Marc Cortes is Director of the Executive Master in Digital Business at Esade
What do companies as varied as Amazon, Uber, Airbnb, TaskRabbit and Spotify have in common? They have all implemented a platform business model. In other words, they promote and make it easier for different groups of users to connect and interact, creating environments to exchange goods, services or information.
The platform model, a new way of doing business made possible thanks to the digital economy, consists of three elements: intermediation between two groups of users/clients; creating supply and demand in the platform; and building the business based on third-party assets, such as Uber drivers, AirBnB apartments and TaskRabbitt taskers.
These companies’ success stems from their ability to take advantage of these three components. This might lead some to think it’s a simple model that merely requires aggregating supply and demand. According to a McKinsey study, creating new business models is a priority for 41% of executives, and platform models are at the top of the list. However, hundreds of companies try to intermediate in this industry and fail. Why? There are five key factors to ensure a platform model succeeds.
1. Supply or demand aggregator?
Not all platform templates are created equal. A first basic decision must be made: does the company focus on the source or the demand? Models that think they can start by capturing users on both sides of the equation inevitably fail. They will have to do it first. conquer a camp; This will then convince the other party to use the platform.
Some work by aggregating calls to an already existing supply, reducing search prices for users. For the latter, the platform will make it less difficult and more effective to locate the service they are for. of model.
Other source packages for a call for that already exists. The concept here is that the platform reduces acquisition and operational prices, such as payment strategies and, as a result, reduces prices for consumers and their transactions. An example is the logistics service that Amazon gives suppliers in their market.
2. Incentives and matches
The first step on the road to success is attracting users. This type of model requires volume. Would anyone use Airbnb without its supply of accommodations in places users want to visit? This implies capturing them by providing them all the incentives available. When entering a new market, for example, Uber offers drivers higher commissions and free or lower-priced trips to users.
The point of the moment is to decrease friction. Platform capacity will have to effectively lower or eliminate transaction prices for users. Using the past example, Uber can guarantee, through its algorithm, that users will locate a car, with data on estimated time of arrival and driving force ratings. This greatly improves the usability of the service.
Finally, when the platform has very low users and transaction costs, the matching phase begins. This translates into consistent features and pricing to incentivize recurring usage, a key thing of good fortune in any revenue model. The use of synthetic intelligence (AI) insights and algorithms is key here.
3. Another set of phase measures
Another key to good fortune is to perceive what corporate phase it is at any given time and use the ideal measures to measure your progress. The first phase is known, and the main KPIs come with the number of registered users, the engagement with them, and the charge of their capture. After this phase, the conversion score begins. Here, KPIs related to conversion rate and recurring source of revenue (MRR) per month are essential. Finally, the expansion and retention phase occurs, when corporations review themselves to achieve successful expansion and build transaction volume. The basic measures here are KPIs aimed at tracking the unsubscribe rate, average user revenue stream (ARPU), and cross-sells.
4. Data in the of everything
There’s no platform style where data-driven resolution isn’t in the middle of it all. AI and device learning are essential to help platforms grow and innovate. These technologies make it imaginable to analyze massive amounts of data, identify trends, and provide personalized recommendations. AI can also improve operational power and automate processes, leading to more positive delight for users and a higher price for businesses.
5. A (temporary) perk
Laning a successful platform style today is much more complicated than when Uber, Airbnb and the reservation arrived here and took over the market in their respective industries. The keys to them were the absence of any competitor (leading to those corporations to call “category creators”) and use network effects (of which an intelligent, in this case, the platform increases the price because more users truly use them).
The pressure to succeed thus lies in identifying not only an industry, product or service which represents an opportunity, but also trying to create a competitive advantage, even if only temporarily. This implies finding the element which differentiates a business from its competitors, allowing it to grow and successfully transition through the different phases described above. If a company doesn’t manage to get to the conversion stage, its success is practically impossible.
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