April 29, 2020 / Thomas Schiller
Some of the most successful companies in the world are platforms. Their rise inspires the creation of new start-ups or corporate ventures every week, with the vision of becoming the “Amazon for this or that industry”. Equipped with 100 user stories by the consulting firm of choice and with the first five employees sitting in a coworking space, everything may seem to be ready for getting started. But how do you actually develop a platform?
There is no blueprint for how to develop a platform, and even best practices, if they exist at all, are often just a collective gut feeling. But whether it’s a disruptive app, an industry marketplace, or a new Fintech start-up, there’s one challenge all these new companies share: the technology.
As an agency, we accompany businesses in this phase by designing the technological basis of the platforms with them and developing the software. Experience has shown that the success of these ventures and start-ups depends above all on clearly defining one's own position, the right onboarding strategy and perseverance. Read on to find out what you should be looking out for.
A clear sense of identity
Platforms such as marketplaces, transportation services or social networks appear very different at first glance, but all function according to the following principle:
There are different providers who offer their products or services to users. Then there is the platform operator, who provides the underlying infrastructure for this. This makes platforms the gatekeepers of customer access.
In concrete terms: AirBnB does not own a single apartment itself, the company merely provides the software for providers and users to advertise and rent apartments. If you want to rent out your private apartment for a short period of time, you are well advised to do so against commission on Airbnb, instead of starting your own website and possibly never being found by potential customers.
Many platform operators are also active as vendors or providers on their own platform and are usually very successful in doing so. This success is mainly based on the information and data of providers, supply, users and demand that they collect through their operations. A prominent example of a company that is active in such a dual role is Netflix, which started out as an online video store in 1997 and today draws over 50 percent of new content on the platform from its own film production. Of course, Amazon also has to be mentioned here, which is not only an operator but also a retailer and, since 2009, with Amazon Basics, also a manufacturer of its own products.
Clearly positioning oneself as an intermediary player will ensure the right strategic course, especially during the development phase.
These well-known examples make it easy to forget that they could only have come into existence because of their underlying platform infrastructure. So, if you plan to build a platform, such as an industry marketplace, merely as an additional distribution channel for your company, you run the risk of jeopardizing the success of the entire platform. You have to concentrate on creating value for users and providers and thus keep your eye on the essentials. Clearly positioning oneself as an intermediary player will ensure the right strategic course, especially during the development phase.
One of these strategies is to, in a first step, focus the platform only on users or providers by creating added value for one of the two user groups. Especially peer-to-peer networks that are primarily user-oriented, such as LinkedIn or Facebook, initially performed well without recruiting, advertising or games by giving users the opportunity to network and communicate — even if the successful monetization of the platform was only made possible by offering additional services.
The American startup Shiftpixy is currently demonstrating that this approach can be reversed. With the goal of offering a platform for mini-job placement via App, Shiftpixy is focusing on the job provider side in a first step. However, not by offering them placement services, but by using a staff planning software with which the providers, such as restaurant operators, can organize their shifts. The software is designed in such a way that free shifts can be placed on the job platform with a single click. Even if the underlying platform does not have enough users or even has no users at all, the shift planning software is valuable for providers right from the start and can therefore be monetized before the actual platform.
Using a network
Another strategy is to use an already existing network in order to have a large userbase on the platform right from the start. Certainly not as creative, but clearly effective. Of course, this only works if you have a network that has a significant market share, and is therefore only an option for established players. Although the corporate world has long slept on the subject of platforms, more and more companies are starting to invest in ventures to secure existing customer access in the long term. They often do this in cooperation with other market players in order to jointly develop central platforms, which is a real paradigm shift in many industries. One example of such a platform is kollex, a B2B beverage ordering platform jointly founded by beverage brands Bitburger, Krombacher and Coca Cola, which also simultaneously digitalizes the infrastructure of its wholesalers. Win-win.
Starting as a provider
A further strategy is, as a platform operator, to initially act as a seller as well, thus creating an offer of products or services to acquire customers before other suppliers are on board. Amazon, which initially started out selling books itself, is one example. This strategy has the major disadvantage that it is particularly resource-intensive: setting up customer service, warehousing and distribution structures is a gigantic project. In addition, platform companies are technology companies at the core. The business that takes place on the platform is usually far from that. That’s why Amazon focused on books: they are easy to store and transport and mostly have a rather long shelf life. Pun intended.
Intense, difficult, but nevertheless worthwhile
Whichever of these paths new platform ventures and start-ups will choose: The initial phase will always be an investment-intensive dry spell. However, the potential inherent in the model leaves no doubt that we will see the rise of new platforms in the near future. By the way, Berlin already has a mobility platform called Jelbi, a project of the Berlin public transport authority Berliner Verkehrsverbund (BVG), which, similar to tripgo in the USA, combines offerings of other mobility platforms such as MyTaxi, ShareNow and Uber in one app. The age of platform-platforms is already dawning.
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Thomas Schiller, Senior Consultant
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