Edited and created by Oscar Michel, Masters in Journalism, DCU.
Great guest post from Laure Claire and Benoit Reillier, founders of Launchworks, a digital strategy boutique focused on designing innovative business models. They recently co-authored Platform Strategy: How to unlock the power of communities and networks to grow your business (Routledge 2017).
Laure Claire and Benoit Reillier
What is the future of platforms?
With Google’s €2.4bn fine by EU’s competition authorities, Amazon’s $13.5bn acquisition of WholeFoods and Uber’s management trouble at the top, platforms have recently made the headlines. But while some people are talking about their demise we believe platforms are there to stay. This is because ‘platform businesses’ attract distinct groups of customers, match, connect and enable them to transact rather than just sell products and services. This gives them unique abilities to harness the power of communities to create value, scale and adapt. While some of these individual businesses will no doubt fail, we believe that the business model itself has a bright future and here are some of our ‘platform predictions’ for the next few years.
Platforms will continue to overtake traditional businesses
Over the past fifteen years, platform businesses have disrupted many sectors. Airbnb is now one of the largest hospitality companies in the world (larger than Hilton). Uber –despite obvious leadership flaws at the top- is now a global transport company. Marketplaces like eBay or Alibaba have become global shopping malls. In fact, the five largest companies in the world today, in terms of market capitalisation, are Apple, Google, Amazon, Facebook and Microsoft. And all are powered by platforms. We see this trend continuing as more traditional firms get overtaken by platform-powered businesses. Also the global internet connectivity underpinning platform growth is still under way and will therefore help these business models establish themselves in developing markets. While most of the action have been in C2C or B2C so far, we currently see increasing activity in the B2B platform world with –for example- the recent launch of Amazon for business.
Traditional businesses will try to develop platform capabilities to become ‘platform- powered’
While many platform businesses are ‘pure’ in that they are first and foremost a platform, we increasingly see businesses combine old and new business models. Established incumbents, like the AccorHotel group, are trying to harness the power of platforms through acquisitions (onefinestay, Travel Keys and John Paul, all recently acquired by Accor, are respectively luxury flat, villa and concierge service platforms). AccorHotel has also opened its booking portal to curated independent hotels that are not Accor Group properties. These businesses are not trying to transform themselves entirely into pure platforms but to become ‘platform-powered’ and benefit from some of the ‘magic’ that platform businesses bring (global scalability, long tail, network effects etc.) to supplement their traditional offering (hotel rooms). In fact, this is exactly what businesses like Amazon have managed to do by cleverly combining their traditional ecommerce operations (buying and selling stuff online) with their marketplace (where merchants are matched and connected with buyers). Today the Amazon Marketplace accounts for more than 65% of online sales and benefits from the synergies with its online ecommerce capabilities… the ‘whole is definitely worth a lot more than the sum of the parts’. In that sense platforms will also benefit from supplementing their platforms activities with traditional business models where it makes sense.
Platforms will continue to disrupt the way we work
Marketplaces are not just about goods but also about services. Marketplaces for talents for example are growing fast. Firms like Upwork now have more than 15 million freelancers on its books while premium providers like Talmix offer a wide selection of seasoned consultants. This offers companies unprecedented access to skills but will also intensify competition amongst platform participants. This in turn will strengthen the need for differentiated skillsets and capabilities to compete in this increasingly global market. Even Amazon has its Mechanical Turk service to provide ‘business and developer access to an on- demand scalable workforce’. The number of workers using platforms as users and/or producers is likely to increase significantly over the next few years. The number of people working for platform companies themselves will increase as well but not as fast as the number of platform participants. Also, the skillset to grow and run a platform business will continue to diverge from what it takes to succeed in a traditional business…
Some platforms will increasingly be automated
The emergence of new technologies that facilitate frictionless matching, connecting and transacting (such as blockchain or AI) will make platforms increasingly automated. In some cases, these changes will be visible and the side of a platform where humans were involved (say the taxi drivers of Uber or Lyft for the sake of the argument) will increasingly be automated (self-driving cars are around the corner… literally!). In other cases, the changes will be more subtle and existing platforms will just be more efficient in how they match participants. RankBrain, Google’s machine-learning AI search system, already helps Google deal with about 15 percent of its daily queries.
Platforms to save the world
There is much concern about the future and how innovation in general will play out. When we present at conferences or deliver lectures at Universities we see first-hand the apprehension of many. Yes, things are changing and the ‘job for life’ models of the past are clearly not an option anymore. Yet we can’t help to believe that innovation in general and platforms in particular can also be harnessed to help us deal with some of the world’s most pressing concerns. Platforms are efficient at connecting borrowers with lenders in emerging markets for example (e.g. micro lending platform kiva.org) or even advanced medical equipment/labs with research teams (e.g. marketplace for scientists scienceexchange.com) or individuals with causes they may care about (e.g. fundraising platform Justgiving). These are just some predictions and we shouldn’t forget that it’s up to all of us to decide which kind of platform economy we want to see flourish.