Openness is the key to the platform economy

The platform economy is based on interaction, and calls for the sharing of the co-created value. Openness and interface transparency are at the core of a successful platform economy.

platformeconomy

Ecosystems and platforms continue to triumph: while integrating users, service providers, producers and complementors they are blurring traditional industry boundaries. The examples of Apple and Airbnb demonstrate how digital platforms cross sectoral boundaries and traditional controlled market mechanisms. Such platforms are also enabling global connections and interoperability.

Digital platforms provide greater accessibility, speed, efficiency – and sometimes an improved user experience, service and greater convenience compared to existing ones. In value creation, there is a shift towards networked structures crossing organisational and industry boundaries, enabling new kinds of business models in place of traditional value chain structures.

Value is created through interaction, but are the benefits shared?

It is often forgotten that the platform economy is based on interaction of many. Still, the focus is often on the single entity of the platform owner. This so-called platform company manages the key platform components (both the technology processing the data and the business logic built on this). Most examples suggest that it also takes the lion’s share of the revenue (see Harvard Business Review: What Airbnb, Uber, and Alibaba Have in Common). The ‘winner takes all’ thinking has encouraged many companies around the world to develop their own platforms.

As a result, many platform companies have created new kinds of ground rules and integrating services that combine, analyse and interpret the information passing through the platform – while highlighting the benefits of the platform company. Unfortunately, though the value of each platform depends on the participation of partners, in many cases these so-called boundary resources are not genuinely open. According to a recent study by ETLA (The Research Institute of The Finnish Economy), out of a sample of 51 companies none had published their­ collaborative or technical boundary resources.  (See: ETLA, “The lack of boundaries resources hinders the growth of industrial internet”, in Finnish.)

The new type of value creation is based on joint activities within the ecosystem formed by a set of actors, with the provision of suitably filtered data and value for various users. This means that a company providing individual services that are seamlessly connected to the creation of customer value and to a platform, can win in the platform economy.

Towards transparent value sharing

To create the integral interactions, a platform needs to attract, involve and interconnect value creators on both the supply and demand sides. Open interfaces and integrated data create new interaction, which is not directly controlled by a single actor, such as a platform owner.

The greatest change needs to take place in our way of thinking: success in the platform economy will mean taking account of the perspectives of network actors – often several players – and openly building participation opportunities. Openly laying out the benefits and investments involved for all parties would provide a starting point for understanding the functioning and dynamics of interaction within an ecosystem. This would enable the mobilisation and compatibility of everyone’s resources and expertise – while meeting the customer’s needs.

Therefore, a win-win-win model, beneficial for all ecosystem actors, and replacing the “winner takes it all”- model, requires transparency in value sharing, as well as a change of mindset. This applies to both direct and indirect benefits. The benefits of the platform economy are not or neither will always being shared fifty-fifty. Each actor should take account of this in their business model. Thus, openness is the key to the platform economy – in which there can be multiple winners.

vttblog_kaisa_still_marko_seppanen_katri_valkokari_crop

Kaisa Still, Senior Scientist, VTT

Marko Seppänen, Professor, Tampere University of Technology
Twitter @DrSeppanen

Katri Valkokari, Principal Scientist, VTT
Twitter @valkatti

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s