Creating a Successful Digital Business Model

What is the platform model?

The platform model is one of the terms that more and more people are becoming familiar with in the wake of digitization. By means of virtual interfaces, digital platforms ensure synergy effects and, above all, interaction between different interest groups such as companies, customers, but also employees and suppliers. They enable the exchange of goods, services and information and even offer the potential to transform the entire value chain into a value network. The term platform covers search engines like Google as well as social networks (Facebook) or marketplaces like Amazon or Airbnb. The platform model is at least as important in B2B, where it forms the solid, cloud-based foundation for economic success in an increasingly data-driven world. If you want to do digital business as a company, whether in B2C or B2B, you can't get around platform solutions. Where implementation initially involves costs and time, there is also enormous potential, for example to simplify workflows or to offer customers additional services.

If you don't move with the times, you have to move with the times. This truism applies not only to products or the processes in the background, but also to the company's own business model per se. In the B2C environment, commerce and purchasing processes are increasingly shifting to the digital world, and a paradigm shift can be observed in the B2C sector as well. The so-called "pipeline business model" (characterized by linear value chains), for years the status quo in the industry, is reaching its limits. With modern platforms, suppliers, customers, tools and resources are linked together in a matrix-like and flexible manner. In this way, they allow companies to meet the high demands of customers in the age of Industry 4.0 and to position themselves for the challenges of the future.

Why do platforms make sense?

Because digitization unfortunately always brings complexity with it. Huge amounts of data are generated, which can enable sound decisions, but which first have to be contextualized and evaluated. Platform models can take the wind out of the sails of this complexity and give the responsible persons back their overview. Those who can map, overview and control everything in one system have more time for the core tasks of their company. CRM or marketing automation systems, for example, can achieve this in concrete terms. Data-based tools enable feedback loops for quality assurance and the use of existing unused capacities can reduce fixed costs.

When it comes not just to internal processes, but to customer interaction, platform-based business models can provide a significant competitive advantage over competitors. Algorithms (artificial intelligence) in the background can be used to target customers with customized offers, resulting in more sales. Those who set up a digital business model offer their customers a direct and uncomplicated point of contact for complaints and feedback. This increases the quality of service and thus also the satisfaction of existing customers. Platform business models can be scaled much faster than traditional pipelines. As a result, growth can be massively accelerated and the competitive position decisively improved - usually without building up additional resources. Because even if platforms in themselves offer some advantages and facilitations such as a better overview or faster exchange with partners of interest, it is primarily about doing digital business with a platform as a company.

How can you earn money with platforms?

There are various ways to do this. You don't always have to make a clean sweep and start everything from scratch. On the one hand, this is not even necessary if solid sales are guaranteed with the current structures; on the other hand, there is the danger of confusing and scaring off existing customers with radical transformations. Change is undoubtedly important, but this can very well manifest itself in the expansion of the existing business model. As a modern marketplace fully integrated into internal systems, a platform allows companies to offer their own goods and corresponding additional services online. Business processes are increasingly shifting to the Internet, even in the B2B sector. Companies should give customers the opportunity to conclude license renewals or insurance policies online or to make additional purchases. The journey is increasingly moving from physical products to digital services. These must be available to customers digitally via smartphones or tablets.

But new business models can also be built thanks to digital platforms. In a membership model, users pay for a (limited or unlimited) offering of the platform infrastructure. With an extensive range of service or tutorial videos, B2B companies can also do business digitally with this. This option offers the possibility of cross-selling: Anyone who purchases a machine or software product for their own production can use the manufacturer's platform to learn how the product is most easily installed, operated or maintained. A modified form can be to make a certain part of the platform products or services available free of charge, thus minimizing the barriers to entry. A well-known example is Spotify, which is initially free but offers various functions only with a subscription. Such a freemium model can additionally be monetized (depending on the industry and target group) with advertisements.

Those who bring together supply and demand on their platform earn money by means of transaction fees from every transaction made possible between two or more players. This is how Airbnb or Fiverr, for example, make their money. This form of monetization is particularly useful for new, disruptive business models; it offers the great advantage that the operators generate revenue without much effort. The challenge is rather to make the platform known and to get users onto the platform.

Another option is the monetization of data, which is often criticized and legally complex. There are no costs for using the platform, but users provide their own data. The operator (e.g., Facebook), in turn, allows third parties to access the data, thereby enabling direct contact with the target group. So platforms don't earn money from every user group, but they don't have to if the bottom line is positive. To achieve this, however, a platform model must first be set up.

Where to start?

So anyone who is toying with the idea of benefiting from the advantages of an internal platform or even building up a digital business model must ask themselves strategic questions before the launch. What is the specific goal of the platform and what benefits does it offer the respective stakeholders? It makes more sense to start with one project and expand it if necessary before opening up too many construction sites, which then further increase the complexity that is supposed to be reduced. It is also important to consider how users become aware of the platform and how they can be motivated to use it. Getting your own employees to use the platform will be relatively easy if the benefits are clearly communicated and the process is supported with appropriate training and defined internal contacts. Acquiring external target groups, on the other hand, involves more effort and expense. Once the concept is in place, the solution must be implemented. You can either set up your own solution or use existing modular systems available on the market. The effort required to get started is lower when using these standardized solutions, and scalability is higher. With custom-built solutions, however, companies can be sure that all the applications they want are really included.

In the growth phase that follows this start-up phase, the focus is on the users and their activities. And these must now be analyzed using voting or evaluation procedures (keyword: rating systems). For this purpose, it can also be useful (in homeopathic doses) to actively gather information from the platform users about the satisfaction of the user experience. In this way, it is possible to identify where the degree of personalization and added value for the user need to be increased and to increase the attractiveness for future users. One possible approach is to initially only use your own platform model yourself and gradually roll it out for customers or suppliers.

During the maturity phase, the focus is on retaining existing users. At this stage in particular, it is crucial that user-friendliness is mature and that all applications run stably. Additional growth is possible in this phase primarily by expanding the core functions. Essential for this is the analysis of feedback, user behavior and the derivation of resulting recommendations for action. These subsequently increase the added value of the platform and thus enhance its attractiveness. And that in turn leads to more and, above all, more satisfied customers and more money.

Contact us to learn more

Today, it is more important than ever for companies, especially in the SME sector, to take measures to increase their productivity. It's the only way to ensure they can compete, operate efficiently and continue to deliver safe, high-quality products to their customers. The right technology can not only prove to be extremely helpful in this regard, but will impact the future of the company.

At Webzeile, we develop technologies that help companies deal with complexity. In addition to our products, we are a reliable partner for our customers, providing consulting and project management services to guide them through their projects from start to finish.

If you would like to learn how Pacific Codeline can positively change your business, contact us today to schedule a free initial consultation.