Why Build a Digital Platform?
Today, communication is almost completely through digital channels. To have a visible and findable presence in the marketplace, a digital platform must be present that fits the various stages of the customer journey. McKinsey & Company reports that digital platforms and ecosystems define the new competition. The leading competitors in any industry are now “Tech first” and have vibrant and aggressive digital platforms or ecosystems.
Digital platforms and ecosystems have become an essential part of the business landscape and are no longer the domain of only digital natives. Today, digital platforms satisfy a continuum of needs, from automobile insurance and real estate services to advice from doctors. In large part, even individuals now communicate via a digital platform to digital platform on sites like Facebook and online dating sites. But merely building a website is not what a digital platform or ecosystem is about. It is much more. McKinsey in their 2018 survey of 1600 C-suite executives found 5-year EBIT growth of 2.2% and 10% beyond. Companies surveyed by McKinsey with digital platforms had annual EBIT earnings boosts of 1.4% which outpaced non-digital platform companies by 1.1 % or nearly 4.5 times greater growth. Across products, sectors, and developed economies, McKinsey found that a single digital platform prevails 75% of the time.
Not surprisingly, the top reasons these digital platforms thrive are connected to network and scale effects, in tandem with the desire to secure end-to-end digital services. Moreover, the customer journey of the largest purchasing power groups of consumers demands an online digital presence to do business. Further, the digital native consumers expect thought leader content, expert advice, and customer reviews before they will trust doing business. Most digital active and digitally responsible customers give the rationale that they use digital platforms to make it possible to combine individual services and integrate them into full-service offerings.
Further, digitally active companies cite their digital platform presence in terms of their desire to develop a bigger base of customers across categories at scale. In the competitive business environment, with spreading digital platforms and ecosystems, and expanding networking effects-speed of first-mover advantages and winner take all dynamics will continue to become even more important for incumbents to consider and ultimately demand competitive digital platforms and ecosystems.
As technology continues to revolutionize the market strategy of modern business, companies including startups are leveraging the digital platform and ecosystem to encompass the new shifts in customer interaction. Most responsible companies and startups are recognizing the necessity to establish digital platforms so they can integrate them into their business models to reach out to new customers and new marketplaces.
A digital platform consists of multiple services, representing a unique combination of software and hardware services a company utilizes to deliver its digital strategy. Digital platform strategies are one of the fastest-growing markets. Digital platforms help businesses enhance user experience in order to attract new customers. The evolution of advanced technologies such as IoT, AI, Cloud, and analytics are playing a crucial role in driving the growth of the digital platform market. McKinsey’s survey strongly indicates new evidence for the power of digital platforms and suggests it is a winning operation model for digital strategy. A digital platform is the unique collection of tools and services an organization uses to deliver its digital strategy. Another way to look at a digital platform is it is a business model that allows multiple participants (producers and consumers) to connect to it, interact with each other and create and exchange value.
Benefits of a digital platform are: generate revenue, reduce costs, foster collaboration and innovation for new products and services, gain speed to put products on the targeted markets.