This article is part of our Retail Reloaded series. The series offers a new vision for retail businesses through an evolved use of technology.
Our hypothesis suggests three core strategic actions. SAVE, ACCELERATE, and SHARE. These strategies will guide you on both how to best use technology and where a retail business should be developing new capabilities, new skills, and, importantly, a new vision for the future.
In this article, as part of the SHARE strategy, you will learn platform thinking — the strengths of this business model that made it thrive in Post-COVID world. And, more importantly, how to apply it to your retail business and attract vendors and consumers to your marketplace.
Platforms connect all the dots and dot knots
In 2020 platforms are still growing strong. With 6 out of 10 most valuable global companies by market capitalization being platforms—Apple, Microsoft, Google, Amazon, Facebook, and Alibaba Group—the trend does not show the signs of slowing down. As COVID-19 sweeps the world, digital retail is gaining power every day and platforms stand as the last product in the digital evolution.
In the ecosystem where platforms have evolved businesses from selling specific products and services to facilitating transactions between users, the ultimate sell is the experience, the attraction is intuitively human.
As consumers, we fall for the ease of use and community feeling. As retail business owners, we worry about making that platform connection happen. And there are reasons to be worried. Technology has become an accessible commodity, but even so, only a few succeed in building a platform emporium.
Here’s what we learned, helping organizations platformize their businesses and products, about creating the ecosystem that will attract and grow user connections.
Platform models shift from meeting specific customer need (product) to meeting broader market needs (marketplace) with a range of products to maximize interactions and increase value for users, vendors and platform owners.
Hybrid model: Product to platform ?
Sharing is the new gold!
Probably the most common among platforms is a hybrid model, which is when a platform sells its own products shoulder to shoulder with the 3rd party ones. The most obvious examples here are Amazon+WholeFoods, Apple, Facebook, and many others.
A number, if not the majority, of the most successful platforms today grew out of successful products that recognized the potential in expanding their offer to cover wider areas of customer needs (based on data and user behavior analytics, of course). However, the companies that did not start off as platforms may find the platform approach extremely mind bogging. Even though we mostly understand the kind of pivot necessary to achieve such multidimensionality, it is still a frightening turn, and the more established an organization is in its own space, the harder it is to transform.
Take work efficiency giant, Salesforce, for example—it started as a CRM tool, soon became the best in class, and upon gaining a whooping number of users, expanded the product offer to serve its users throughout the whole business journey. But, even with a few different apps on the menu it was still just a product.
Platform thinking is a state of mind
Just like an octopus—grab them with all 8!
/Gif via GIPHY
Only when Salesforce opened its code for developers to build upon for various business cases did it become a platform, and by doing so, it became the most powerful business platform the world has seen. It is so customizable, so multi-fold, and so niche, that it can be used by a solopreneuer or a company of tens of thousands of users in exactly the same way. It will offer exactly the same benefits because the pricing model is designed to respond to particular use cases.
Scalable tech = scalable pricing ?
Customers think with their wallets. Evolve your pricing, Mr/s Retailer!
Platform pricing responds to a myriad of business scenarios based mainly on the number of users, type of user, apps used, and data usage levels (computing power) per month. What users get in B2B platforms is the access to a robust ecosystem of apps that work together to improve their business, whichever the size, use case, or industry. By implementing scalable pricing systems, platforms are able to capture a wider range of customers. As a customer, I appreciate the option to pay only for the services I am actually using. In the case of B2C product or service selling platforms, fee is usually paid by the vendors or buyers.
Users => developers => vendors => users => ❤️
Closing the circle by letting members develop, buy, and sell at the same time!
Sometimes, a company would build an app using a platform to facilitate its own business, but seeing the potential in the app’s niche application, it would productize its own innovation and put it on the market for other organizations to explore and use. This is how Salesforce managed to add value to all the links in the value chain—turning users into vendors and vendors into users. Thus, the offer is always growing and getting perfected by those who care the most.
The art of matchmaking ?
True connections thrive on fun, love and reciprocal gain! It’s a game of give and take.
In many cases, platforms connect intricate networks of members with the same goals—travel, shopping, rides, socialization… People collaborate for gain. This is why we say that a platform’s job is to provide value to all parties involved in a transaction.
Since platform acts as a facilitator and arbitrator of transactions—a matchmaker, if you will—it must lay out the rules of conduct and create the infrastructure that enable easy connections and transactions among users. It serves as a physical or virtual space for multiple groups to get together.
Let’s for a second take a look at the hospitality platform, Airbnb, and how it revolutionized the way we travel by connecting globetrotters, who prefer the real local experiences, with hosts, who transformed themselves into entrepreneurs by turning their apartments into mini enterprises. The platform facilitates connections based on mutual interest, earnings and savings for everyone. It’s a multiple win.
However, for such a complex system to be operative and trustworthy on a large scale, it demanded rules of conduct for the sake of personal safety of travelers and host property. At the same time, it offered freedom for the hosts to choose their own house rules while empowering the guests to evaluate the service they received. The quality of service is predicated on the principle of social reward (good review). Good review brings more business but it also provides a personal satisfaction and human connection between hosts and guests.
The delivery in most cases falls on the vendor, platform serves only as an enabler. In the example of Airbnb, hosts provide accommodation service while Airbnb moderates and enhances experiences, payments, and communication. It also provides support and serves as an arbitrator for issues.
Customer service as a religion ?
You know this one, but remember you can always find better ways to woo them!
The leaders of online retail, Amazon and Alibaba, which now own more than half of global market, have recognized early on the importance of infrastructure and logistics in providing supreme customer service. By offering free or fast shipping, discounted prices and special deals for their Prime members, Amazon has attracted millions of users in the last 5 years. The ease of use, the unprecedented product offering, as well the integrated services and product bundles have brought them world market domination.
In December 2019, the U.S. Amazon Prime members are estimated to have reached 112 million, each spending $1,400 on the e-retail platform per year. As of 2019, the company generates the majority of its net revenue ($280.5 billion, more than all other retailers combined) through retail product sales, followed by third-party sales, and subscriptions including Amazon Prime and AWS.
*What made them stand out? If you ever used Amazon you know how easy it is to find, evaluate and buy the stuff you want.
At the heart of everything Amazon does is their laser focus on a customer, reflected in their vision:
Our vision is to be Earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.
What does a customer want?
Quality and choice of products
Easy shopping experience
Online shop to platform reinvention ?
Change starts from within!
Another company that realized the importance of platform approach is the Europe’s largest online fashion retailer from Germany, Zalando. Together with the world leader in design thinking and innovation, IDEO, Zalando set out to discover their purpose and pursue innovation that will serve that purpose.
Zalando exists to reimagine fashion, for the good of all.
They explain the discovery process in a short video.
Zalando established The Studio, a department dedicated solely to prototyping, testing ideas and distributing innovation throughout the company. Since its inception, Studio has tested 70 prototypes and launched 10 projects with the goal of inspiring the organization to appreciate the role of design and innovation in driving the business. They learnt how to build things quickly, try them out, and fail fast, allowing them to make better business decisions and scale only what made sense—the method they called new Ways of Working (WoW), a combination of design thinking and agile development.
Read about their discovery process, new culture adoption methodology and distribution among 15,000 employees, and the purpose activation through a platform whose aim was to provide a combination of new services and experiences that will inspire its employees and customers and help them inspire others.
Any retail company that is currently thinking about platformizing their business, that is to say transforming their infrastructure, culture, way of thinking and economic model, first needs to establish the processes that will support the change from within.
Digital Butterfly Effect ?
Butterfly is the symbol of transformation!
One of the hardest challenges leaders face to keep up with rapid flux and fluid economy is how to propagate the new ideas, innovation and structural changes to all employees within organization.
Facing one such challenge when introducing new ways of thinking and new technologies in their century solid and trillions worth shipping business, which was at the time operated in Excel sheets, our client StenaLine’s ex CTO, Amer Mohamad, came up with the clever ways of humanizing technology to make it more acceptable among the employees. Under his leadership, StenaLine has taken a few decisive steps towards platformizing their business operations and customer service using Big Data, ML and AI.
In his lecture, Amer talks about “The Digital Butterfly Effect”, which is the term he invented to explain the transformation the organization went through to get to trust new technologies and achieve new levels of business efficiency, new competencies within the teams, as well as the benefits that such an approach has brought to them and their customers. The trick is to get people excited and engaged with the new world, make them loose their fears, and embrace the technology that is not there to steal their jobs but transform and improve them.
The chances are that, just like the largest fashion retailer, Zalando, your company doesn’t have an idea about where to start when making a leap into platforms. As a retailer, your focus has been on the customer. A platform is a step further in that same direction, expanding the reach and offering more value, but with a tech twist to it.
The companies that don’t have innovation and/or product design teams must consider hiring experts to import competencies or hire a tech consulting and product development company that can help them discover and implement a transformation strategy, delivering a platform which will then be used as a vehicle of change. Many companies, like Zalando, opt to do both. Relying on the partner’s experience in business transformation and platformization, while preserving the knowledge for the long run within the team after the project was implemented.
When it comes to technology development (strictly tech), most companies choose to rely on the external resources as hiring top tech talent is a costly and timely process with uncertain outcome.
Our goal here is to help managers understand the challenges and opportunities that lie ahead so that they can decide whether to hire a company like HTEC to help them build platforms and establish new business models or try to do it on their own in the capacity that can deliver such a transformation. Our framework and insights derive from our combined experience advising and supporting the companies (including a few we mention in this article) on their platformization journey. This article is intended to serve as a starting point, which provides the basis for thinking and strategizing around the existing company capacities and its possibilities.
It is possible to build a platform on top of any product (Apple Watch, iPad, video game, cat loving website!) if you have big enough customer base that third-party vendors would be interested in selling to and an idea about the platform’s competitive advantage over the existing solutions. Well, there’s also the functionality, personalization, socialization and gamification elements that would help your platform become lovable. This brings us to the technical part of the game—technology strategy and infrastructure.
All platforms are built in the cloud. It allows scalability based on consumption with a pay-as-you-go service preferred by all businesses since its inception.
An interesting illustration of a cloud platform is our own Humeds Cardea-3 telehealth cardiac solution, consisting of medical hardware device and a software platform (web and mobile) for real-time ECG signal acquisition, analysis, diagnostics, and sharing with the medical staff. This solution saves lives because it can process huge amounts of ECG signal data from the cloud where algorithms are applied to discern the types of waves and heart conditions. In the same way, retail platforms are collecting customer data to understand their buying habits and predict behaviors. Cloud flexibility, reliability, and security is essential.
Depending on their business needs and technical infrastructure, the companies can choose between three main cloud computing solution providers: AWS, Google and Microsoft Azure.
Data is the main platform fuel. Use it to drive the matching.
Because of numerous data breaches that have shook the Internet in the past 10 years, data protection is among top priorities for anyone collecting personal data from customers today. As a matter of fact, cautious companies have appointed a person, Data Protection Officer, to manage, track and report on the data usage and offset any risks. The issue of data protection is decided upon before the platform even gets into production and the output of such decisions is the Data Protection Policy which reaches far beyond just platform usage, and how customer data is stored and used—it becomes an integral part of business operations. A practical guide on data protection strategies and implementation for businesses by Federal Trade Commission can be found » on this link.
Note to a reader ?
As an ISO 27001 certified company, our team advises and implements the highest security standards into our customers’ products. We would be happy to help you make better information security decisions and implement them into your platform. If you’re facing security-related challenges, use the form at the end of this article to schedule a 30-minute call with our platform data security and compliance experts.
Platforms are multilayered with complex underlying infrastructure and middleware which often include the combinations of third party software, electronics and devices, development tools, cloud computing we just mentioned, container orchestrators such as Kubernetes, payment processors, communication tools, business intelligence (BI) technology, database management systems, and other tech resources that all need to work together to produce a coherently functioning system. This coherence is achieved through integrations. Each component of a platform can now be either custom built or integrated to respond to an exact business requirement. The decisions are made based on business requirements and so much more.
In the product discovery phase, such crucial decision are being made. With technology, especially, wrong decisions can cost project managers and company leadership millions, with broken deadlines, accumulating stress, debt, and layoffs. The hard truth is 70% of projects fail. It’s a dangerous and competitive territory where knowing how to control all the moving parts is a technical art on its own.
We have worked across industries and verticals, pulling together what we learned to help businesses make less mistakes when deciding whether to buy/build/or integrate technology. This //how-to guide// draws from our extensive experience building and integrating technology for our customers (some of which have become unicorns, many others are the leaders in their domains) and ourselves. Don’t hesitate to reach out and ask for help if you get lost along the way.
One of our clients, the company which transforms thousands of city parking garages into integrated commercial hubs, now valued at one billion, has based its parking platform’s success on integrating new technologies. As their technology partner, HTEC helps them navigate new technologies and automate processes by integrating parking access control system and devices, payment processors and devices, and self-operating kitchens and food delivery facilities that will be available on the parking. These technologies use different sensors, devices, hardware, and software to create a fully-automated customer experience.
Programmability & APIs
In the opposite direction, platforms offer developers ways to build new or integrate existing solutions and offer products and services via platforms. This is why APIs exist.
Facebook is one great example of an almost unlimited programmability. It provides 3rd party developers with the access to user profiles, friends, events, likes, photos and practically all available information with the goal of extending the Facebook reach into external applications. Facebook platform also provides a set of developer tools for sending and retrieving data to and from the platform, including advance machine learning for AI, business tools, gaming, social integration, tools for developers to build AR/VR experiences and Graph API that allows apps to read and write Facebook social graph. It behaves like a living organism that keeps feeding on information, as well as own and external app development to secure the infinite growth through attraction. For as long as people keep using it, it will continue to be developed and vice versa. Facebook created a closed ecosystem, a world on its own, that continues to perplex scientists, economists and sociologists.
As we leave you pondering whether your retail business can live up to the platform dream, here are the key questions you may want to ask yourself in the wake of a platform idea:
What value can your platform bring to your customers, 3rd party vendors, advertisers, service providers, and your own products and services?
Critical mass—how grand is your current clout?
What key resources (technology and human), relationships (customers, vendors, service providers) and organizational changes would be required?
Key to solve the chicken and egg problem is to get both developers and consumers on board.
Must ensure that developers produce and create value.
Crucial to enable successful core interactions.
Optimize technology for scaling.
Determine monetization from the start.
Create a culture that can handle external control.
Platforms win by natural selection. Arguably the only way to stand out today is by targeting a niche market with an exquisite selection and a unique customer experience which includes enabling interactions, social feedback, curating signals and products, strong brand image and storytelling.
But above all this, your business model and culture need to change from one directional retailer to open-ended developer playground. Digital augmentations can support your retail transformation and set you apart from competitors.
If you need help envisioning and developing your platform retail business — HTEC designers, business advisors and technologists can work with you to create that vision and roadmap. Let us help you SHARE your marketplace and reach stakeholders quickly, with a massive scale-up readiness and support. We offer 30-minute free consultation for all qualified businesses. Use the form below to tell us about your platform thinking.
In our next article, we will discuss the integration and partnership opportunities which open new highways for fast and agile product development, thus decreasing risks and reducing the cost of an initial investment.