To compete in the platform economy, companies need to first determine their role. Are you an owner such as Google with the Google Play store or player as with the Android app developers?
This must be assessed carefully as it takes a lot of resources to build and own a platform. And as a player, you need to pick a platform where you can find a niche in. In both cases, you will have to be there for the long term.
There are three approaches to consider when entering the platform economy:
- Invest: Some companies have invested in startups that could develop a platform complementary to the industry they are in. SingTel, for example, has invested in various new companies through its Innov8 fund.
One of these is ShopBack, a company that runs a cashback programme for various online stores. When customers shop via the site, they get a percentage of their purchase money back. At the end of last year, it had given out S$1.2 million in cashback.
- Set up: Others have created a separate entity that has the startup DNA to move and evolve quickly. It's also one way of transcending the silos that are common in many traditional, entrenched companies.
Chinese search engine Baidu recently spun off its video platform as a separate entity in a bid to boost profits for the parent company. Going independent means Baidu Video can act like a startup, as well as raise capital and draw on the experience of third-party investors that might not interact with it if it were still part of Baidu.
- Partner: What if there's already a sizeable startup that has taken up the platform owner role in your industry? One way forward is to work out a deal with such a player. If this platform company has access to millions of users, it would be foolhardy not to tap into the ecosystem.
One example is how mail and logistics provider SingPost teamed up with e-commerce site Alibaba to deliver items that consumers buy online. They're also planning for a joint venture in international e-commerce logistics because of the complementary roles that each play in the platform economy. And together, they could corner a significant part of the e-commerce market as more people in Asia shop online.
The platform economy is here to stay and it'll apply not just to start-ups or technology companies. So, while they may have paved the way for the platform economy model, there is no stopping traditional companies from entering the game.
And the latter could be the next innovation giants as well. In three to five years, they may well be the ones changing how business is done, if they start early to build a strong foundation to plug into the platform economy.
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