08 May 2016
This excellent article by Mark Thompson from 2015 sets out the definition of a ‘digital business’ as one that is specifically configured to exploit shared internet-based infrastructure’s unique ability to:
- consolidate consumers into platforms of demand;
- simplify supply and value chains; and
- readily enable a much wider and plural supply base producing ecosystems of supply.
Sangeet Paul Choudary’s book Platform Scale explains the difference between ‘Pipe’ business models and ‘Platform’ business models:
- Pipes create value through processes that co-ordinate internal labour and resource towards efficient delivery of value to aggregated consumers.
- Platforms orchestrate value-exchanging interactions in their ecosystems using data about the participant.
The transition from pipes to platforms requires a shift in thinking:
- Markets: Consumers to Producers
- Competitive advantage: Resources to Ecosystems
- Value creation: Processes to Interactions
And interestingly he argues that platforms need interaction-first thinking, above user-first thinking
A whole host of new skills and functions are needed to establish and grow a platform.
- Standards: Define services in common ways to enable the market to operate.
- Quality: Make the quality of each service transparent, whether that is determined centrally or through the community
- Personalisation: Tailor each participants’ experience to ensure they are served the most relevant services from a large market
- Matching: Match supply with demand using data and algorithms
- Ecosystem: Enable an ecosystem of ancillary services through plug and play architecture
- Marketing: Attract both producers and consumers to the platform
- Virality: Design the platform to enable organic sharing with others
- Lock in: Enable the build up of cumulative value such as reputation, influence, collections or learning filters
Behaviour and culture
- Governance: Establish rules and decision-making procedures
- Culture: Set community norms such as through moderation and curation
- Behaviour: Reward desirable behaviour such as through UX or using friction
- Feedback: Facilitate feedback from consumers to producers
- Empowerment: Train and support market participants and devolve governance roles to them