Creating a digital platform is a great opportunity for not only start-ups but also matured organizations. For example larger enterprises – those coming from the non-digital era as well as IT vendors – can be enabled to significantly grow their business by taking advantage of new economies of scale. The clue lays in The Long Tail (TLT) idea of the Ubers and Airbnbs of this world: TLT combined with a core platform qualifies organizations to take advantage of mass differentiation to serve a huge amount of new micro-markets by using network effects and scaling, aiming to create advanced new ecosystems. Many platforms in current days are built upon two-sided networks, focusing on matching and creating interactions usually for either C2C (e.g., Uber), B2B (e.g., Quill) or B2C (e.g., Netflix) relationships. This specialization has fairly grown many companies into global market leaders.
The idea of this blog post is to go beyond: Creating a platform which can cover any kind of X2X relationship (A-, B- and C-related) in a truly multi-sided network, supported and empowered by relevant new digital technologies: The Digital X2X Platform with offerings from a truly cross-sector perspective to gain sustainable competitive advantage in an highly-competitive platform market.
While traditional large enterprises needed time to grow reaching their current sizes, new upcoming organizations using platform technology in the 2000’s have scaled enormously faster to often a bigger market capitalization than their conventional counterparts as following table by Geoffrey Parker, Researcher at MIT, shows:
As commenced in the introduction, the secret for such growth lays in the platform’s ability to reach – through TLT and matching – a mass market where nevertheless customer-centricity in the crowd is guaranteed. These firms have in common to go-to market with one single core offering. There is a lot of literature available, explaining the reasons for such success.
2. The Digital X2X Platform
In this blog post, we will go beyond, and focus on major facets of an advanced platform approach which is shaped by decentral offerings from a variety of business partners (which – besides enterprises – can also come from government- and consumer-side), but are still centrally bundled and governed in one single Digital X2X Platform as follows:
The core includes the infrastructure and middleware technologies, utilizing enablers like AI, Big Data and Blockchain. The environmental enablers include further technologies like Cloud, Internet of Things (IoT), Mobile technologies including VR/AR, and Social Media. The networks to be utilized for the platform’s ecosystem can conclude business partners from any A (Administration), B (Business) and C (Consumer) side who interact based upon specific matching criteria through a variety of different business relationships and offerings. When the organization creates such platform, there are many opportunities to monetize from all those user interactions.
2.1 Platform Technology
Creating such Platform can be handled either in-house through coding it from scratch and letting it run self-hosted (which would be a very complex endeavor). Or, XaaS providers may be involved to outsource specific service areas like:
- IaaS (Infrastructure as a Service) – For Infrastructure Architects: Allocation of infrastructure like storage and networking capabilities.
- PaaS (Platform as a Service) – For Application Developers: Broad collection of application infrastructure (middleware) services like the application platform and database services.
- SaaS (Software as a Service) – For End Users: Platform software can be managed remotely as well, e.g., on a pay-for-use or subscription-based model.
You often see these services structured as a pyramid like the following, showing also examples on typical providers:
Once an organization made the decision to outsource a service to the market, Analyst companies like, besides others, Gartner or Forrester can be frequented to figure out the right partner. For example, the following Gartner report shows the vendors for IaaS:
As result, the current two best providers with enough maturity to help building the X2X platform are AWS (Amazon Web Services) and Microsoft with Azure. Both offer network infrastructure, storage, servers, virtualization and operating systems. It has to be considered that at least the areas of software and data should be kept under the own’s organizational governance. Still, there is a lot of flexibility in regard to pre-configured content from an application and industry-related perspective, offered from both AWS– and Azure-solution side. Taking advantage of such ready-to-use-packages gives organizations the opportunity to create unique platforms even faster. For example, Netflix is built on AWS, and could grow its business to become global market leader among online video providers.
2.2 Platform Users
Not only in two-sided but in any multi-sided platform, users are needed for both the supply and demand side. This means for The Digital X2X Platform that participants can join the ecosystem on any side. Hereby, the following user types can be defined (showing also relevant examples):
- A (Administration): Governmental institutions, higher educational institutions..
- B (Business): Existing and new clients to the organization, partners, analysts, …
- C (Consumer): Private citizen, the own employees, …
Especially in the early stage of the platform, it is important to attract a large group of users to participate. We will focus on this more in the upcoming ‘chapter 3’.
One additional aspect is that in today’s times, it is more and more likely that not only humans, but also things may join the ecosystem of such digital platform, acting independently from humans with own AI and objectives.
2.3 Platform Offerings/Apps
This section is about how to develop platform offerings, comparing the different types, and the impact by X2X-relations.
2.3.1 How to develop Platform Offerings
The platform needs to be equipped with offerings which attract X2X markets. There are two approaches how to build them:
1. Build offerings with own resources: Before innovative solutions are created, it has to be questioned whether the firm is capable to create the targeted offerings in-house (either from scratch, and/or by making existing other solutions platform-ready), or to create a start-up and outsource the work to this own independent entity. The last option will cultivate the true entrepreneurial culture, and give the people more freedom to concentrate on the business development, without too much influence of company policies and politics which is common in larger firms (that often delays or stops true innovation). We also need to take into consideration that apps for the X2X market need to be valuable, unique, and hard to copy, since these are the key factors to gain the sustained competitive advantages. The right speed to go-to market is another critical issue. Hereby, Disruptive Innovation is believed as a good approach: Optimistically, you can enter the market earlier than the competitors with similar modern solutions and strategically focusing on the niche market first, then approaching the more profitable areas.
2. Invite partners and govern their content: Once the platform is built as an ecosystem for partners, the partner channels can target government, business and consumer sides by inviting them to contribute contents. One of the already existing market examples (for B2B, not X2X) is the “SAP Cloud Platform” (SCP), which is built to attract business partners to develop and provide apps by using the SCP as a distribution channel for a go-to market by SAP. In order to build the real X2X platform, business partners to upload offerings can include any A, B or C side, see former ‘chapter 2.2’.
2.3.2 Types of Platform Offerings
Another interesting point is looking at how these type of solutions are being offered on today’s existing market platforms. The following graph from Fraunhofer Institute shows such transaction types, discovering that most market participants focus on services and physical goods, while digital goods seem to have a lower attractivity level.
2.3.3 X2X-related Platform Offerings
Creating the targeted offerings have to be made by respecting the X2X relationship’s uniqueness. In a ‘maximum configuration‘, the following associations are possible:
Explanations and exemplary offerings within these nine dimensions as follows:
- A2A: This relationship targets government-to-government transactions, e.g., platform apps to support the exchange of passport data inside a country or even between different countries.
- B2A: Enterprises have to submit a lot of data to governments for several reasons, e.g., custom declarations in supply chains which can be also managed via platform technology.
- C2A: Private citizen joining governmental institutions to provide services, e.g., a platform can match government demands with citizen to become poll clerks.
- A2B: Providing government services to enterprises, e.g., governments which want firms to use standardized digital forms.
- B2B: This relationship is interesting due to the industry-specifics: In case of having the same industry, inner-industry-related solutions can be offered. E.g., a combination of car sharing services between two Automotive OEM makers (BMW and Daimler are doing this). Or, it is also possible to create cross-industry-synergies, e.g., by offering insurance services from the BFSI industry to rental car companies. Another interesting aspect is to provide as a platform provider services between different business partners, or even to the same company as external agent.
- C2B: Private citizen to offer their services to enterprises. E.g., IBM created a crowdsourcing platform to flexibly onboard freelancers to their IBM projects.
- A2C: Government institutions offering their services digitally to private citizen, e.g., e-government services.
- B2C: Companies using TLT to approach consumers with offerings, e.g., Netflix.
- C2C: Services from private citizen to private citizen, e.g., eBay or Uber.
A platform can theoretically cover all of above relationships with appropriate solutions, which would mean that only very large-scale companies have the capacity to start this journey. In reality, it is more likely that organizations focus on specific offerings (first) which the own company is most capable of. It is recommended to structure these offerings into portfolio clusters which need to go in line with the firm’s own missions. But the missions can also change. Then again, Disruptive Innovation can be used to target white spots to strengthen existing (as well as to add new) portfolio clusters.
2.4 Platform Enablers
It is also important to make such platform becoming unique enough to gain sustainable competitive advantage as early as possible. Yet, besides the user’s needs which will be the main driver of the platform, as well as the uniqueness of the platform solutions to be offered, there must additional technology and management enablers in place which add further strategic strengths. As follows are a set of potential enablers which can be utilized:
- Big Data: Organizations have usually an enormous data pool from their client experiences, but often do not yet take (enough) advantage out of that, e.g., not offering market research reports or best practices through own platform offerings. But selective pieces of this valuable content may be offered, e.g. via Freemium content provision or apps to the public.
- Artificial Intelligence (AI): AI might be internally used to predict future usage and procurement based on the increasing amount of transaction data inside the platform. Also, AI might be externally used in newly developed applications (which are offered then on the platform to clients), e.g., using a big data to make predictions on future developments in specific industries whenever enough market data is available and authorization for such specific scenario is granted.
- Internet of Things (IoT): Depending on the type of IT offerings on the platform, for some specific scenarios on client site, it can make sense to utilize IoT scenarios, e.g., by adding sensors as part of the offerings for analyzing data (for improving the platform and its apps), by supporting digital twin scenarios, or even by controlling several functionalities of platform applications.
- Blockchain: The Digital X2X Platform should use Blockchain technology for two reasons: Firstly, it will show trust to business partners as any transaction through the platform can be verified; secondly, it offers decentral tracking functionalities for all transactions which makes retracing simple.
- Mobile and VR/AR: As long as VR/AR is not yet fully accepted, mobile devices are not dead: Therefore, it is a must that users can access the platform via smartphones or smart watches. But once global regions will adapt 5G or even faster protocols, the mobile data performance will strongly increase and allow a massive utilization of new VR/AR applications, enabling users staying decentrally connected to the platform with much more advanced functions.
- Points System: This is is not a digital topic,. but consider a point system to privilege more heavy platform users. Similarly like a Star Alliance system, customers, employees or other users may be offered advantages like cheaper or free solutions; or third party products like an Apple Watch to be given as a hook.
There are more enablers to be thought about, but above list gives a first strategic advise on how to sharpen the own’s platforms profile.
3. How to start and launch The Digital X2X Platform
The steps on how to setup such platform and its environment are as follows:
3.1 Business Plan
Take this blog article as a basis and develop your Business Plan. Question yourself: how do you plan to monetize from the platform? Whom are you going to charge (which sides; and are you going to give subsidies for a period of time)? Here are some examples from the market on platform monetization strategies, showing how to charge from users:
- Transaction fees and commissions (e.g., Airbnb), and/or listing fees (e.g., eBay)
- Access (e.g., subscription-based access)
- Advertising (3rd parties doing commercials on the own platform)
- Freemium or Metered approach (“from Free to Fee”, e.g., digital newspapers)
- Premium payments (e.g., charging users for a better visibility or ranking)
It also has to be considered that different X2X-relationships offer different opportunities in money-making. One analysis hereby has been done by Fraunhofer Institute which has to be seen as an imperfect insight in the X2X business:
Besides these examples on the B and C side, it would be most likely that subscription would be a major source for A2X-relationships while it is commission and listing/bidding for X2A.
3.2 Gain Top Executive Stakeholder Awareness and Support
Then, you should execute a pitch and get Top-Decision-Maker buy-in (e.g., from CEO, CTO, or Head of R&D) and make such person become the Executive Sponsor. This is important for the required budget, but also relevant for solving politics. Such Executives demand a well-structured Business Plan, explaining why the new investment into the platform leads to new revenue (and profit). In this regard – after Prof. Alain Pinsonneault – the following framework shows the relationship between IT investment and organization’s profit:
3.3 Strategy Alignment
As logical next step, you need to make firm leaders to adjust the firm’s organizational strategy as building a The Digital X2X Platform has major impacts on the organization’s products and markets.
3.4 The Digital X2X Platform Core Team
Now, the core team to govern and develop the platform has to be founded. For the governing function, the formerly mentioned Executive Sponsor is needed as per political commitment as well as to ensure an appropriate funding. Then as for the developing unit, it depends on the firm’s own capabilities whether or not to build the platform inhouse, or to better create an independent external entrepreneurial entity like a start-up and outsource the work there.
Leaders in today’s business would go even further: Oliver Koeth, CTO of NTT DATA Germany GmbH, claims that “successful platforms of the future will be started outside the boundaries of a single enterprise“, involving not only the own entrepreneurial unit, but also different business partners on eye-level to ensure a proper scaling from the beginning on.
Such business partners can be recruited, e.g., from a infrastructure and middleware perspective as well as for the platform’s offering ecosystem.
Respecting the unique organizational structure and its global scale, it is recommended to found a global program team, reporting to the Executive Sponsor, to connect all of the global business units including the external start-up unit and even the external business partners to each others, ensuring that all relevant stakeholders in the organization are engaged, ensuring a proper transformation to the joint owned platform start.
3.6 Develop the (first) Apps
In addition to creating the platform’s infrastructure and middleware, the software layer has to be targeted as well. This has been described in detail in above ‘chapter 2.3’. One aspect not yet mentioned is that instead of “closed innovation”, it can be an idea to utilize also the “open innovation” approach (e.g., crowdsourcing) to ensure to generate truly attractive apps, e.g., for the X2C markets.
3.7 Manage Change
As this platform will bring major changes in paradigms in organizations implementing it, it will be natural that resistance occurs on any level. For example, the organization has to learn that not scaling supply like in traditional business is important anymore, but from platform’s perspective the scaling of the demand. This and other change impacts are well described in an article from HBR. At the end, it comes to the utilization of best practices like the stakeholder engagement techniques from PMI’s PMBOK which especially shows that the powerful stakeholders having the highest impact must be managed closely to continuously get the required support to establish (and run) the X2X Platform:
3.8 Launch The Digital X2X Platform and Go-To Market
To make the platform and its offerings ready for launch, it has to be ensured that also the necessary staff (e.g., Marketing, Sales, IT, Support) is trained and ready. Then as for the go-to market, marketing and sales campaigns should be run to create demand, making the markets adapt the platform and its offerings. Very important hereby is to decide for a smart platform launch strategy: INSEAD has published a good article about this – five of their strategies including market examples are as follows:
- Follow-the-rabbit strategy (e.g., Amazon who first focused on online retailers, then the platform)
- Staging value creation (e.g., digital newspapers hire writers to create initial high quality content)
- Single-side strategy (e.g., Open Table created useful tools for restaurants)
- Simultaneous on-boarding (e.g., Facebook focused on both sides in the early stage even it was a small initial set)
- Micro-market strategy (e.g., Facebook launched a close community of Harvard alumni first)
3.9 Continuous Improvement and Maintenance
When the platform is live, ensure that there are continuous innovation cycles for both the platform functionalities as well as to further expand the own offering portfolio plus to replace outdated apps constantly. And just to make the story complete, it is critical to ensure that the platform is safely running and maintained.
In today’s times, there are huge opportunities to step into the platform market. This is valid for both younger firms making the platform as their core offering, as well as for larger enterprises to see the platform as an extension to an already existing matured business model. The larger the platform is expected to grow (in terms of involved A, B and C users and equivalent platform offerings), the more either an organization with strong own IT capabilities is needed to develop this ecosystem while pieces of required services have to be outsourced to XaaS providers.
In an all-encompassing approach, The Digital X2X Platform covers any kind of X2X business. But, this is a theoretic maximum model. In reality, organizations should focus on offering clusters provided by the platform, which are somehow related under a portfolio to support the firm’s branding and missions. The good point is hereby the scalability, giving the own organization the flexibility to further grow in terms of new offerings and users.
Finally, it is important to gain sustainable competitive advantage. Besides the selection and quality of the offerings as well as the quantity on users participating, the utilization of new technologies like AI, Blockchain, and IoT will further help to stand out of the crowd of today’s platform providers.