Digital Platforms: Product, Shelf, or Hybrid? – 5 Questions about the Approach Choice

“What platform approach suits my business model best?” …is now the question that companies interested in platforms will be asking themselves. To help make decisions about the right approach on the path to the platform economy, we have posed 5 specific questions:

1. How strong is my own brand and its customer acceptance?

“A strong brand is a company’s greatest asset.” This is especially true when entering the platform business.

To pave the way into the platform economy and to build a digital platform of your own (hybrid/shelf) or to be “only” a platform participant (product), it’s essential to identify the breadth of the customer base and the strength of the brand. Because one thing is for sure, awareness and trust are assets that established companies have over tech startups.

Companies with a large number of existing customers can strengthen customer loyalty by offering other companies’ products on their platform. This allows platform operators to gain valuable insights into customer preferences and further develop their own product portfolio based on this.

Companies with a narrower customer base but high-quality products can derive value from participating in other platforms (product). This distribution channel is usually cheaper than building their own distribution network and provides the “less known company” unexpected new opportunities in customer acquisition.

2. Welche Vertriebskanäle nutzen wir aktuell?

“Occupying the customer interface brings you one step closer to the platform solution.”

If product distribution already occurs through your own channels (direct sales), and customer acceptance is high, companies have the best conditions for building their own digital platform.

However, if companies primarily use other channels (indirect distribution) or distribute their products through an “intermediary,” participating solely (product) in a platform pays off because it does not require higher distribution costs than other sales channels. However, those who content themselves with the role of the supplier in the long run risk ending up on the wrong shelf and being overlooked by customers.

3. How digital (affine) are our products and employees?

“A platform is much more than technology; a certain level of digital competence is essential.”

The digital maturity of a company is also crucial for choosing the best approach:

On the one hand, the company has an advantage if it can already conclude its products online. A platform requires this, as it operates online and not analogously on a marketplace.

On the other hand, it’s important that the company’s culture aligns with the business model of the “Digital Platform.” Since the word “digital” is already included in the buzzword “Digital Platform,” the individual and organizational digital mindset of employees is particularly important for the successful implementation of a digital platform business model. A willingness to change is a central requirement on the path to the platform economy.

4. How innovative and agile is our company?

“Digital platforms create fertile ground for your own innovation process.”

Amazon, Facebook, Google, Check24 – what do all these companies have in common? Yes, they are platform companies, but not only that: they are also extremely innovative. Amazon, for example, seizes every new market trend to stay at the top, whether it’s Big Data, Machine Learning, or IoT. Amazon not only jumps on the bandwagon but aims to steer it.

That’s why one thing is certain for us: the platform economy represents a paradigm shift. Only companies willing to make fundamental changes to their business model will succeed with a platform solution.

5. How competitive are our prices?

“Price leadership is the best prerequisite for participating in the platform business model.”

Due to the transparency of digital platforms, customers have the opportunity to compare various providers of the same product with each other: the first glance here almost always goes to the price. If products or services are priced higher, the second look goes to the quality of the products or customer acceptance and brand strength.

Companies, especially those who are price leaders in their niche, have an advantage, as product suppliers in the platform business, by foregoing their distribution network, they gain cost advantages.

Amazon, in particular, was able to score with its price-performance ratio in the beginning. The books in their online store were on average 10% cheaper than in brick-and-mortar retail.Even though this particularly speaks for the platform approach “product,” don’t hesitate to establish your own digital platform, as Amazon also started small as a book retailer and is now the world’s most well-known platform.

Authors: Stefan Roßbach, Raik Borkowski & Stefan Ruhland

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