From pipeline to platform

What do tech giants and successful start-ups and scale-ups have in common? They use one or more digital platforms to grow strongly and dominate their market. “In the traditional pipeline model, a company will buy in products, develop its core business and sell on with a margin. A digital platform starts with the question: how can I play a central role between different manufacturers and different customers? Do we have parties that are prepared to play on our platform? Can we develop a willingness to play? Only then can you work on the willingness to pay: how can I bring these parties together and get paid for it?” explains Steve Muylle, Professor of Digital Strategy & Marketing.

Pay2play

Professor Muylle illustrates the pay2play principle with an example. “A conventional taxi company will buy or lease a number of cars, recruit drivers and provide taxi services. Uber, on the other hand, positions itself in the middle between people who have a car, people who need a ride, a retailer who wants to know when most of the rides occur, other mobility providers, and so on. Uber does not provide taxi services; instead, it facilitates mobility. All the drivers who wish to ‘play’ on the Uber platform are required to pay 20% of their fee to Uber. It has a completely different business model behind it.”

Disrupted pipeline

“The greatest challenge lies in the monetisation,” says Jorn De Neve, Head of Advisory at KPMG Belgium. “Most companies know that sooner or later they will have to exchange their pipeline model for a digital platform on which players from their own and other sectors will have to acquire a unique sales market, one that is also interesting enough for people to pay for it. But how do they get started? This kind of systemic disruption of your business model requires a different way of thinking and working to everyone else, including us. It's not the same as supervising a takeover, for example, where we know in advance exactly which path we will take.”

Back to basics

How can we become a digital platform? This is a question that Professor Muylle receives from all walks of business life during his digital strategy programme: “Platform thinking is a hot topic. However, we are noticing that managers and executives misuse the concept of ‘platform’ all too often these days. They think that a marketplace or a portal will give them a digital platform. But that's not the whole story. For this reason, together with my colleague Amit Basu from the American SMU Cox School of Business, I have written a memorandum in which we use examples to illustrate exactly what characterises a digital platform.” (see box)

Entrepreneurial approach + academic support

The ‘Digital platforms’ memorandum marked the start of a three-year partnership between Vlerick and KPMG Belgium. Öztürk Taspinar supervises the partnership from within KPMG: “We have been co-creating with our clients in our open innovation ecosystem for some time now. In our ignition centre, companies can experiment with what ‘platformisation’ could do for them. It also gives them the opportunity to experiment in safety and to be advised by our multi-disciplinary teams. At KPMG, we can link this secure ‘sandbox’ environment to the insights we have gained from the cross-pollination between revenue models in various sectors. This will enable our clients to switch quickly – i.e. faster than their competitors – and migrate to a new revenue model. This partnership allows us to support our professional services and entrepreneurial approach with robust academic research.”

Mutual trust

“We know from experience that together we can convert disruptive business models into insights and instruments that we can both use to guide and advise our clients,” adds Jorn De Neve. “By definition, a platform solution is tailor-made, labour-intensive, co-creative and interactive. It is not a delineated solution, but a shared journey in which you will have to make tactical and strategic decisions about the partners with which you wish to build a platform. Mutual trust between the parties is essential. The insights, case studies and best practices from this partnership strengthen this relationship of trust and allow us to play our role of trusted advisor to the full.”

Battle for platform positions

This mutual trust is all the more important when you realise that the battle for platform positions is currently raging. Professor Muylle: “KBC may be a forerunner in our country with the Kate platform, but the bank and insurer must be aware of a possible threat posed by tech giants such as Google or Amazon, not to mention less well-known start-ups that want their own piece of the action in more and more sectors. Every sector is checking out who might be able to take over a platform.” If you succeed in setting up a platform that enjoys such trust in the market that willingness to play results, your next step is to maintain that trust so that the result is a willingness to pay.

Also for local SMEs

This does not detract from the fact that SMEs are also examining how they can make a difference in their local market with a digital platform. Professor Muylle: “Inspired by what market leaders AB-Inbev and Heineken are doing, a local family-run brewery recently asked me: how can we also become a digital platform? How can we connect the local cafés to which we sell beer with suppliers of food, cutlery, glasses, etc., and distil a payment model from this? I was pleasantly surprised that a company with its roots in the 19th century wanted to set up a strategic session about this. As you can see, platform thinking isn't just for tech giants or trendy start-ups and scale-ups.”

Intermediary, infomediary, portal, marketplace, platform, etc.

What is a digital platform?

There appears to be Babylonian confusion surrounding the term ‘digital platform’, even among managers and executives. Professor Steve Muylle and his American colleague Amit Basu from the SMU Cox School of Business have therefore written the ‘Digital Platforms’ memorandum. On the basis of numerous examples, you will discover:

• What we mean by a digital platform
• Which types of digital platforms exist
• Which questions you should ask when launching a digital platform

Download the ‘Digital Platforms’ memorandum for free