Platform Economy

Platform Economy is a modern take on business, that combines economies at scale, technology and modern business models.

AirBnB, Uber and Facebook are examples of companies, where the ecosystem they’ve created generates content, provides resources which are then consumed by the end-users at the other end of the platform.

A true platform economy pioneer builds an unfair competitive advantage through the use of modern business solutions and by creating a network and enabling an operational platform between different entities, enabled by intuitive and innovative technological solutions. Once the ecosystem around a platform is built, even major players in the industry will have a hard time challenging it. The value of the platform is much more than the sum of its parts.

Applying platform economy to your business

From the point of view of a single company, it’s of key importance to understand one’s role in platforms is and whether or not your business relies on a platform created for your specific needs. If you’re pursuing an unfair competitive advantage over your competitors, it is worth it to at least scope out the possibility of creating your own platform.

Let’s say for example if a company operating in the steel industry wants to improve its competitiveness, it can probably do so by using platforms created by others instead of having to come up with its own. Even then, it will have a role in platform economy and will gain benefits from being a part of it.

However, to gain a competitive advantage over the other businesses operating on the same platform depend on a variety of factors. You need to consider how successful your marketing is, how the client reviews are and what’s the price range of your products compared to the competition. The other way, obviously, is that you invest in developing a platform of your own and make your own rules.

Have you noticed how you’ve started hearing about platform economy success stories more and more frequently?

Where do I start if I want to develop a platform?

The starting point for a successful platform economy is a winning business concept, where the technical solution is merely a tool, albeit a necessary and a critical one. Should every company therefore strive to create a platform?

Absolutely, if you want to build on your advantages and make your own way!

First, you need to consider the type of company you are and what kind of a role you want to reach in your market. If you’re starting out globally significant with a considerable pool of resources and an established network – like for example Valmet or Kone – it’s justified to start importing your ecosystem to a platform that you yourself are managing.

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Competitive advantage – The guide on the path to success

Competitive advantage is the comparable advantage a company holds over its competitors and potential competitors. This advantage can be found in a specific skillset, ability, way of work or other factors. Unlike digitalization, platform economy can be considered an actual recipe for building an unfair competitive advantage. It’s a formula, with which basically any business can be redesigned into being digitally compatible to reach success or even disrupting its competitive field.

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Defendability – To stay on the path to success

Defendability is a characteristic in the company that makes duplicating its business extremely hard for others. Once a distinguishable and successful business concept has been built, the company needs to stop and consider how they can maintain the new status quo. Preferably, this is done efficiently, permanently and by continuously distancing from what the competition is trying to do.

Google is a great example of a global infrastructure. It’s easily defendable, because building a network as expansive as the one Google has is both expensive and slow. Few have the capability or the will to challenge that.

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Network effects

Network effects are what happens when new users make the network more valuable to existing users. Once the network crosses a critical threshold, competing networks traditionally start losing ground and become less interesting in comparison.

Network effects are one of the best ways to create defendability in online business. Companies, whose business is entwined with (preferably several) network effects has all the potential to make it big in the market.

When you look at any of the massive successes in online business regardless of industry, you can often identify different kinds of network effects as the keys to success.

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Application Programming Interface (API)

At the core of platform economy is a digital platform consisting of data, that is accessible through pre-determined means. This avenue to data is called an Application Programming Interface, or API for short. In the early 00’s, Amazon decided that all of its internal products must be built with API’s. This in turn enabled the birth of Amazon AWS cloud platform, its commercialization and maximal scaling to become one of the big three cloud platform providers.

A modern, well-designed API can harness an entire core business into a channel that can serve various target groups. The API itself can be – if it’s well-documented – a product, which is referred to as API-as-a-Product or API-as-a-Service.

Additionally, the data the API gathers can be packaged and used to create a mobile application, which can then be used to improve the accessibility of a certain target group of customers (for example TripAdvisor).

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A culture of experimentation

The implementation model of modern online business is experimental design and development. This means data- and user-driven design, where one is ready to challenge the models that no longer work or are found to be inefficient and through experimentation building new and better ways to conduct business.

At the heart of experimentation are meaningfulness, creative problem solving, accepting failure as a part of the path to success, a culture of constant improvement, measurability and the ability to self- and flock-guide work.

A business concept that stands out is at the core of platform economy, and Sofokus has the skills and the experience

This raises an interesting question: Even if you start out at zero, once your platform establishes itself in the marketplace, it becomes more and more challenging to the competition to displace you. It might even be more convenient for the competition to try and buy your platform out from disrupting the market.

Sofokus is experienced in platform economy

A business concept that stands out is at the core of platform economy. Here are some comments from our customers:

“Sofokus offers the skills and tools of a large software developer with the agility of a small one.“
Pasi Kivekäs, CEO, Flextila
Read the entire customer story.

“Our needs were clear from the start and we knew what our platform had to do. How we would achieve that and how successful it would be was unclear, but Sofokus helped us with these points. When it comes to transactions, there are a lot of issues to consider and determine correctly”
Mona Haataja, CEO, BRANG
Read the entire customer story.


Digital Platform – the Heart of a Business

Should I develope my own platform or is it better to utilize existing ones? This question concerns many new startups, but also companies with a lucrative business.

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