The rise of the platform economy

A thought-provoking new whitepaper co-authored by Accenture South Africa and the Gordon Institute of Business Science, focuses on a fundamental economic shift – the rise of the platform economy.

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This growing composite of many-sided, demand-driven businesses is coming to dominate linear strategies of old. Companies can now create ecosystems with their businesses at the centre, changing how businesses compete and create value.

Dr Jeff Yu-Jen Chen, faculty at Gordon Institute of Business Science, Platform strategies can benefit small and large companies. ‘Leaders should explore how platform-enabled business models can complement the traditional modus operandi of their organisations.

‘From Apple to Amazon to Alibaba, digital platforms are more pervasive and powerful than ever,’ the whitepaper, entitled South Africa: Winning with Digital Platform explains. ‘That’s why South African companies must consider developing a platform strategy – whether they own a platform or not.’

Today’s major platforms are both incredibly powerful and highly visible. Amazon, for example, touches the lives of millions of consumers and manufacturers, while MasterCard and Visa’s payment platforms hold enormous sway over cardholders, retailers, and merchants alike. Apple shapes how millions consume entertainment and information through the iPhone, iTunes, the App Store and iOS operating system.

‘Globally, most executives know they need to capitalise on new relationships and develop a network of digital partners to position their businesses in emerging ecosystems,’ the report emphasises. Over a quarter (27 per cent) of the 3 000-plus executives that responded to the Accenture survey said that digital ecosystems are transforming the way their organisations deliver value. Some 81 per cent said they expect platform-based business models to be core to their growth strategy in 2018.

Major platform plays

The top 15 public platform companies represent US$2.6 trillion in market capitalisation worldwide. Last year, seven of the top eleven Forbes Global Top 100 companies with the largest market cap increase were leading platform companies.

Several newer, increasingly powerful digital platforms – some of which have spawned entirely new markets – are adding value for buyers and sellers. Among other insights, the whitepaper highlights a simple commonality in the major platforms’ success: carving out a role in a fragmented or saturated market by aggregating services into a single, convenient point of access.

‘All industries are exposed to disruption, and established companies are among the most vulnerable,’ says Rory Moore, innovation lead for Accenture in Africa. ‘Those businesses that are well prepared for disruption are building their growth strategy on platforms.’

Yusof Seedat, research director at Accenture Africa notes that digital start-ups have used platform models to reach US$1 billion valuations in just four years, a feat that Fortune 500 companies previously took 20 years to do. ‘Credit the network effect – the more participants that join the platform, the greater the value for everyone involved. The other big reason? The platform revolution is disrupting industries and dramatically changing how business is done,’ Seedat explains.

Platforms in SA

Are South African companies ready to follow their international counterparts? The whitepaper assesses this question, benchmarking South Africa’s platform readiness against its G20 peers.

‘Accenture’s Platform Readiness Index benchmarked G20 countries on factors that create an enabling environment for digital-platform adoption and measured the maturity of the digital population and market based on its size, savviness, culture and spirit of collaborative innovation,’ the report notes. ‘It also looked at the quality of each country’s technology infrastructure and assessed market regulation.’ The results are thought provoking and point to certain key areas of improvement for South Africa, which includes two critical platform success factors: creating an enabling environment and growing critical mass.

Among its insights, the whitepaper notes that the attraction of digital platforms is due to the network effect – the growth in value for all that comes with every platform participant that joins. The situation is a dynamic one: Platform owners and participants must constantly innovate to remain relevant – adding value to customers and to the platform ecosystem.