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.