provide interpretation services. Why not make a digital platform where anyone can use these services in just seconds by using mobile phone and professional interpreters around the world? (Actually, there is a company doing this called Tulka). Tying every key asset and player to a digital platform creates an environment that pulls customers like a magnet. This is not rocket science; it’s a pretty straightforward digital strategy.

Platform economy might sound complex, but the basic principle is simple.

It’s clear that becoming the best in the world won’t be a cakewalk, but laying a path towards it can be. A digital platform is a key. Gather your key knowledge, assets and players around it, and end customers will follow. You won’t even have to be number one. But you will have to take a stand in the platform game sooner or later. Otherwise someone else will.

Here’s how you start. First you need a business concept, where digitality is at the core. Before that, investments in a digital platform would be a waste. After you have a modern business strategy, using a platform becomes usually self-evident. A good digital platform is a “home base” that ties your traditional assets together into an easily accessible form to end customers.  The best thing is that a digital platform is a strategy that even a startup can use.

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