The Digital Platform Playbook

Value proposition of a digital platform

A digital platform’s success is built around ecosystem adoption. Unlike traditional products, where firms work across the value chain to create and deliver value internally, value on a platform business is created through ecosystem participation. 

The first consideration towards a digital platform’s success lies in its ability to deliver value to its core user, develop the ability to serve ecosystem stakeholders, and drive adoption across multiple ecosystem stakeholders. 

Three key questions: 

1. How do we deliver value to the user?
2. How do we deliver consistent experiences for ecosystem stakeholders through a single view of the ecosystem?
3. How do we align incentives and user experience to drive digital platform adoption across all parties?

Ecosystem orchestration for trust and governance

A platform firm plays a central coordination role in any connected ecosystem, orchestrating interactions and activities across ecosystem participants. To successfully execute a digital platform strategy, a platform firm needs to build trust among ecosystem participants as well as between participants and the platform. This involves (1) building a trusted environment to facilitate ecosystem transactions, (2) signaling its commitment to partners to support their innovation on the platform, and (3) mitigating and managing any conflicts of interest that may arise between the platform and ecosystem participants.

Three key questions: 

1. How do we provide a high trust environment for ecosystem participants to interact?
2. How do we provide a high trust environment for ecosystem partners to commit resources, time, and effort to innovate around our platform?
3. How do we ensure fair governance in managing ecosystem relationships?

How to build a digital platform organization

Platform firms are tightly aligned on vision but loosely coupled for innovation. They resolve the traditional trade-off between scale and customization. Platform firms are able to serve a spectrum of varied use cases without losing economies of scale. They do this by (1)  leveraging shared services to drive standardization across the organization, (2) setting up governance that enables both standardization and agility, and (3) driving innovation at scale by empowering small, autonomous teams to innovate close to the customer.

Three key questions: 

1. Have we set up the right shared services and internal platforms to maximize coordination and cross-leverage?
2. Have we set up the right internal governance to enable operational agility and scale in execution?
3. Have we set up the right organizational structure to drive innovation at scale?

Understanding the role of technology in digital platforms

Platform firms need scalable and resilient technology and three factors in particular – data interoperability, infrastructure scalability, and management of cybersecurity and privacy – may well separate the leaders from the laggards.

Three key questions: 

1. Does our data strategy and internal API implementation support extension towards open business models and ecosystem participation?
2. Can our infrastructure scale to support non-linear growth in ecosystem interactions?
3. Is our platform’s commitment to building trust in the ecosystem adequately supported by its technological choices regarding privacy and cybersecurity?

Also read: Scaling digital platforms

Platform regulation – navigating challenges and leveraging opportunities

Regulating platforms – a Regulation is one of the key forces that shapes the market and competitive environment in which a firm may deploy its platform strategy. Execution of any digital platform strategy involves:

1. Accounting for regulatory headwinds that may constrain business model assumptions
2. Actively piggybacking regulatory tailwinds; and
3. Actively shaping the regulatory environment to align the platform’s roadmap with evolving regulation

Three key questions:

1. Regulatory changes may pose headwinds to digital platform business models. How do we address such headwinds?
2. Regulatory tailwinds may make a target market particularly ripe for platform transformation. How does our digital platform design leverage such regulatory tailwinds?
3. Platforms often operate in market conditions which are not fully regulated. How can platforms build industry standards and influence future regulation in their favor?

Also read: How digital platforms respond to regulation

Role of leadership teams in digital transformation

Managing any change initiative requires senior leadership support of the business case and organizational momentum towards execution. Gaining such support for platform businesses can be particularly difficult owing to longer investment horizons, confusion around choosing pre-revenue metrics, and the risk appetite and biases of senior leadership. Gaining senior leadership alignment is particularly important to the success of platform businesses and is the final set of issues we explore with this white paper.

Three key questions:

1. How do we gain senior leadership support and galvanize the organization behind the change initiative towards transforming to a platform business?
2. How do we drive alignment on the investment horizon for the digital platform?
3. How do we measure the success of the platform initiatives?