Digital platform: Value proposition to the user

How do we deliver value to the user?

This article is part of the Digital Platforms hub

A platform business creates value by enabling interactions among ecosystem participants. A platform should be structured with a view to sustainably enabling the core interaction.

As explained in the book Platform Scale

Every platform has a Core Interaction, a set of actions that producers and consumers on your platform perform repeatedly to gain value out of the platform. Creators upload videos on YouTube and viewers view it and upvote/downvote it. It’s an engine where all three actions are required. Any of these breaks down and the platform may fail to continue creating and delivering value in the manner that it originally intended to.

The Core Interaction is a set of actions that you need producers and consumers to engage in repeatedly in order to derive value out of your platform. In the core interaction, platforms deliver value to consumers through personalized experiences and relevant recommendations. They also leverage data to build superior decision support systems for users. For instance, real estate  platforms like Zillow and Redfin deliver superior decision support on valuation of houses, enabling buyers to make an informed decision. Platforms that create value through data typically capture a wide range of data from users and further inform these data profiles through third-party data sharing partnerships.

Sephora, similarly, integrates its in-store experience with multiple online touchpoints, to create a seamless customer experience. Sephora builds a detailed customer data profile by capturing user preferences to drive personalization of offers and recommendations. Sephora’s Fragrance IQ captures user preferences in-store regarding fragrances of choice through a personalized questionnaire or through shortlisting of the fragrance family and recommends relevant fragrances based on this data. Sephora’s Color IQ captures the skin tone of the user and recommends a makeup foundation which matches the skin tone. Sephora’s Skincare IQ assists users in finding recommended skin lotions based on a personalized questionnaire. Sephora’s online communities – BeautyTalk and BeautyBoard – further provide a means to engage user communities, capture greater data, and personalized recommendations to individual users. Sephora’s Virtual Artist is a decision support system – a virtual try-on app which allows users to try makeup variations on their phone. Based on looks that the user likes, the platform delivers product recommendations and beauty tips to achieve the desired makeup effect with the recommended products. Platforms deliver value to producers by providing the tools of production and the decision support to improve production.

For instance, education platforms like Udemy and Skillshare Provide the tools for educators to run online courses and provide analytics and targeting capabilities to enable them to improve learner engagement. Platform organizations must also invest in community management to build communities of engaged users. This is especially important if users contribute key value to the platform. While outliers Waze, WhatsApp, and Instagram employed less than 100 people each at the time of acquisition, the real value on these platforms was built through the contributions from their user communities.

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The Importance of community management cannot be overstated. As explained in the book ‘Platform Scale’

Community management is often viewed as an extension of marketing. But a community isn’t simply a more participative audience. A community must be scaled in a platform business, in much the same way that a workforce of employees is scaled within an organization. Community management requires structuring and managing incentives for participants, enabling the learning and development of producers, and creating a host of other support infrastructure that the human resources department would traditionally provide to an organization internally. Managing community incentives and governance is as important as managing internal employee conduct and compliance.

The first non-founding employee at Instagram was neither an engineer nor a designer, nor even a marketer. The Instagram founders understood the importance of managing ecosystems and communities. 

Employee #1, Josh Riedel, was a community manager, tasked solely with managing the growing community of content creators on Instagram. Community management is all the more important when one considers the fact that service marketplaces, like Airbnb, compete with traditional service providers, like hotels. Traditional service providers invest heavily in training and managing incentives for their staff. To provide a service quality at par with traditional service providers, today’s service marketplaces must ensure that they invest in community management and development, much the same way that hotels invest in employee training. Most on-demand labor platforms today must redesign community management as a human resources management function for an age of open platforms. B2B platforms firms like SAP, Salesforce, and Intuit rely on their user community to supplement their internal workforce. During the busy tax season, Intuit’s TurboTax tax preparation software leverages its community of users to augment its in-house customer support team in answering user queries. In a platform world, brands can also better leverage platform influencers to engage their customers. During the Covid-19 pandemic, apparel brand Levi’s partnered with TikTok influencers to create customized denim using FutureFinish 3-D denim customization technology, and enabled consumers to purchase these items on TikTok videos by the influencers.

Nike’s Run Club – a key component of its platform strategy– allows running enthusiasts to develop and track running habits. Nike invested in ensuring that every touchpoint with the runner is integrated to create a single view of the customer and deliver value across the customer journey. Run Club connects with any digital watch OS or smartphone to sync data and measure progress. To engage users, RunClub offers tutorials for runners based on their skill level. It captures data on speed, location, distance, elevation, heart rate etc. to create a comprehensive user profile. It enables community challenges to drive engagement and works across partner applications like Spotify and iTunes to allow runners to control their music while they run.

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Frequently Asked Questions

How do platforms like YouTube or Instagram maintain core interactions, preventing breakdowns, ensuring user value?

Platforms like YouTube or Instagram sustain their core interactions through a combination of factors, including robust infrastructure, user engagement strategies, and continuous innovation. For instance, YouTube ensures its core interaction of creators uploading videos and viewers engaging with them by providing reliable video hosting services, implementing algorithms for personalized recommendations, and fostering a vibrant community through features like comments and likes. Instagram similarly maintains its core interaction of sharing photos and videos by facilitating seamless content creation and discovery, while also investing in community management to foster user engagement and content creation.

How do platforms effectively manage communities, encouraging participation and governance? Share insights/examples.

Effective community management in platforms involves structuring incentives for participants, facilitating learning and development opportunities, and establishing governance mechanisms to ensure a positive and productive environment. Platforms like Airbnb and Instagram recognize the importance of community management in fostering trust and satisfaction among users. For instance, Airbnb invests in mechanisms such as user reviews, verification processes, and support services to enhance trust and safety within its community of hosts and guests. Instagram’s early focus on community management, exemplified by the hiring of a dedicated community manager as its first non-founding employee, underscores the platform’s commitment to nurturing a thriving ecosystem of content creators and users.

How do platform businesses distinguish themselves from traditional service providers in community engagement?

Platform businesses differentiate themselves from traditional service providers by leveraging the power of communities and user-generated content to deliver value and enhance customer experiences. Unlike hotels or educational institutions, platforms like Udemy and Nike Run Club empower users to create and share content, participate in communities, and personalize their experiences based on their preferences and needs. For example, Nike Run Club not only provides tools for tracking running activities but also fosters a sense of community through challenges, tutorials, and integration with partner applications. Similarly, education platforms like Udemy offer educators the tools and analytics to create and improve online courses, while also fostering peer-to-peer learning and collaboration among learners. Overall, platforms redefine the relationship between businesses and their customers by facilitating co-creation, engagement, and personalized experiences through effective community management and user engagement strategies.