Paradigm shift ensures successful platform business
While there is much interest in the platform economy and platform businesses, and a lot of literature on case studies of well-known platform businesses such as Uber and Airbnb, there is a lack of information on what is needed to transform existing businesses to platforms.
The two teamed up to delve deeper into how an existing business can be transformed into a platform, using Bramhope’s experience of achieving this change.
Bramhope, established in 2002, is based in Centurion, Pretoria, and specialises in industrial supply, including maintenance, repair and operations goods and consulting services; personal protective equipment; health, safety and hygiene products; as well as products for the outdoor and leisure markets.
The academic and the CEO say the first step in their research was to define what is meant by a platform business. Most definitions refer to a business that generates revenue from services delivered via apps and APIs on a scalable technical foundation that customers and suppliers can integrate into their offering.
Due to these definitions, people often confuse a platform business with a firm that uses platform technologies in its offerings, they say.
However, studies of successful platform businesses show they exhibit very different characteristics in all aspects of the business; including strategic, structural, cultural, infrastructure and value creation differences.
Marais and Gerber therefore define a platform business as a company that transformed completely and exhibits platform characteristics in all aspects of the business, rather than one that uses platform technologies.
Existing businesses, in most cases, are caught up with old, traditional business models, strategies, legacy IT systems and cultures, they say. It is therefore difficult for these firms to transform due to their internal defence mechanisms, and they also find it hard to absorb the required rate of change necessary to make this switch.
The research duo concluded that the most important strategic characteristic of a platform company is the goal and purpose: the True North.
Setting the True North
Setting the True North requires a paradigm shift in the company’s core purpose. This transformation is a journey, or perhaps rather, a quest. A true platform company evolves over time and the transformation journey often involves detours, note Gerber and Marais, but must start by carefully reflecting on the nature of the company, its value propositions, products and strategy.
The most important thing is understanding and identifying what its core value proposition could be. It evolves from the core business of the existing company, but through platform thinking, a unique value proposition could be identified.
Platform thinking includes considering customer needs and behaviour, the potential of various IT technologies, connectivity and real-time feedback loops, as well as partner coordination and collaboration.
This sounds deceptively simple, they point out. However, digitisation and digital transformation subtly alters perspectives of the core business. Identifying this value proposition sets the True North of the journey.
The first question that needs to be answered is: How can platform thinking drive superior value creation for both customer and platform partners?
Step 1: Identify the platform value proposition
Bramhope’s platform journey started with an initiative to reduce the total cost of ownership and risk for customers, requiring the core business processes to be digitised, allowing it to understand and manage customer consumption so that value is realised for clients.
Platform thinking also involves analysing how the essential value proposition is supported through partnerships, so platform partners become key considerations. Partners in the Bramhope platform are offered new markets and visibility of demand from customers.
Platform thinking considers technology, and the Bramhope technology and accumulation of big data evolved, allowing it to more accurately measure and predict customers’ consumption behaviour.
The local company’s experience is similar to those of established unicorn platform companies. Uber and Airbnb followed a similar route, where the value creation model transformed over time.
Step 2: Ensure sustainable revenue generation
As shown in the figure above, the creation of value for all the platform partners does not stop. Revenue generation for the participants of a platform company ensures sustainability.
Marais and Gerber note that an interesting observation of established platform companies is that their market potential is large, with potential global expansion, mainly because the value proposition is due to digitisation, which is less location-dependent.
Step 3: Staying true to the True North
This step includes the continuous refinement of the company’s strategy and direction towards the identified platform transformation and value proposition.
At Bramhope, a significant part of the digital transformation design process involved envisioning what it would look and feel like in the future, including how technology will transform the workplace, so it designed its cloud IT platform to support this value proposition.
Step 4: Align the organisation’s culture
As technology advances, people and the organisational culture, not technology, became the focus of the workplace. The new vision and purpose need to be embraced by all employees, so Bramhope focused on employing creative people and upskilling employees so that they embrace the platform vision and can apply technology in new and innovative ways.
These ‘soft’ aspects were crucial in the implementation of the platform transformation and different skills were required in addition to the basic skill sets, such as the emphasis placed on complex problem-solving, creativity and innovation, Gerber and Marais point out.
They quote the World Economic Forum, which stated: “Any company can digitally transform in their own way. However, they should remember one thing: if they make every other change but employees are not empowered, the digital transformation will not be successful. Empowering people is the key to achieving profound and lasting digital transformation that provides sustainable growth and inclusion.”