Business designs are fundamentally changing
The era of digital platforms
Traditionally businesses have relied on internal labor and owned resources to scale value creation. New approaches to business design are on the rise and taking up the competition in the digital space. We call them platforms. Because of digitalisation the traditional way of producing, distributing and consuming almost any form of value is getting outdated. There is need for a more efficient and engaging model, and many industry business designs are lined up for a fundamental change.
The market in more or less any industry can be organized in producers on the one side and consumers on the other side. The producers produce products, contents or services and the consumers consume these on the other side.
For as long as we have had industry the dominant model of business has been based upon value being produced and delivered upstream and consumed downstream. Producers simple enough create stuff and push them out to the mass market of consumers. Let's call this traditional business design for a “pipe model”. As illustrated in the model; much like water flowing through a pipeline - there is a linear flow of consumer goods.
Take the television industry as example. A TV-producer (the “single producer in the illustration) has a limited amount of workers (content creators) creating stuff (content). The scale of such as business system is powered by the ability to organize the workers and other resources efficiently. In the end TV-producer can only produce a limited set of content. In turn this limited universe of content needs to be relevant, interesting and valuable for practically all the consumers the television station has aggregated.
We see pipes almost everywhere, and the model is under pressure. Millions of content producers spew out content every day. If we expand the example from the television industry, and include any content industry and content type, we recognize that the mountain of available content has never been higher. No matter what interest you have the available digital content is growing exponentially. Said in one word, the content space in inefficient.
Faced with the challenges of the “pipe” business design, more and more players find themselves in the need of a new way of building their methods of delivering their goods to their target group. The emerging business models look more like platforms, based upon a more networked model of value creation. A platform is where you connect and interact with the people you want your content to reach, rather than just distributing “out in the blind”.
Unlike pipes, platforms allow users to create and consume value. Platforms does not just simply create and push stuff out to the market, like pipes does in linear fashions. They are intelligent and driven of strong market forces like increased connectedness, decentralized production and the rise of data driven algorithms. All driving a whole new design for business. The content consumers want more relevant content and to take part in the process of both creating, curating, sharing and discussing them.
With the new platform designs businesses can now scale more efficiently, powered by the ability to leverage and orchestrate a global connected ecosystem of producers and consumers toward efficient value creation and exchange of content. The management of platform scale involves both design and optimization of the value-exchange interactions between the producers and the consumers.
In opposite to pipes, platforms leverage on an external ecosystem of users and partners connected to the business over the Internet. Instead of itself creating the content value, a platform works as an infrastructure and governs the conditions that allow external users to create value on the one side and consume value on the other side.
To take a new example, let´s revert back to the television industry. In opposite to the pipe styled television channels, YouTube works in a platform and network fashion. In the second illustration you we can see how YouTube as a platform is different from the television channels.
On the left side of the model we can see that anyone can be a producer on YouTube. In opposite to the pipe designed television industry, the volume of producers on YouTube is very large. With many producers the universe for the consumers is huge (instead of very limited). Furthermore, the YouTube platform has strong filters, which enables each unique consumer an efficient way to find, explore and enjoy videos according to their unique interest, needs and preferences.
In the world of platforms the ecosystem is the new warehouse or supply chain. Network effects are the new driver for scale and data is the new dollar. Scale is achieved by leveraging interactions in the ecosystem, and organizations must shift from a dollar absorbing to data absorbing culture.
Platforms are redefining everything from who can open a hotel (like with AirBnB) to run a taxi (like with Uber) to be a financial lender (like with LendingClub).
In platforms you can think of community management is the new human resource management. The decision makers are more and more algorithms, and behavior design can be seen as the new loyalty program. Sales funnels are suddenly described as user journeys and data science is the new business process optimization for user interactions.
We can see this happen not only for a particular set of industries, but also across more or less all industries.
The “Ocean Space” is one of these. As a knowledge cluster it includes the maritime, offshore energy and seafood industries. The technology company “Ocean Hub” has built a platform (www.oceanhub.com) for this unique and global eco-system. The platform helps the industry players to efficiently consume and distribute content, connect and interact with each other in the digital space.
-Blog: The Ocean Space plays a key role for Earths future. It needs a shared digital platform
-Interview on Ocean Hub TV: The Ocean Content Space is chaotic
-Video Blog: How do we acquire Ocean Space knowledge in today´s digital reality?