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Capturing rewards of platform business models

We recommend three approaches for implementing a platform strategy, and they can be used in concert with each other.

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Why do platforms matter to you? They are already having a multitrillion-dollar business effect, making it critical for leaders to weigh the implications, consequences, and benefits, and fully explore the questions they should be asking.

Remember that less than 25 years ago, you could find plenty of business leaders who were certain the internet meant nothing to their strategies or operations. Today, substitute “platform business model” for “the internet,” and then consider whether your enterprise has fully evaluated the platform opportunity.

Even if the impact hasn’t infiltrated your segment yet, imagine the state of your enterprise in another 25 years. Understand that the rise of a platform economy didn’t materialize spontaneously on the pages of business journals. In late 2018, the total market value attributed to platform economics was estimated at USD 7 trillion. It’s projected to expand to around USD 60 trillion by 2025, or nearly one-third of all global commerce.

The basic concept is quite familiar. Big-box stores or mass-appeal retailers are physical platforms — a centralized locus of transactions, with a defined set of features and operating characteristics — where buyers and sellers find each other.

All these platforms trade information, enable commerce, drive social exchange, and offer a value proposition that attracts lots of participants. In turn, such circumstances generate value for the platform provider. These rewards can include greater revenue, profit, market share, and the disproportionate market influence that comes with acting as a “convener.”

Tapping into the greatest possibilities of platforms will depend on thorough, realistic assessments of marketplace value shifts and future value propositions. And setting a platform strategy starts with deciding whether to initiate your own platform, or participate in existing or emerging platforms. Many companies will be able to grow by participating on platforms. A much smaller number are expected to orchestrate and own a major platform; organizations in this group clearly need the capabilities to be a first mover or major platform player.

Either way, a sustained competitive position will likely require a bold, definitive strategy based on a host of smart, strategic choices. These choices include: how enterprises create distinct value, establish required partnerships, and deploy, monetize, and scale their use of platforms.

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Meet the authors

Edward Giesen

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, Partner, Digital Business Strategy and Transformation

Jamie Cattell

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, Global Leader, Digital Strategy Service Line, IBM Services

Saul J. Berman

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, Vice President, Chief Strategist, IBM Global Business Services

Fidel Santos

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, Associate Partner, IBM Digital Strategy

Anthony Marshall, Senior Research Director, IBM Institute for Business Value

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