Other parts of this series:
South African businesses have an opportunity to provide new products, services and customer experiences by capitalising on digital platforms such as those provided by Google, Amazon … and South Africa’s Discovery Health.
The platform economy is transforming how national and global economies function. Companies that understand how platforms work can use them to gain massive advantages. According to our research, South Africa lags behind. In our Platform Readiness survey, South Africa ranks 14th out of 16 countries.
We tend to think of platforms and ecosystems as a result of the Fourth Industrial Revolution of the early 21st Century. But plenty of companies and industries have employed the power of platforms and ecosystems in the past, with some instructive lessons.
One example of a 20th Century platform is a newspaper or magazine; advertisers use the platform to reach the readers. Another example is a shopping mall, which is a kind of platform that aggregates real-estate, facilities management, security and parking, and attracts foot traffic. If the shopping mall were a 21st Century invention it could be called “foot traffic as a service” or FTaaS.
Both these examples – newspapers and shopping malls – have given way to digital platform companies. Newspapers are under threat from “new media” companies such as Google and social media networks such as Facebook. Shopping malls are under threat from on-line retailers and platforms such as Amazon and Alibaba.
In 2018, five of the first 11 of the Forbes Global Top 100 Companies were digital platform companies, with a combined market cap of US$2,6 trillion.
A digital platform creates value in three ways:
1. It provides a common set of functions that accelerate application development so solutions can be deployed to the business more quickly. In my last blog, I talked about how Google Maps powers Uber and Airbnb. It’s quicker and easier to build something on Google Maps’ platform than to develop it yourself.
2. It connects an ecosystem of previously disparate devices, software and service providers to drive more relevant and compelling customer outcomes. Think of how companies are moving to more tightly integrate their billing and invoicing systems with their banking systems for automatic bank reconciliations and faster settlements. Or home automation systems like your video-enabled doorbell integrating with security systems. Or the fridge interfacing with online shopping.
3. It fosters greater innovation among ecosystem participants.
Some people use the word “platform” and “ecosystem” interchangeably. They are in fact different concepts.
An ecosystem is built on top of a platform. In the example of a shopping centre we can see the platform is the physical structure, with its parking and security and free wi-fi and janitorial services. Once the platform is in place, an ecosystem of shops, restaurants and entertainment can be built on top of the platform.
Companies that want to participate in the platform economy need to decide if it suits them better to be an ecosystem partner or a platform provider. Both approaches can lead to huge success.
One local example is health insurer Discovery. Its platform is the Vitality program.
It has a large and growing ecosystem of healthcare providers, gyms, consumer electronics vendors which sell fitness trackers—and even grocery stores. As this platform attracts more members to its ecosystem, it enables Discovery to use the data it collects to tailor its offerings to individual members. The result is a better service, healthier customers, more accurate pricing, and lower costs for the insurer.
Not every company needs to be a platform provider. Most will find it cheaper and faster to leverage existing platforms to enter new ecosystems and become enablers or collaborators in building new products, services and customer experiences. Much of Discovery’s recent growth has come from recruiting other insurers, in other parts of the world, as partners on its Vitality platform.
It is also possible to develop a platform and be an ecosystem partner simultaneously. I will look at this this hybrid approach in my next blog article.
There is reason for optimism. According to Accenture’s Tech Vision survey in South Africa, almost two thirds of local executives are already taking steps to participate in digital ecosystems. I hope you’ll stay with me as we explore this topic further.