Platform and Ecosystem Transitions
Value Creation in a Digital Age
Purpose of study
The purpose of this study is to explore.
- How businesses can connect with people (prosumers) in today’s world through platforms and ecosystem transitioning to drive and create value, and
- How a value-chain-based or traditional business can transition into new digital market to remain competitive in the digital age.
In achieving the above-mentioned goals, the proposed research shall be looking at Uber business model as case study.
Background
Digitization challenges existing organizations and industries. The associated advancement changes the way organizations, and their customers interact. This has increasingly fostered the emergence of platforms to facilitate such interaction. Online platforms are software or hardware infrastructures that serve as a foundation and facilitate the interaction between multiple parties (e.g., between organizations and users). Organizations create platforms as part of a larger ecosystem. One major challenge concerns the design of platform-based ecosystems, so all participants benefit from their participation. The management of associated relationships with other ecosystem participants is consequently a key challenge and demands according to foresight. (Benedict J. Drasch, 2019)
A platform is a business model that creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. To make these exchanges happen, platforms harness and create large, scalable networks of users and resources that can be accessed on demand. (Alex Moazed, 2021)
Like Facebook, Uber, or Alibaba, these businesses don’t directly create and control inventory via a supply chain the way linear businesses do. Platform businesses don’t own the means of production— instead, they create the means of connection. In the case of Tesla for example, Tesla owns both the means of production and at the same time, the means of connection which is a typical example to learn from for traditional or what is mostly referred to linear organizations to transition into this new ecosystem of combining platforms and connecting with consumers at the same time to be able to create value in this digital age.
Managers and entrepreneurs in the digital era must learn to live in two worlds—the conventional economy and the platform economy. Platforms that operate for business purposes usually exist at the level of an industry or ecosystem, bringing together individuals and organizations so they can innovate and interact in ways not otherwise possible. Platforms create economic value far beyond what we see in conventional companies. (Michael A. Cusumano et al, 2019)
Successful platforms facilitate exchanges by reducing transaction costs and/or by enabling externalized innovation. With the advent of connected technology, these ecosystems enable platforms to scale in ways that traditional businesses cannot. For example, the COVID-19 pandemic lockdown was like “the last straw that broke the camels back” in the case of Prometric Inc. Prometric Inc prior to this time had been administering various board examinations and tests through a traditional and conventional means of owning product and physical spaces with direct and physical interactions with candidates. Today, Prometric Inc, has now built a platform for connecting with candidates at the comfort of their homes. Although this is still work-in-progress, but these transition as helped Prometric reduce cost drastically and create value for their clients and organization at large according to the CEO- Roy Simrell
It’s important to remember that a platform is a business model, not just a piece of technology. A lot of people make the mistake of conflating a platform with a mobile app or a website, but a platform isn’t just a piece of software. It’s a holistic business model that creates value by bringing together consumers and producers.
The most common misuse of the term “platform” is when it’s used to describe an integrated suite of software products. (Alex Moazed, 2021)