With dynamic technological advancements and the rapid growth of startups disrupting various industries, corporations are under increasing pressure to adapt and innovate. Consequently, they find themselves pondering crucial questions: Should they develop their own platform? Would it be wiser to leverage existing platforms for sales? Alternatively, forming strategic alliances with other entities to collaboratively create something new could be a viable option. Matthias Walter, Pau Monserrat, and Prasad MK explore these diverse approaches and opportunities available to corporations.
Why Corporates Should Consider Platforms
There are several reasons why corporates should consider exploring platforms, but let’s focus on three key drivers.
Firstly, platforms can help alleviate inefficiencies within a corporation’s internal operations as they have the potential to streamline procurement processes and generate new revenue streams. For instance, Pau Monserrat mentioned that NH Hotel Group was able to transform an inefficient procurement department into a profitable business by adopting a platform approach.
Secondly, platforms and marketplaces enable corporations to stay relevant and competitive in a rapidly changing business environment. According to Statista, in 2020, the average lifespan of a company on the Standard and Poor’s 500 Index was just over 21 years, compared to 32 years in 1965. By embracing platforms and marketplaces, corporations can adapt to evolving customer demands, form new partnerships, and ultimately drive growth. Platforms also assist corporations in maintaining and strengthening customer relationships.
"C-level executives and company boards constantly strive to enhance their relevance to end customers. As customer needs evolve across industries, corporations seek to stay aligned with growing demands. Adopting an ecosystem model becomes crucial for corporations to disrupt their industry rather than being disrupted by others.", Prasad MK.
As customers increasingly expect seamless, end-to-end experiences that transcend traditional industry boundaries, corporations must find ways to meet these expectations while also differentiating themselves from competitors. Building or participating in platforms enables corporations to stay top-of-mind for customers and continue delivering value.
Exploring the Options: Build, Partner, Spin- off, or Consortium?
When it comes to exploring platform and marketplace options, corporates have several avenues to consider. These can be broadly categorized into four main approaches: building their own platforms, partnering with existing ones, spinning off a separate entity, or forming a consortium with other industry players.
1. Building Their Own Platform. This approach involves the corporate developing its platforms, either in-house or through external partners. While this can offer the benefits of increased control and customization, it may also involve significant time and resource investment. Additionally, there may be challenges associated with integrating the new platform into the corporate’s existing systems and processes.
2. Partnering with Existing Platforms. Partnering can offer corporates a more streamlined route to market, allowing them to leverage the expertise, technology, and user base of the partner platform. This approach can also help corporates expand their reach and tap into new customer segments. However, partnering with an existing platform may involve relinquishing some control over the corporate’s offerings and customer relationships.
3. Spinning Off a Separate Entity. Some corporations may choose to spin off a separate entity dedicated to platform and marketplace initiatives. This approach can provide increased agility, as the spin-off operates independently from the parent company, making it easier to adapt to evolving market conditions. This is particularly popular in the health tech and education tech sectors within the media space. It is an option where corporations tend to allocate funds and initiate new venture businesses.
"Spinning off provides agility. Within a corporate structure, you can get absorbed and lack primary focus. Corporates have valuable assets like networks, whereas startups lack them initially. Startups need agility, something corporations struggle with. Spinoffs embody startup spirit with corporate resources.", Pau Montserrat.
4. Forming a Consortium. With other industry players to develop and launch a shared platform. It’s observed a growing demand, particularly within the automotive segment or any industry dealing with significant data flow. Corporates are striving to create monetization strategies based on end-to-end data, leading them to explore the establishment of consortiums or orchestration of consortiums. These initiatives aim to address broader issues such as interoperability and the monetization of data across the board.
Learning from Failures When Building a Platform Business
While there are numerous success stories in the world of platform businesses, there are also several cases of failures and lessons to be learned. Three key lessons learned were mentioned regarding corporate platforms:
First is the importance of creating a flywheel effect by understanding the needs of all personas involved in the ecosystem and ensuring a win-win situation for everyone.
Second is the need for a cultural shift within the company to embrace startup mentality and agility.
Third is not overestimating market leadership and taking a grounded approach to value proposition.
"To develop a value proposition, we discuss three layers: engagement, intelligence, and infrastructure. However, constructing infrastructure requires a significantly higher cost investment, and this is an advantage that B2B companies already possess.", Matthias Walter.
Embracing the Platform Revolution
In conclusion, platforms and marketplaces offer significant opportunities for corporates looking to drive growth, enhance efficiency, and stay relevant in a rapidly changing business landscape. By carefully considering their options and adopting a strategic, agile approach, corporates can successfully navigate the platform and marketplace revolution, ensuring they remain at the forefront of their industries and continue to deliver value to their customers.
Written by Katrin Maikova ©TheNTWK
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