Platform and Ecosystem in the Digital Business Era

by Togar Alam Napitupulu

Companies are changing their business models from product-focused into platform-based, which is not merely about selling products and services. A platform-based company attempts to build an entire ecosystem where multiple parties can do various transactions and things in it. Platforms emphasize on the connection, network, and partnership. Their goals are to provide as many products and services there are, to become the biggest platform. This is done by collaborating with everyone, even with the customers and the competitors.

Examples for platforms are marketplaces, such as Amazon, Uber, and Airbnb. Uber and Airbnb don’t own any of the products they sell, Uber doesn’t have any car, and Airbnb doesn’t have any hotel. They are all about the platforms. They are C2C. While some platforms are B2B, Amazon for example, still sell their own products. However, they are also C2C, which they invite everyone to sell on their platforms. The reason some platforms still provide products and services themselves is to provide greater control and customer experiences because third-party sometimes can be unpredictable. In determining their platform model, companies should identify which function of the business that will become better if provided by themselves. This means, they should do a customization for their companies and choose which are better fit, based on their company characteristic, vision, value, and conditions. For example, Alibaba started by relying on third-party logistics, but then it created its own logistic. Alibaba chose this logistic function to invest because Alibaba might face some problems with its logistics and wanted to have more control for the delivery; and ultimately it is the customers that become driving factor for competitiveness, not necessarily cost advantage and product differentiation in a digital transformation era.

The definition of platform is not only about marketplace, it also encompasses the concept of the connection of technologies. Companies like Google and Tesla are for example. Google’s homes, called Nest, are platforms to build applications for ‘smart home’. Nest platform attracts many developers and companies that want to collaborate. Tesla’s cars are a set of integrated technologies in an ecosystem that create a platform. In this perspective, if there is an advanced technology, but not integrated or managed into a platform, there can be no significant benefit. In this era, we must be able to adjust to the current condition of demand. Also, a platform has to follow the ethics and regulations of business and government.

Ecosystem mentioned on the other hand can be explained in terms of business, which is a community of various industries who work together towards the same goals which are to support innovation and satisfy customer needs through both collaboration and competition. Indeed, openness of the ecosystem is better. We can see the prove from Android that had 87.7 percent of global market share, and Apple’s iOS for only 12.1 percent. With an open platform, it opens larger market and able to boost the innovation and growth, also with high efficiency that leads to reduced cost.

To summarize, the following are some advantages of having platform compared to traditional business, Greater Access to Sellers, Better Value to Consumers, Suitable for Market Growth, Asset-light, Scalability, Incentive for Innovation.  It is therefore, all companies should start to transform into a platform. Perhaps not in all area, as to transform to a marketplace, but to transform some of the area to be a platform. Companies should really understand and consider it. A platform suits better in this digitalization era, to survive the competition where customers are becoming more demanding and has low cost to switch. It is therefore suggested that all traditional companies should start to transform by now. If not, the companies will soon lose its competitive advantage to new entrants.