The platform ecosystem canvas defining the core elements of new economy

Google, Facebook, Amazon, Apple and many more. The success of platform owner companies has created the hype around the concept. It is often forgotten that the platform owners are not doing the business alone.

The new platform economy is based on interaction of many involved actors. Platforms will give companies new opportunities by changing how they interact with each other, oftentimes also disrupting the traditional business rules. Therefore, configuration of platform ecosystem is one of the key tasks in a platform economy.

How to support identification and understanding of a win-win-win model that is beneficial for all platform ecosystem actors? Based on the broad literature review (Sorri et al. 2016), we have built a platform canvas with eight key elements describing the critical characteristics (see Figure below).

Platform ecosystem canvas

Figure. Platform ecosystem canvas.

To create the integral interactions, a platform needs to attract, involve and interconnect value creators on both the supply and demand sides. The core three elements – value and participants including both users and producers – describe the most important activity of the platform: the core interaction. Each and every interaction in a platform starts from co-creating value, and the platform has to manage the exchange of value by using the filters. In digital platforms the filtering is typically based on algorithms. Those software-based tools enable the proper and relevant fit of the exchange between producers and users.

After understanding the core interaction and the value the participants need or want to exchange, it is relatively easy to define the key enablers of platforms’ network effects. To put it short, direct network effects explain how a platform attracts others to participate whereas indirect network effects arise from attracting others to contribute to in value creation. Then, technical and co-operative resources are closely linked to network effects as they set the rules of participating and sharing within the platform. At the same time, overall governance practices define in more detail how the collaboration within the ecosystem is orchestrated. Open interfaces and integrated filtering of data can enable network effects and create new interaction, which may not be directly controlled by the platform owner.

Finally, the last and crucial element is the value capture, i.e. monetizing as it a critical question from the viewpoint of business model. At the moment, most of the platforms have rather traditional earning logics such as subscription or transaction based models. The transparency in benefit sharing is critical, although the earnings within the platform economy are not or neither will always being shared equally. Each actor should take account of this in their business model.

The canvas is intended to be used in guiding the platform ecosystem participants – platform owners, complementors, infrastructure and service providers – through eight key elements, ensuring reviews of all critical perspectives. The platform canvas helps to challenge the platform by opening their thinking towards multi-dimensional value co-creation between ecosystem members. We have tested with seven industrial case companies, and based on their feedback, it was viewed useful for business managers’ in their platform based business model innovation.

See also our previous posts on platforms:

Openness is the key to the platform economy

When everything is about platforms and platforms are about everything

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Krista Sorri TUT

Kaisa Still, Senior Scientist, VTT

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

Katri Valkokari, Principal Scientist, VTT
Twitter @valkatti

Krista Sorri, Project Researcher, Tampere University of Technology

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.

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Kaisa Still, Senior Scientist, VTT

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

Katri Valkokari, Principal Scientist, VTT
Twitter @valkatti

Is security achievable in a digitalised and networked platform society?

Mikko_Dufva

The digital transformation and platform economy are expected to herald an era of new growth and a break with existing industries. By platform economy, we mean a new, multi-directional way of creating value, in which producers and users of services are connected by social and technological structures and the distinction between them is blurred. Driven by the digital transformation, the rapid and extensive collection and analysis of information will enable networked activity within the platform economy.

Companies based on the logic of the platform economy have already gained market share from actors sticking with traditional practices. However, the impact of the platform economy is not restricted to new companies breaking into the market, but challenges the current economic logic in general. For example, the concept of the cooperative is enjoying a renaissance, while the sharing economy is creating a new kind of communality. All of this is giving the tax man grey hairs.

What do you mean, security?

Discussions of the platform economy have gradually shifted their focus from technology-orientation and the contemplation of new business models to social impacts. The debate has centred on the transformations in various industries and the workplace. Less attention, on the other hand, has been paid to security – now is the time to consider preparing for the changes being ushered in by the platform economy. Security is about more than information security and privacy issues; it also concerns other challenges and opportunities – related to trust, risks, the distribution of power and the management of complex wholes – that will accompany the new networked practices.

Networks and increasing mutual dependence have led to an entirely new approach to the concept of security. The risks are now much more complex and difficult to identify. In place of hierarchies, organisations are now network-based and temporary venues where traditional top-down control no longer works. This means that we are operating in a complex world of adaptive systems in which chaos theory would be a more appropriate starting point than process models. In this context, concepts such as power, control and trust gain new meanings and dimensions. What does power mean within an interdependent system? Can trust be outsourced to algorithms?

Rather than individual and single players, in the platform economy the focus is shifting towards communities and collaboration. The platform economy is a particular headache for legislators because its business models and the blurring of roles between customer and company do not fit into existing ‘pigeonholes’. Traditional supervision and regulation are difficult to apply when, for example, an accommodation service frames itself as merely a link between supply and demand – and owns no accommodation. Although regulations and restrictions will remain important for networked operations, the related culture will become an even more important source of security.

Will the platform economy take security to a new level?

On the other hand, security could be boosted by the platform economy, digital transformation and networking. Platforms connect people, while communities built on platforms take care of their members, particularly if the platform incentivises them to do so. The design of platforms and networks involves a social as well as technical and business challenges: how can we create platforms that promote security and build a sense of community? In a situation where all interactions leave a digital trace, will the resulting, reputation-based economy build trust or inequality? What role will companies, the state and individuals play in shaping platforms?

The digital transformation, platform economy and many other, corresponding terms refer to the transition from a production-based society to a collaborative one. Instead of focusing on which sector will be the next to be disrupted by a platform economy player, perhaps we should take a proactive attitude and talk about how to create the kind of future we all want. How can the digital transformation and platforms serve common goals and forge security? How can we ensure fairness, the minimisation of risks, and common ground rules?

These questions, among many others, are explored by the foresight, organisational dynamics and systemic change team at VTT in projects such as Platform Value Now.

Mikko Dufva, Research Scientist

mikko.dufva (a) vtt.fi

Twitter: @mdufva

When everything is about platforms and platforms are about everything

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Has anyone not heard of Uber, Facebook, LinkedIn or AirBnB? That platforms are the way to be successful? Our analysis makes some of this hype visible, as it reveals many ways to describe and define the concept of platform.

There is a definite hype around platforms on-going, and many companies are building their own platforms or platform strategies to find their way for success. In our research project IPLATE, we are gearing toward understanding the competencies related to platforms, i.e. ingredients needed to build a winning cake in platform economy. We approach platforms as interactive, collaborative multisided marketplaces with possibilities of networks effects for value-creation.

In order to find the best recipes we go to explore the concept of platform – so that we can understand the resources and capabilities for success – we find that platform has been defined with multiple words. Toward addressing these complexities, we analysed 12 relevant and rather highly-cited journal articles and reports about platforms (list at the end of the blog). In these, the word “platform” was mentioned altogether 1791 times, which correspond to the average of 149 per publication (with a range of 35 to 309 per publication).

With the analysis we found 31 words that were used as a prefix to define platform and 39 words that were used after the word platform. Figure below presents the words in alphabetical order. We can see that supply-chain platform but also platform supply-chain get mentioned. Similarly, technology platform and platform technology as well as market platform and platform market were mentioned. Accordingly, both business and technology are present: the terms related to technology are highlighted in red, the ones to business in blue. The roles mentioned in this platform economy include: platform partner, platform sponsors, platform owners, platform leaders (or leader wannabes), platform entrants, and platform complementors (in green).

Figure: Summary of words describing platforms.

With this analysis, we want to highlight some of the semantics of platform from car platforms and global platforms to platform licencing and platform wars. The breadth of platform approaches is also evident in a recent HBR Insights (from April 2016), which presents 18 articles about the Platform Economy – how online marketplaces are changing the face of business.

So yes, we did find the term platform competence presented as an element of a platform. Still, more interesting and challenging is that these platform competencies should be able to support such as wide arena of platform concepts. In other words, instead of one platform cake there are many different patisseries and therefore there are also many different recipes for success in the platform economy. Moreover, as platform economy is built on network effects and calls for collaboration, companies cannot bake the cake alone.

Kaisa Still, Senior Scientist, VTT

Marko Seppänen, Associate Professor (tenure track), Tampere University of Technology

Katri Valkokari, Principal Scientist, VTT 

List of publications:

  1. Yang, C., & Jiang, S. (2006). Strategies for technology platforms. Research-Technology Management, 49(3), 48-57. (platforms mentioned 220 times)
  2. Gawer, A. (2011) What managers need to know about platforms The European Business Review, July, pp. 40-43. (73 times)
  3. Sawhney, M. S. (1998). Leveraged high-variety strategies: from portfolio thinking to platform thinking. Journal of the Academy of Marketing Science, 26(1), 54-61. (110 times)
  4. Gawer, A., & Cusumano, M. A. (2014). Industry platforms and ecosystem innovation. Journal of Product Innovation Management, 31(3), 417-433. (309 times)
  5. Parker, G. & Van Alstyne, M. W., (2014) Platform Strategy Boston U. School of Management Research Paper No. 2439323. (169 times)
  6. Gawer, A., & Cusumano, M. A. (2008). How companies become platform leaders. MIT Sloan management review, 49(2), 28. (120 times)
  7. Parker, G., & Van Alstyne, M. W. (2009). Six challenges in platform licensing and open innovation. Communications & strategies, (74), 17. (120 times)
  8. Zoric, J. (2011). Connecting business models with service platform designs: Exploiting potential of scenario modeling. Telematics and Informatics, 28(1), 40-54. (35 times)
  9. Basole, R. C., & Karla, J. (2011). On the evolution of mobile platform ecosystem structure and strategy. Business & Information Systems Engineering, 3(5), 313-322. (147 times)
  10. Smedlund, A. (2012). Value cocreation in service platform business models. Service Science, 4(1), 79-88. (123 times)
  11. Kenney, M., & Zysman, J. (2015). Choosing a future in the platform economy: the implications and consequences of digital platforms. In Kauffman Foundation New Entrepreneurial Growth Conference. (159 times)
  12. Accenture Technology Vision 2015 Stretching your boundaries in the digital era. (206 times)